To mark PEI’s 21st anniversary, our editors past and present recalled their most memorable headlines.
In 2007, the world of UK private equity – hitherto largely the preserve of prestigious trade publications – was catapulted into the mainstream media glare.
This unwanted attention stemmed from a few high-profile deals that typified the industry’s rapid growth and expanding reach in the run-up to the financial crisis: notably KKR’s record-breaking £11 billion buyout of high street chemist Boots in 2007, and Permira and CVC Capital Partners’ acquisition of roadside assistance company AA in 2004.
Critically, the latter had attracted the attention of the GMB trade union, which in 2006 turned up with a camel at Permira managing partner Damon Buffini’s local church – a riff on the line in the Bible about it being easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven.
Private equity soon found itself the subject of the wrong sort of headlines. For an industry used to operating in the background, this was a big test. And to begin with, it failed.
First, SVG Capital chairman Nick Ferguson made an unguarded comment to a Financial Times reporter about private equity bosses paying “less tax than a cleaning lady”. The next day, it was front-page news.
A week later, the British Private Equity and Venture Capital Association was hauled in front of the House of Commons Treasury Select Committee – a group of MPs with a mandate to scrutinise the government’s financial policies – to better explain PE’s business model, tax treatment and its impact on UK companies. The session could perhaps best be described as a mauling, with the BVCA seemingly unprepared for the ferocity of the MPs’ assault.
Which brings us to the events of this article: a second Treasury Select Committee hearing a few weeks later, featuring KKR’s Dominic Murphy, Carlyle’s Robert Easton, 3i’s Philip Yea and the aforementioned Buffini. This was box office stuff: the committee room in Westminster was packed to capacity for their inquisition, with hordes of spectators forced to watch on a little TV next door.
Much to the disappointment of the tabloids, however, this was not the blood sport of the BVCA hearing. The ‘Fund Four’ survived largely unscathed, comfortably batting away questions on short-termism, job creation, conflicts of interest and even employee relations. For this they should be applauded – particularly as, your correspondent understands, there were some big firms that chose to draw their Mayfair blinds and turn off their phones when the call went out for volunteers.
Did the industry’s encounter with the UK Treasury Select Committee actually change anything? In some ways no: debates around transparency, carried interest and private equity’s role in society continue in various forms around the world today.
In practice, the biggest beneficiaries were probably financial PR firms; for many PE bosses, this episode was a painful lesson that they needed to take their reputation management a lot more seriously. So, while the industry still finds itself the subject of media, government and public scrutiny, it is at least better equipped to deal with it now.
James Taylor is head of communications for Bridges Fund Management. He was senior editor, private equity, at PEI Group until 2014.