Private Equity in the UK

[Karl H]

Those of you who are so minded may well be aware that around 10% of the UK workforce are employed by Private Equity... PE houses have been a key stimulant in the UK's economic growth over the past five years.

The GMB Union is trying to persuade the Government to deny venture capitalists interest relief on debt to fund deals, arguing that it costs the Treasury ‘billions’. This is of course abject nonsense in that they have ignored the fact that the receipts on the other side of the coin will be taxed, resulting in a broadly neutral situation for HMG.

We need to stop this nonsense and you will see from the GMB website that they are conducting a poll to get support for their proposition. What they have stupidly done is to leave the voting open to all comers! If you go onto their website www.gmb.org.uk you will be able to vote if you are so inclined. It would be great if we could all defeat the proposition!

Yes I do work in M&A. But I am also a liberal. Private Equity has helped make the UK a prosperous place of work. Sure it isn't a panacea but has helped make a lot of business more efficient leading to greater tax revenues for the government. It's not our fault they've spent it so badly.

[cactusmaac]

Mate, around here you'll find plenty of posters who wish the Berlin Wall had never come down.

Anyway, I voted on the poll. 43% isn't bad for the Yeses.

[Charles RB]

they are conducting a poll to get support for their proposition. What they have stupidly done is to leave the voting open to all comers!

Isn't that the whole point of polls?

[Drew Van T.]

Mate, around here you'll find plenty of posters who wish the Berlin Wall had never come down.

That's pretty near offensive cactus.

[cactusmaac]

It's probably less offensive than hoping that suicide bomber got lucky when Cheney visited Afghanistan.

[Drew Van T.]

It's probably less offensive than hoping that suicide bomber got lucky when Cheney visited Afghanistan.

Offensive to Cheney and in bad taste, but at least it's not accusing fellow posters of anything.

Although, if you think of Cheney as part of the US military, as being so close to the Commander in chief, then he actually becomes a legitimate target for certain groups of people that the US is officially at war with...but still not for suicide bombers whose status as combatants and tactics are arguably illegitimate under any circumstance.

[warspite1805]

That's pretty near offensive cactus.

He did't name anyone, I really don't see what is so offensive about the comment.

[BlairH]

Offensive to Cheney and in bad taste, but at least it's not accusing fellow posters of anything.

Accusing fellow posters of what exactly?

[Michael P]

Accusing fellow posters of what exactly?

Supporting the Iron Curtain regimes.

Which is a pretty douchey accusation to level at people just because they don't agree with you.

[Iangould]

He did't name anyone, I really don't see what is so offensive about the comment.

So you wouldn't be offended if I said there were "plenty" of posters here who wish Germany had won World War II?

Edited to add that while I haven't looked at the issue in depth I'm inclined to side with the funds industry - and I still find Maac's remark unfortunate.

[Paul McEnery]

Those of you who are so minded may well be aware that around 10% of the UK workforce are employed by Private Equity... PE houses have been a key stimulant in the UK's economic growth over the past five years.

The GMB Union is trying to persuade the Government to deny venture capitalists interest relief on debt to fund deals, arguing that it costs the Treasury ‘billions’. This is of course abject nonsense in that they have ignored the fact that the receipts on the other side of the coin will be taxed, resulting in a broadly neutral situation for HMG.

We need to stop this nonsense and you will see from the GMB website that they are conducting a poll to get support for their proposition. What they have stupidly done is to leave the voting open to all comers! If you go onto their website www.gmb.org.uk you will be able to vote if you are so inclined. It would be great if we could all defeat the proposition!

Yes I do work in M&A. But I am also a liberal. Private Equity has helped make the UK a prosperous place of work. Sure it isn't a panacea but has helped make a lot of business more efficient leading to greater tax revenues for the government. It's not our fault they've spent it so badly.

Excuse me, but what you're saying here is completely untrue. You haven't just used misleading language to obscure the real issue, you've outright told porky pies about what the real issue is. And that is:

Should Venture Capitalists be allowed to offset interest charges on the loans they take out to buy companies to asset strip, against their tax bill?

Oh look. Something completely different from what you said.

And frankly, these people shouldn't just not get tax relief, they should be put in the stocks in front of all the people they've made unemployed, who should be allowed their choice of blunt object.

Oh, and lest we forget, it's crappy behaviour like what you're supporting that nearly killed Marvel Comics. Boy, we like those predatory takeovers. They're just fucking swell.

