News

The British Private Equity and Venture Capital Association (BVCA) have released a report confirming the main contributor to private equity buy-out success in 2008 was made from leveraging a company to gain a return. The report indicates that operational improvement accounted for less than a fifth of the profits made by private equity. The findings show that ‘adding value’ or improvements to an investment is not a key part of the overall private equity investment strategy. Once again the private equity way of succeeding appears to owe more to financial engineering above all else.



The labour movement has been advocating for the past two years for private equity to develop a social conscience. For too many unions private equity investment strategy is less about long term company improvement and more about financial engineering. UNI Global Union has been working with labour organizations to engage with private equity and encourage adoption of a labour code that supports all stakeholders.



Portfolio companies owned by private equity are loaded with debt and now finding they are vulnerable to the economic downturn. The private equity buy-out model has run out of steam in the current environment. Deals have dried up and companies are left to struggle through the recession. There is serious concern for the number of jobs lost that could be lost. The cost of portfolio company failure in our communities is significant.



UNI is involved in the global debate about how to re-regulate financial markets. UNI is pushing the G20 leaders and to bring about regulation of private equity. The release of the BVCA report affirms the need for bringing a social dimension to investment and financial markets.



For more detail about the BVCA report follow the links:

Profits of buy-out groups tied to debt. Financial Times

http://www.ft.com/cms/s/0/da3c8954-e217-11dd-b1dd-0000779fd2ac.html



Full Copy of BVCA report on the performance of portfolio companies 2008: http://www.bvcaweb.co.uk/