Why Joe Biden is wrong about private equity execs by Jack Welch @FortuneMagazine June 18, 2012, 9:57 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons FORTUNE — Private equity executives and plumbers. In an obvious shot at Republican presidential candidate and Bain Capital chief Mitt Romney, Vice President Joe Biden said a few weeks back that they’re equally prepared to be President — which is to say not at all. With all due respect to the vice president, and certainly no offense intended to plumbers, Mr. Biden, you must be kidding. Here’s why. Let’s start with what PE firms do: They buy troubled companies with the intention of fixing them up. In time, they hope, that will result in a big payday when the new and improved business goes public or is sold to a strategic acquirer. Yes, sometimes the turnaround efforts fail, and companies and jobs are lost. And yes, on occasion PE firms have bought in and overleveraged a business’ assets. Then, as a result of an economic downturn, the company has tanked although the PE firm has gotten out whole. But that’s not what typically happens. It’s just not. Instead the norm is that PE firms buy neglected and floundering orphan divisions of big corporations or snap up standalone businesses that, for any number of reasons, are headed to the boneyard. More: This ain’t Mitt Romney’s private equity market The point is that PE firms virtually never buy fast-growing companies with glistening profits. After all, such companies have access to other kinds of capital. And private equity is not in the business of polishing things up for a low-multiple return; it’s in the business of reinvention, with fireworks at the end. During this kind of overhaul, do jobs get lost? Unfortunately, in the early stages they often do. But are companies saved? Again, yes. That’s the whole point of private equity. You’re trying to get a business from dying to thriving. In the process, some jobs may go, but with success down the road, many more will be created. And by preventing a company from going under, some jobs will certainly be saved. Now let’s talk about the leadership traits that private equity’s most successful practitioners tend to exhibit. Every private equity acquisition begins with sophisticated negotiations between the PE firm, the corporate seller, and the employees of the business being sold. Usually several firms are vying for the business, but it’s not accurate to assume that price is the sole determinant of who wins. Just as critical many times is a PE firm’s ability to bring contentious stakeholders to a shared vision of the future. The result is that private equity managers are experienced in the art of getting tough deals done. Next, because of their familiarity with turning around broken companies, private equity managers usually have a very clear understanding of what it takes to establish a workable balance sheet, how to develop a strategy, and how to execute that strategy. More: Mitt’s message on Bain Top private equity leaders also are typically very good at talent management. You never hear that, but it makes sense. In a well-run company, people make all the difference. Imagine how much more important they are in a rescue operation. Which is why private equity people often end up being smart about building great teams quickly. Finally, when you’re trying to save a company, rarely does the solution lie in keeping it local. Instead, it lies in entering new markets, changing your sourcing, or forming a joint venture abroad. Consequently, private equity firms often goad their acquisitions into the borderless world, which explains why most successful PE leaders tend to have global mindsets about business, regulation, and geopolitics. Which brings us back to Vice President Biden’s remarks. Sophisticated negotiation skills, balance sheet management, strategy development and implementation, talent selection, and a global mindset sure seem like tools you’d want any President to carry, don’t they? Only politics would say it ain’t so. This story is from the July 12, 2012 issue of Fortune.