[Iangould]

"Oh, and lest we forget, it's crappy behaviour like what you're supporting that nearly killed Marvel Comics. "

And that's currently financing the KKR takeover of TXU which will lead to the cancellation of nine proposed coal-fired powerplants in favor of renewable energy and a 10% cut in retail power prices.

[Iangould]

You know I really need to post a lengthier and more considered piece on the "what are your politics and why" but here's the basic bit: "I don't like and don't trust corporate spivs but I want to create an environment where. subject to appropriate legislative restraints, they can make lots and lots of money so we can tax the hell out of them."

This puts me at variance with both most pro-business conservatives and a lot of the traditional left.

but that jsut means both groups are wrong.

[Karl H]

You know I really need to post a lengthier and more considered piece on the "what are your politics and why" but here's the basic bit: "I don't like and don't trust corporate spivs but I want to create an environment where. subject to appropriate legislative restraints, they can make lots and lots of money so we can tax the hell out of them."

This puts me at variance with both most pro-business conservatives and a lot of the traditional left.

but that jsut means both groups are wrong.

Well said sir...

Believe it or not, as someone who works very closely with private equity. There are an increasingly large group of big investors out there who are looking at the sustainability of investments and overall environmental and ethical impact.

As with most things in society, it is only ever the extremists who get the chance to shine in the public arena and get a disproportionate amount of the spotlight as a result.

However, my point stands. Given the current economic climate, one of the key drivers towards environmental and societal change is the reduction of waste - of all kinds, be it physical waste, be it environmental waste or be it cost and efficiency waste.

In the current system, certainly in the UK, the government and the trades unions are unable to run an efficient public sector without the waste or haemorraging of ridiculous amounts of cash. Privatisation in the form of public offerings is not the answer either as there is limited demand from the market. As such, private equity has stepped up to the plate and improved the operating efficiency of the assets.

In the most part, this is not asset-stripping or the wholesale sacking of staff but producing a more efficient company in all aspects.

Sure at the moment this principle concentrates on financial profitability resulting in some people making a lot of money. However, there will always be people who profit. Unfortunately capitalism is a fundamental of the macro-human condition. I do not condone it. However, all watching all the episodes of Star Trek in the world will not take away the fact that mankind is essentially a greedy, snivelling animal. However, there must be a way of transforming that behaviour and making it into something more benevolent for the greater good.

I'm not saying that Private equity is the complete answer but, increased share ownership and participation in company equity for a workforce as a whole coupled with incentivisation of staff to perform in a way that is congruent with those goals be they financial, productive and (hopefully) environmental is a step in the right direction. If people don't want to do that and aren't incentivised to work then quite frankly I have little time for them. I realise there are exceptions in every instance but I would rather have a workforce of 20 people who are incentivised to work on an input-output correlation than 200 people who sit there and watch the clock all day.

thank you and good night.

[cactusmaac]

Frankly, the usefulness of private equity is often overstated.

All too often, like in the case of Debenhams, they use financial engineering and sale and leasebacks of property portfolios to extract a lot of cash from their acquisitions. Then when they make their exit and refloat them, company performance tends to drag because of the underinvestment while they were privately held, and the added debt mountain they have to deal with.

That is why Sainsburys board members thought a private equity offer was in the offing once they'd demonstrably turned the business around. Genuinely improving management performance tends to take a backseat to easy money.

[Karl H]

Frankly, the usefulness of private equity is often overstated.

All too often, like in the case of Debenhams, they use financial engineering and sale and leasebacks of property portfolios to extract a lot of cash from their acquisitions. Then when they make their exit and refloat them, company performance tends to drag because of the underinvestment while they were privately held, and the added debt mountain they have to deal with.

That is why Sainsburys board members thought a private equity offer was in the offing once they'd demonstrably turned the business around. Genuinely improving management performance tends to take a backseat to easy money.

Well to be fair, I tend to work with private businesses which are significantly smaller - typical acquisiton size £50m and the 'black book' of contacts that a PE house can bring is the biggest asset - they can often appoint senior management with the kind of clout to really make a difference to a rapidly growing company. And they have also in my experienced been of significant help in upscaling the company's systems. Sure, at the upper echelon with the giant deals that the likes of Blackstone, KKR, and Permira make, there isn't a huge amout of scope but, at the more entrepeneurial end, it is still significant.

Personally, I believe it's a massive opportunity for the big banks and debt-funders but they probably make enough bunsen anyway :rolleyes:

[cactusmaac]

There are definitely PE groups who do a good job - like Alchemy Partners - but the industry deserves its' mixed image.

[Iangould]

Can I also mention that it took me all of about two minutes to think of two completely legal ways to effectively evade any such ban?