Friday Letter the axeman cometh

News this week that Boris Johnson, London's recently elected mayor, has appointed a former buyout executive generated some dramatic headlines. The industry should take note.  

Tim Parker, the former chief executive of private equity-backed breakdown services business the AA, has joined London mayor Boris Johnson’s administration as his first deputy mayor to inject some private sector discipline.

For mainstream media it was a headline writer’s gift. The normally sober UK newspaper Financial Times led with “Johnson hires ‘prince of darkness’ as deputy” while paper sellers around London carried the Evening Standard’s alarming suggestion on their boards that Johnson was teaming with an axeman.

All of which was in reference to Parker’s reputation for cutting jobs at the businesses he has run.

Johnson is sure to be delighted by the headlines which focus on Parker’s image as a ruthlessly efficient turnaround executive, who cut costs at the AA, Kwik-Fit, Clarks and Kenwood Appliances.

It was part of Johnson’s campaign commitment to end waste, to reduce bureaucracy at City Hall and to improve accountability.

Sure enough the unions, past masters at skewering private equity firms, did not see the appointment in quite the same light. “Tim Parker has a reputation as a private-equity asset-stripper and has been dubbed the Prince of Darkness by unions that have encountered his methods in the past,'' said Bob Crow, general secretary of the Rail, Maritime and Transport union, in an e-mailed statement.

The message to the private equity industry is clear and salutary. Parker has been demonised for the jobs he cut and the personal fortune he has made. He is not remembered for the companies he rescued. Don’t imagine for a second private equity’s political battle is won, just because the direct attacks have abated.

This is a vital reminder as the economy enters more troubled times and the spectre of job losses looms large once more. It is inevitable that some of the jobs to go will be at private equity backed-businesses. How the industry handles itself and its communications is as important as ever.

Jobs are an emotive issue and one which Doug Lowenstein, head of the US buyout lobby group the Private Equity Council, warns the industry to avoid. It is the wrong battle. Private equity-backed businesses may create jobs in the long run, but it also cuts them in the short term. The real argument needs to be about the contribution it makes to the economic health of a nation.

The challenge for the lobbyists and communications experts alike is that “prince of positive economic contribution” makes for a lousy headline.