The head of the world’s largest network of corporate financiers, ICAEW corporate finance faculty chairman Chris Ward, has issued a robust defence of the private equity industry, in response to criticisms that the advisory community has failed to publicly support the sector.
‘There are some sections of the press who have criticised the advisory community for being slow to defend private equity, while we have made and continue to make a good living from advising on private equity transactions. I want to put that right,’ Ward, also global head of corporate finance at Deloitte, said at the faculty’s annual dinner last week.
Since the start of the year private equity has been criticised by various labour groups and politicians for asset stripping and enjoying unfair tax benefits because they leverage their transactions.
Ward described such criticisms as ‘ill-informed rubbish’.
‘Private equity fund managers want to buy, build and develop businesses so they become more valuable. Are they asset-strippers? My answer is no. But there is no room for passengers nor surplus assets in an efficient business, and there is a need on occasions to downsize the workforce and sell off assets to make the business more viable in the future,’ Ward said.
He also rebuffed accusations that private equity enjoyed tax benefits that were unavailable to other businesses.
‘It is certainly not true to imply that PE backed businesses are somehow cheating the Exchequer, which is only too happy to tax to the hilt the recipients of the interest that is paid – the banks,’ Ward said.
Ward’s defence of the industry comes as senior private equity heads prepare to face the influential Treasury select committee.
Damon Buffini, head of Permira, KKR boss Dominic Murphy, 3i’s Philip Yea, Blackstone’s David Blitzer and Robert Easton from Carlyle are to appear before the committee on 20 June, where politicians will grill them on the workings of the industry.
Politicians have taken a strong interest in private equity after the GMB Union and Labour MP Peter Hain launched an attack on the industry, accusing it of opportunism, greed and lacking transparency.
The industry has responded through its trade body, the British Private Equity and Venture Capital Association (BVCA), which formed a working party headed by Sir David Walker, a former Bank of England director, to ‘examine ways in which levels of disclosure in companies backed by the UK private equity industry could be improved’.
Critics, however, have not backed down and still maintain that the industry needs more regulation.
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