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| Equity heads defend the industry | Equity heads defend the industry |
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| Bosses of private equity firms are defending the industry as they face scrutiny from a select committee of UK MPs over the sector's behaviour. | Bosses of private equity firms are defending the industry as they face scrutiny from a select committee of UK MPs over the sector's behaviour. |
| Carlyle head Robert Easton said the notion that the industry focused on asset stripping was "ludicrous", saying it bought firms for the "long term". | Carlyle head Robert Easton said the notion that the industry focused on asset stripping was "ludicrous", saying it bought firms for the "long term". |
| Also present were 3i, KKR and Permira who echoed this, saying they had helped create jobs in firms they bought. | Also present were 3i, KKR and Permira who echoed this, saying they had helped create jobs in firms they bought. |
| MP John McFall said during the session that the industry needed "sorting out". | MP John McFall said during the session that the industry needed "sorting out". |
| The hearing marks the first time that the industry's leaders have had to defend their position to UK politicians in such a public hearing. | The hearing marks the first time that the industry's leaders have had to defend their position to UK politicians in such a public hearing. |
| We do a tremendously good job with workers and stakeholders but the industry has not done a good enough job with our employees Robert Easton, Managing Director, Carlyle Q&A: Private equity | We do a tremendously good job with workers and stakeholders but the industry has not done a good enough job with our employees Robert Easton, Managing Director, Carlyle Q&A: Private equity |
| Private equity has been criticised for using too much debt to finance deals as well as for cutting jobs. | Private equity has been criticised for using too much debt to finance deals as well as for cutting jobs. |
| The bosses are being quizzed over several issues, including the rate of taxes as well as the time-frame that the industry operates on, and employment levels. | The bosses are being quizzed over several issues, including the rate of taxes as well as the time-frame that the industry operates on, and employment levels. |
| Time frame | Time frame |
| Union leaders have been calling for the sector to be more tightly regulated, saying it is the workers who have been losing out when private equity firms make acquisitions. | Union leaders have been calling for the sector to be more tightly regulated, saying it is the workers who have been losing out when private equity firms make acquisitions. |
| Recent years have been a golden age of British wealth creation Robert Peston, BBC business editor class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/06/private_equitys_wedge.html">Read Robert's blog in full | |
| Mr Easton said that overall, Carlyle had seen employment rise by 10% in the firms it acquired. Others cited similar job creation figures. | Mr Easton said that overall, Carlyle had seen employment rise by 10% in the firms it acquired. Others cited similar job creation figures. |
| "We do a tremendously good job with workers and stakeholders," said Mr Easton. | "We do a tremendously good job with workers and stakeholders," said Mr Easton. |
| But he added: "As an industry we have not done a good enough job with our employees" and should do more. | But he added: "As an industry we have not done a good enough job with our employees" and should do more. |
| The industry leaders were talking after representatives from unions had attended a previous session with MPs discussing their concerns in the industry. | The industry leaders were talking after representatives from unions had attended a previous session with MPs discussing their concerns in the industry. |
| Union worries | |
| Jack Dromey, deputy general secretary of the Transport and General Workers Union said: "Workers' rights are the missing link in the current debate on private equity." | Jack Dromey, deputy general secretary of the Transport and General Workers Union said: "Workers' rights are the missing link in the current debate on private equity." |
| Workers' rights are the missing link in the current debate on private equity Jack Dromey, deputy general secretary, T&G | |
| He added that "the measures designed to protect pay, terms and conditions when work transfers from one company to another, needed to be extended to cover private equity deals." | He added that "the measures designed to protect pay, terms and conditions when work transfers from one company to another, needed to be extended to cover private equity deals." |
| Certain cases have become emblematic for unions of what it sees as the negative side of the industry - such as the acquisition by Permira of the AA. | Certain cases have become emblematic for unions of what it sees as the negative side of the industry - such as the acquisition by Permira of the AA. |
| After the AA was bought in 2004, about one third of its workforce of 10,000 lost their jobs. | After the AA was bought in 2004, about one third of its workforce of 10,000 lost their jobs. |
| Pensions | Pensions |
| Private equity funds have increasingly hit the headlines in recent years, snapping up a growing number of UK companies, such as pharmacy group Alliance Boots. | Private equity funds have increasingly hit the headlines in recent years, snapping up a growing number of UK companies, such as pharmacy group Alliance Boots. |
| When KKR boss Dominic Murphy was asked how long his firm KKR would keep Boots, he said it anticipated owning Boots "for at least five years" and that he wanted all employees to be satisfied with its pension fund. | When KKR boss Dominic Murphy was asked how long his firm KKR would keep Boots, he said it anticipated owning Boots "for at least five years" and that he wanted all employees to be satisfied with its pension fund. |
| We've produced world class returns for [our pension funds]. And in an era where pension fund deficits are a big issue Damon Buffini, managing partner, Permira | We've produced world class returns for [our pension funds]. And in an era where pension fund deficits are a big issue Damon Buffini, managing partner, Permira |
| Permira head Damon Buffini argued that private equity deals were to the benefit of millions of pensioners. | Permira head Damon Buffini argued that private equity deals were to the benefit of millions of pensioners. |
| "We have 30 million pensioners in our pension funds. And we've produced world class returns for them in an era where pension fund deficits are a big issue. And I think that's a big positive for the country." | "We have 30 million pensioners in our pension funds. And we've produced world class returns for them in an era where pension fund deficits are a big issue. And I think that's a big positive for the country." |
| Taxes | Taxes |
| Thanks to tax breaks, private equity firms currently pay just 10% tax on gains made on companies they invest in. | Thanks to tax breaks, private equity firms currently pay just 10% tax on gains made on companies they invest in. |
| Private equity executives pay taxes on their basic pay and bonuses, but a large part of their income comes from carried interest, or the 20% slice of profits they can claim once they have paid back their investors. | Private equity executives pay taxes on their basic pay and bonuses, but a large part of their income comes from carried interest, or the 20% slice of profits they can claim once they have paid back their investors. |
| This money is classed as a capital gain and, as such, is subject to a tax level of 10%. Critics say it should be charged at a normal tax rate. | This money is classed as a capital gain and, as such, is subject to a tax level of 10%. Critics say it should be charged at a normal tax rate. |
| Transparency | Transparency |
| Last week, Peter Linthwaite, the head of the British Private Equity and Venture Capital Association, which represents the UK's private equity industry, unexpectedly resigned after he was widely criticised for a weak showing before the committee. | Last week, Peter Linthwaite, the head of the British Private Equity and Venture Capital Association, which represents the UK's private equity industry, unexpectedly resigned after he was widely criticised for a weak showing before the committee. |
| The Treasury select committee is looking at four main areas regarding tax levels in the industry: | The Treasury select committee is looking at four main areas regarding tax levels in the industry: |
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| Concerning transparency, it is studying such factors as market abuse and conflict of interest, and the ranking of risk. | Concerning transparency, it is studying such factors as market abuse and conflict of interest, and the ranking of risk. |