The biggest show in town(3)

There was still a full hour before the scheduled start when journalists started trickling into the reception of Portcullis House, home of the Treasury Select Committee's second hearing into private equity on 20 June. Outside, paparazzi lurked, waiting to capture the arrival of the four senior buyout executives who would be facing scrutiny on the industry's behalf.

As time ticked by, the trickle became a throng; then with half an hour to go, the media were finally allowed to flood up the stairs towards the hearing room, enabling many to catch up with the fortunate few who had managed to beat the crowds to the front of the queue. A ten minute delay only added to the anticipation – and then the doors were opened, and the assembled mass poured inside.

“Steady on, it's not a football match,” said a gruff guard, clearly unimpressed at the rancorous lack of decorum as private equity hacks trampled over their comrades to snatch the last seats in the small and sticky hearing room. They were the lucky ones – dozens more were still stuck outside in a queue that snaked around the block, belatedly allowed in to watch on a big screen next door. As private equity drama goes, this was as good as it gets – big crowds, big names, and big stakes. For one day only, the industry was the biggest show in town.

Inside, we watched the big beasts of the private equity jungle sidle almost apologetically in the room, breathing a sigh of relief that Permira's Damon Buffini, Carlyle's Robert Easton, Dominic Murphy from KKR and Philip Yea from 3i had foregone the pinstripes and braces (although Buffini was wearing a rather eye-catching watch). But their quiet self-assurance – and trailing clouds of PR advisers – suggested that after the previous week's mismatch, when a delegation from the BVCA were mauled by the committee's attack dogs, this would be a fairer fight.

For the first hour, the unions took centre stage, focusing their assault on leveraged buyouts. Or was it management buy-ins? They didn't seem entirely sure, but either way, big was bad.

The committee was not uniformly accommodating. “They're an easy target for you,” said Labour MP Sion Simon. “A young industry that knew nothing about the media or the political process. It's old-fashioned class politics, you're just kicking them round because you can. That's what's going on here, is it?”

Not at all, the unionists demurred – they were merely sticking up for their members. And their opponents were in no need of sympathy, according to the eloquent Jack Dromey of the TGWU. “I'm not sure whether you think we should be taking a retiring collection for our friends in private equity?” he quipped.

But for the most part, the labour leaders were given a fairly easy ride. After all, this was just the undercard – everyone was saving their big punches for the main event. Conservative MP – and former Apollo Management partner – Brooks Newmark scored the only real body blow, pointing out that the GMB's report on private equity's pension fund liabilities included at least two entities that were nothing to do with private equity. But he lacked the conviction to land the killer punch, and the union deftly slipped away from the ropes.

COMFORTABLE BATTING
And then the hour had finally come, as the unionists swapped seats with their nemeses. Not that Philip Yea was really a nemesis – the 3i chief executive, who seemed very much the senior prefect of the group, was even referred to by the committee as “the acceptable face of private equity”.

He was flanked by three of the UK's modern-day kings of capitalism – to his left Murphy, looking remarkably youthful for a man who's spent the last ten years doing deals; to his right the bookish-looking Eastman of Carlyle, and at the end of the row the powerful figure of Buffini. From PEI's vantage point, the twitching of his neck muscles at some of the committee's more unintelligent questions was almost audible.

The four men had clearly been well briefed, and their core messages were clear: we're benevolent long-term investors; we make pots of money for pensioners. Stay calm; concede nothing; fight sound bites with statistics (like KKR's 31 year history, which Murphy mentioned roughly 47 times; and the 30 million pensioners benefiting from Permira's returns).

By and large, the strategy worked – not least because most of the Treasury's committee seemed ill-qualified to trip them up. Several betrayed an ignorance of the workings of the industry, so long periods were wasted needlessly wrangling over minor details – not least a 15 minute discussion of a BVCA memorandum that eve

By and large, the strategy worked – not least because most of the Treasury's committee seemed ill-qualified to trip them up. Several betrayed an ignorance of the workings of the industry, so long periods were wasted needlessly wrangling over minor details – not least a 15 minute discussion of a BVCA memorandum that even made the endlessly cheerful Yea almost lose his temper.

By and large, the strategy worked – not least because most of the Treasury's committee seemed ill-qualified to trip them up. Several betrayed an ignorance of the workings of the industry, so long periods were wasted needlessly wrangling over minor details – not least a 15 minute discussion of a BVCA memorandum that even made the endlessly cheerful Yea almost lose his temper.

The four comfortably batted away questions on shorttermism, job creation, conflicts of interest, and even employee relations. “As an industry we have not done a good enough job [of communicating] with our employees,” admitted the consistently impressive Easton. Though just to be clear, he wasn't talking about his own firm here. “When I buy a company, I go and meet every single employee. I've stood in front of workforces from Sheffield to South Korea.”

The only question that really caused the quartet to stumble came from an unlikely source – their former industry colleague Newmark, who quizzed them on excessive leverage levels. Their rather woolly answers seemingly served only to irritate him, and he castigated their responses – perhaps keen to avert any suspicion of partiality.

Of course the real focus of the debate – although the panel could thank SVG's Nick Ferguson for this, rather than the Treasury itself – was always going to be the tax row. The committee members gloried in private equity's disunity, reminding the panel of the “enemy within” – grandees like Ferguson and Sir Ronald Cohen who are openly advocating a change to the tax rules. “You're fighting like ferrets in a sack, aren't you?” tittered chairman John McFall. “Do you think you're losing the argument?”

Again, the panel battened down the hatches and largely managed to fend off the assault, although they provoked the chairman's wrath by claiming not to know how much capital gains tax their organisations paid to the Inland Revenue each year. “I find that amazing – you're the really bright guys, the masters of the universe,” said an astonished McFall, to much hilarity in the chamber. Though one did wonder whether he would have been able to quantify his own tax bill, or that of his committee, had push come to shove.

As the hordes filed out into the Westminster evening afterwards, the consensus seemed to be that honours were fairly even at the end of a long three hours. In fact the greatest testimony to the performance of the panel – who slipped away rapidly looking relieved – was the general sense of disappointment among the journalists who had been hoping for a more dramatic headline.

But for a few hours at least, private equity had been front page news. Proprietors of large UK buyout funds will be praying that this won't happen again in a hurry.