Private Equity - Come on Guys!

It’s been interesting to see how some of the cleverest and most entrepreneurial people in the land, who are hugely adept at making money, have proved utterly inept at PR in the face of the ill-informed and largely irrelevant comments from the trades union leaders.

I think the debate also exposes the uneasy relationship the British people have with success.

Damon Buffini of Permeira made an excellent point before his House of Commons grilling, which was that his company is a business that he started with his own money 23 years ago. I’m pretty sure that if he was a retailer, or manufacturer of electronic goods we’d all be saluting him now. Because his business has the title “private equity” he’s branded this decade’s unacceptable face of capitalism. “Arise Sir Alan, Sir Tom, Sir Philip etc” – what are the odds on “arise Sir Damon?”

In fact Sir Tom Hunter, or “billionaire Sir Tom” as he is styled in the press, now runs West Coast Capital, which is of course a private equity company founded with the money he made in retailing. It’s doing battle with the big bad ogre Tesco right now as Sir Tom tries to consolidate the garden centre industry. And consolidating fragmented industries is a typical private equity strategy. When someone popular like Sir Tom does it, he’s a good egg. When a far-too successful outfit like Tesco does it then it’s just too much.

Mandelson, when he was Industry Secretary, and Brown as Chancellor made it very clear that they wanted to encourage entrepreneurship and risk-taking. They did this by de-stigmatising failure and through some generous tax breaks, for people who sell business assets they have held for more than two years.

We simply have to face the fact that if you encourage entrepreneurs they will go for it. And if they are successful they will get rich. If they are not successful they will lose. Get over it!

Looking through the private equity companies’ investment portfolios, it’s very hard to spot any PR agencies amongst them. Far too nebulous and intangible. My bet is that the smarter guys will be having another look at exactly what that industry does right now. Who knows - maybe it’s ripe for consolidation?