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‘More openness’ means more trust for private equity

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05/03/2007

The British Venture Capital Association (BVCA) has agreed to adopt a voluntary code in a bid to be seen as ‘more open’ by critics who view venture capital firms as closed and secretive. The agreement came during a conference in Frankfurt.

There have been fierce attacks on the industry in recent months, mostly by unions and MPs, as more private equity firms make a UK investment in British companies and take them off the indexes and stock exchanges.

The private equity firms use clients’ money and borrowed money to buy companies and turn them around. In the UK they have bagged the AA and Birds Eye, amongst others like Incisive Media. There are also currently plans for a consortium of private equity firms to buy Sainsbury’s.

The private equity firms have backing from the Government, with Chancellor Gordon Brown praising their ability to create jobs quickly and make a significant UK investment in the British economy.

But the unions have accused the private equity firms of being too secretive and of a poor record towards employees when they have taken over companies.

Firms like Permira, that bought the AA and Birds Eye – and sacked many people – have provoked particular fury amongst the unions. The GMB union claimed the voluntary code of agreement was “too little, too late”.

However, continuing the theme of Government support for the industry as a means of promoting UK investment, economic secretary to the Treasury, Ed Balls, welcomed the announcement and said: “Private equity is an important part of the UK financial services sector and can play an important wider economic role creating jobs and developing companies.”

 

 

 

 

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