It's detractors call it 'Casino Capitalism', a brand of capitalism that espouses the worst of free market theory. The private equity industry has been facing a massive amount of flak in recent times from politicians, trade union workers and employment groups, who have accused them of asset stripping, dubious employment practices and avoiding any corporate social responsibility practices.
The Financial Times in it's March 1 issue has a number of articles on the trials and tribulations faced by the various private equity groups, especially those based in the UK, ever since a number of them targeted some of Britain's most high profile retailers such as Sainsbury's and Boots. In the same issue, Ed Balls the City minister has stated that though unlisted companies are not subject to the same scrutiny as public companies, perhaps the time had come for the private equity industry to regulate itself in a more transparent manner.
However, I do feel that some of the criticism is quite unfair and uncalled for. Having worked for one of the top global private equity firms myself, I do feel that most fail to take into account the fact that private equity firms more often than not invest in loss making companies that have not been in the black for quite some time or never at all. Restructuring the workforce is one way of bringing the company back into profitability, and handing it back to the shareholders in a healthier state. Also, private equity groups
don't get interest relief on equity loans that are put into the companies.
The industry has been doing its bit by introducing a number of safety regulations but more time is needed. Let's stop calling them names and support them in their initiative to generate greater wealth creation.
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