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Company's interest regarding private equity buyouts - Dissertation Example

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Company's interest regarding private equity buyouts

In just one generation the private equity industry has grew to become a dynamo for growth, innovation and enterprise (Kolade. W, 2008). Britain is a world leader in this sector with one of the largest private equity markets globally, second only to the US. There are over 450 active UK firms, which provide several billion pounds each year to unquoted companies. Despite private equity now being a recognised asset class, the rapid growth in market has provoked debate about private equity and its intensions. Private equity firms have been taking over some of the UK's most notorious names, many making phenomenal improvements to these companies, but there has still been criticism of their vilifying greed and heartless nature to others. Some have characterised these private equity firms as the ‘Gluttons at Gate’.
Supporters of private equity, including the government, praise its ability to create jobs quickly and contribute to the economy (BBC, 2007). Private equity groups claim they are improving the performance of UK companies by giving them stronger management and market discipline. They also claim that private equity investors generate superior returns for their shareholders; that private equity is clean and simple, not cluttered by all the governance bureaucracy of the publicly quoted sector (superior doc).
Conversely others would disagree, most notably employees at companies which have been bought by private equity groups only to see hundreds of job cuts being made. ...
It’s questioned whether the private equity boom will provide good long-term investment results or whether we are seeing the inflation of yet another financial bubble, with the destruction of viable companies as a damaging by-product (Demaria, 2010). But perhaps the most controversial argument may be taxation implications. PE companies have been accused of using loopholes to pay too little tax, with the rate sometimes as low as 10% (BBC, 2007). Private equity executives pay taxes on their basic pay and bonuses, but a large part of their income comes from carried interest - the carry - which is the 20% slice of profits they can claim once they have paid back their investors. This money is classed as a capital gain and thanks to taper relief, it is only subject to a tax level of 10%. Critics say it should be charged at a normal tax rate. It is an emotive subject, with one private equity boss saying that some of the richest men in Britain were paying tax at a lower level than the cleaners who tidied their offices (BBC, 2007). Perhaps if the UK changes its tax regime, private equity investors will just move overseas. Ethical issues During this research, my main focus will be pay attention to the ethical issues. No data collected through any means will be used in any undesirable or negative way. Any information collected will be used only for the purpose at hand. Talking about the financial buy outs, ethical considerations must be given their due importance in that case too. Financial statements of any and every company should be made public as per the law and the information offered must be authentic. Blackstone Group is the former owner of Southern Cross as it bought the company in 2004 and left it 2006. Initially, Southern ...Show more


Private equity originated in the late 18th century, when entrepreneurs found wealthy individuals to back their projects on an ad hoc basis. This informal method of financing became an industry in the late 1970s and early 1980s when a number of private equity firms were founded (Arundale. K, 2010)…
Author : archibaldbraun
Companys interest regarding private equity buyouts essay example
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