companies because they aren’t run to make profit and because it would take a very long time to fix the structural problems and inherent uncompetitive nature of monopolies. Therefore, my suggestion would be to provide the PE firms with further tax breaks on future deals to act as a motive to improve the state of these struggling firms.
Conclusion
In light of my findings, I shall conclude my debate as concisely as possible. Quite simply, I feel private equity firms are misrepresented in the UK. All the evidence I have collected suggests that their expertise brings great benefits to target companies and it is only on the odd occasion that a transaction is carried out in bad faith, maybe where employees are fired by a PE firm not to cut costs but to make extortionate personal profit, that it is reported in the news and rightly so. Even so, this is normally offset by the investment into the firm to create jobs in the medium term. Regarding the large pay packets GPs receive, I would like to defend the reputation of the industry by asking critics to take into account the fact that the GPs have to be the best in the business. It is near impossible to earn (in some cases tens of) millions of pounds a year in this sector without having a combination of the best knowledge, experience and social dexterity. The reason being – this is often something people forget – that there are many performance and regulatory hurdles for GPs to overcome on the way to improving a company’s performance, in other words they aren’t just some greedy city wide-boys making a buck out of another man’s misery. The very fact that investors over the years have trusted these firms with hundreds of billions of pounds of their own money says something for the sectors integrity and stability, doesn’t it? Ever since the industry was born in the 1980’s, it has been the subject of scrutiny from regulators, independent analysts, newspapers and governments to name a few and whilst many of their reports have said that PE firms are acting only for personal gain and record ‘severe compliance shortfalls’ 7 , none of them have stopped the undisputed rise of the leveraged buyout industry. As much as it would be wrong for me to imply that industry growth is a sign of innocent, meritocratic remuneration, it would also be equally wrong of me to imply that these reports and articles weren’t written in a way to please the private equity sceptic population who read them. Nevertheless, I can only convey to you what I see through my eyes; my personal belief is that if these GPs have been making huge profits for over 35 years now, then there’s been enough time for lawsuits to inflict massive structural, financial and moral blows to the heart of the private equity industry. There’s also been sufficient time for governments to introduce legislation to block these practices. You would think that any Prime Minister worth his while would pounce at the opportunity to round up public support and gain countless votes by restricting the powers and profits of the ‘bully-boy partners’ of private equity, so why haven’t they? It’s simple; the often neglected, long term benefits of private equity buyouts often outweigh the over-exaggerated, short term costs. Campbell, D., & Campbell, A. (2008). The Economic Impact of Private Equity. Hertfordshire: Ashridge Business School. Coy, P. (2012, January 11). Private Equity: Hero or Villain? Retrieved July 23, 2014, from Bloomberg Bussiness Week Magazine: http://www.businessweek.com/magazine/private-equity-hero-or-villain- 01112012.html Permira. (2012). Investing in Growth. London: Permira. Peston, R. (2008). Who Runs Britain? . London: Hodder & Stoughton. Picker, L. (2011). Private Equity and Employment. Massachusetts: The National Bureau of Economic Research. Piketty, T. (2013). Capital in the Twenty First Century. Paris: Éditions du Seuil. Popov, A., & Roosenboom, P. (2009). Does Private Equity Innovation Spur Innovation? Frankfurt: ECB. Private Equity Growth Capital Council. (2007). Private Equity at Work . Retrieved July 23, 2014, from PEGCC: http://www.pegcc.org/education/how-does-private-equity-work/ Weissmann, J. (2012). Is Private Equity Bad for the Economy. The Atlantic Bibliography
7 http://www.businessweek.com/articles/2014-05-08/three-signs-the-best-days-of-private-equity-are-over
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