Private equity’s most outspoken chief, Jon Moulton of Alchemy, has predicted
that tax and more regulation will contribute to the slowdown of private equity
‘There will be large private equity failures this year… the politicians will
be back and we can look forward to more regulation and tax damaging this
business,’ Moulton said.
He blamed the industry for ignoring regular standards of due diligence during
the boom years, the
‘Buy-outs were done on mythical numbers like pro-forma, adjusted, normalised
EBITDA, which almost always turned out to be 20% higher than reality. We were
buying false numbers and doing it willingly but the quality of what we were
doing had come down. It’s the same thing that was going on in the US sub-prime
market,’ he said.
Accountants and regulators were also criticised but Moulton reserved the
worst for banks:’They bought all this rubbish themselves, most of which their
senior managers didn’t understand, and they have been left holding the baby with
un-saleable, overpriced, over-enthusiastic debt. They are in trouble themselves.
It’s the same as the sub-prime salesman. They will sell anything to anyone, and
they did. If you pay enough bonuses, people will do anything,’ he said.
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