Private equity and unions should both benefit from the inclusion of sovereign wealth funds and personal vehicles within Sir David Walker’s regulatory recommendations.
Walker’s desire to expand his soon-to-be-published recommendations on the voluntary regulation of the private equity industry to include sovereign wealth funds and rich entrepreneurs is one that should be matched by big leveraged buyout funds and unions alike.
For private equity’s largest investors, calling for the likes of
For the unions, it would extend the degree of protection and inclusion in these transactions and ongoing ownership to more than just the Permira/Carlyle/Kohlberg Kravis Roberts/Duke Street Capital “axis of evil” they have targeted to date.
The former group have already been playing ball –
Ironically, that awareness comes after even more dramatic changes in the past three months that have made Walker’s report seem redundant in the current LBO-less market, but should prove important both in terms of explaining what exactly it is that private equity does to improve its portfolio companies, especially now that gearing will play less of a role for more recent investments.
The unions make no such claims for quasi-private equity investors, despite a number of them buying some of the UK’s largest and best-known assets. Delta Two, a Qatari state vehicle, has been in discussions with the Sainsbury family regarding a £10.6bn bid for the UK supermarket chain for months following CVC Capital Partners’ failed bid. Much of the union’s ire towards private equity was fuelled by interest in both CVC’s tilt at Sainsbury and KKR’s buyout of Alliance Boots.
Regarding Delta Two’s pursuit of
They should. Dubai International Capital, the international investment arm of Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum’s Dubai Holding, last week bought German chemicals maker Almatis for US$1.2bn. It also purchased a 9.9% stake in US hedge fund
Earlier investments in Europe include Tussauds Group (in which it retains a 20% stake after a sale to Blackstone’s Merlin Entertainments), Travelodge, Doncasters Group, Mauser, DaimlerChrysler and a minority stake in defence firm EADS.
In January, DIC even made a play for one of England’s biggest football teams, Liverpool FC, only walking away when it could not agree terms with the board – ironically, its investment in Och Ziff means it has an effective tie with an even bigger football team, Manchester United, as Och Ziff was one of the Glazer family’s backers.
However, at the time of the Liverpool interest, many of the club’s fans rejoiced at a Roman Abramovich-style takeover, making reference to the Sheik’s wealth and forgetting that it would be a disciplined private equity-style unit (and not its owner) that would be investing and looking to divest with substantial profits within several years. Liverpool’s eventual owners, Tom Hicks (of Hicks Muse fame) and George Gillett, will almost certainly follow a similar strategy.
Football fans can be forgiven for regarding the differences among sovereign wealth funds, personal vehicles and private equity proper as semantics, but for unions also to ignore the differences or indeed the very existence of private equity-style investors would be a clear own goal.
By Robert Venes