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
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
Critics, however, have not backed down and still maintain that the industry
needs more regulation.
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