Welcome to the world of private equity, also known as the“ billionaire factory ”, where Already very wealthy companies have used low interest rates and considerable firepower - a billion dollar buying spree this year.
This week ordinary mortals got a rare glimpse of the private equity industry, which turns money and is top-secret - who buys businesses, often using more debt than stock investors would tolerate, then float it or sell it again - like the data link London Bridgepoint has gone public.
The float has left 166 Bridgepoint employees sitting on a combined £ 2.5bn windfall. Company executive chairman William Jackson sold £ 7.8million worth of shares and hung on to a stake worth around £ 42million. Frederic Pescatori, Head of Bridgepoint in France and Southern Europe, collected around 16.5 millions of pounds sterling and still owned shares valued at nearly £ 85million. CFO Adam Jones sold for £ 4million but held shares worth £ 22.8million after the stock rose 29% when it debuted on Wednesday.
Bridgepoint has also been extended its largesse to well-known town figures persuaded to join the board. Archie Norman , chairman of Marks & Spencer, received a fee of £ 1.75 million to become a lead independent director (in addition to his annual fee of £ 200,000 to serve on the board). Three other non-executives, including ITV Managing Director Carolyn McCall, were also awarded £ 500,000 for joining the board of directors.tion.
Prem Sikka, professor emeritus of accounting at the University of Essex and his peers said: "The big cats. Marks & Spencer, Archie Nor man, received £ 1.75million honorarium to join the board of directors of private equity firm Bridgepoint It's time to limit tax breaks on big cats.
Lord Sikka said private equity firms have "devoured Debenhams, Maplins, Toys R Us, Bernard Matthews, nursing homes and many more" , adding that high leverage and aggressive tax planning were the main tools in the industry.
Bridgepoint - who is most famous for having previously owned Pret A Manger and now owns Burger King UK and arts and crafts supplier Hobbycraft, and holds a minority stakein the Itsu food chain among its £ 23bn in assets under management - is just one of dozens of private equity firms around the world that are posting record returns because of good debt. market and lockdowns, which forced many companies to seek investment, created the perfect conditions for transactions.
"The great foreclosure crisis has overturned many industry forecasts and trends while strengthening and accelerating others, including private equity, which has arguably never known a more favorable environment to do business, ”said Dominick Mondesir, Senior Analyst European private capital within the private equity research firm Pitchbook. “Transaction activity has reached unprecedented levels, due to a combination of strong leveraged credit markets and aAccelerated European economic enterprise fueled by the increase in the vaccination rate.
Private equity firms closed a record 6,298 deals worth $ 513 billion (£ 373 billion) up to present this year - the highest number since records began in 1980, according to figures from data provider Refinitiv.
The UK has been a breeding ground for particularly fertile hunt for US-based private equity firms, as US-based firms have been seen as cheap due to the fall in the value of the pound since the Brexit vote.
The supermarket Morrisons , infrastructure company John Laing, industrial property developer St Modwen, UDG Healthcare and fund manager Sanne have all received stock offers in recent months.
So far this year, private equity firms announced 124 deals for UK companies (both takeovers and minority stakes) worth a combined £ 41.5 billion, according to data firm Dealogic.
US company Blackstone on Thursday announced a near doubling of second-quarter distributable earnings to $ 1.1 billion, pushing its shares up 4.5%, gaining a record market value of $ 131 billion.
Jonathan Gray, president and multi-billion dollar COO of Blackstone, said, "When we look into the second quarter, in our private equity portfolio, 98% of our companies recorded revenue increases. Of the 2,000 thborrowers in our credit zone, we had a default. "
Luke Hildyard, Director of the High Pay Center, who advocates for the limitation of remuneration executives said, "There are many examples of private equity firms doing very well thanks to recent economic developments, but it is important to ask whether society as a whole will benefit from this windfall.
Ludovic Phalippou, professor of financial economics at Said Business School at Oxford University, aroused outrage from the industry by publishing an academic article accusing private equity chiefs of paying themselves a vast management fee.
In the journal, titled An annoying fact: the returns of private equity and usiBillionaire , Phalippou said private equity chiefs have paid around $ 230 billion in performance fees since 2006, despite an average return equivalent to that of a single U.S. stock tracker.
"This transfer of wealth from several hundred million pension plan members to a few thousand people working in private equity could be the one of the most important in the history of modern finance, "said Phalippou.
He said the fees, which were ultimately paid by the Investors in private equity funds such as Pensions, had helped turn 19 other private equity bosses into billionaires since 2005, bringing the total number of private equity chiefs to nine zero fortunes at 22.
"The private equity industry may need to rethink its wayeconomic, reduce costs and reconsider the way performance fees are paid in order to remain sustainable. However, this will likely generate fewer billionaires, ”Phalippou noted.