Private Equity Creative Action Network Mtg - Transport House T&G - London - Saturday 14 June 3pm

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camille
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Jun 10 2008 17:06
Private Equity Creative Action Network Mtg - Transport House T&G - London - Saturday 14 June 3pm

Invitation to join the Private Equity Creative Action Network (PECAN)

Hi,

:: a new collective project has started in London targeting Private Equity, with the view to establishing a creative and long term campaign to make visible the current invisible mechanisms and workings of finance capital. From our initial discussions with friends here and also in the US we have thought it might be useful to begin the campaign with a focus on a private equity trust who is the world's fourth largest employer - KKR.

If you didn't know KKR was the fourth largest employer in the world, don't worry - neither did we. We didn't know that much about Private Equity either. But then after a bit of digging around we realised that the scale and power of private equity trusts are increasingly getting bigger. Of course as their power expands so does ours, especially if you consider that
- 1 in 5 workers in the UK or 20% of the workforce now work for a PE firm
- 20 firms employ around 5million people.
- But unlike us, the top ten men who head up Private Equity firms are 'worth' $35 billion US dollars.

Without wanting to get too technical there are very real and legal mechanisms that Private Equity Firms like KKR use that enable them to make such huge profits. These profits are made at the expense of jobs, wages and conditions, by reducing the amount of tax companies pay (to basically nothing) and then enable huge transfers of wealth in management fees, commissions, and payouts to CEO's.

In the 80's the individuals who took money from the poor and distributed it to a small rich elite through buying up companies were known as 'corporate raiders' or 'vulture capitalists'. Today the story of debt and profit looks something like this.

---- Private equity firms like KKR raise investment funds (from pension funds, wealthy individuals) to buy out companies.
---- They then proceed to load the company up with massive debts (enabling them to legally pay little or no tax).
---- Use debt servicing as a rational for cutting wages and staff, sell off assets, cutting costs and 'increasing' profit - hence are able to provide high returns with little risk to the investors.
---- Before fleeing the wreckage taking their profits with them.

The PECAN collective is currently involved in trying to think of ways to open up the space of direct action and ideas against private equity so that we can better understand, campaign and take action against some the effects of finance capitalism in our own lives - like the current credit crisis, abolition of the 10p tax rate, increasing food and fuel prices, unsustainable developments, crashes in the property markets and unaffordable rental housing.

We would like to invite you to our meeting on Saturday 14 June at 3pm, at Transport House T&G Holborn Office, to help us build and plan for an initial day of action on 17 July. This will be part of a global day of action, involving both community and activists groups and unions, aiming to have around 125 actions in as many cities and 25 countries. We are hoping that this is just the first action targeting Private Equity in the UK, and to build a movement against the industry as a whole, and to use our campaign against this industry to highlight how so few people have managed to amass such extreme wealth in such a short amount of time globally.

If you are interested and want to come to the meeting, or just want to find out more, drop us an email.

solidarity,
PECAN

KnowledgeIsPower
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Jul 21 2008 10:07

The problem is that you clearly are not well-informed about the private equity industry. Googling "private equity" for 2 hours doesn't make you an expert on the industry, nor does it entitle you to brain-wash other people with bleeding-heart, incorrect as well as unsubstantiated facts. I recommend reading the works of Harvard Professor Josh Lerner, or perhaps Andrew Metrick(Wharton Professor) on how these firms actually operate and their resounding impact on the society's in which they operate. It is completely irresponsible for you to make ill-informed claims with no facts to back-up your cause. You have wasted enough of my time and others.

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Lone Wolf
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Jul 21 2008 11:42
KnowledgeIsPower wrote:
The problem is that you clearly are not well-informed about the private equity industry. Googling "private equity" for 2 hours doesn't make you an expert on the industry, nor does it entitle you to brain-wash other people with bleeding-heart, incorrect as well as unsubstantiated facts. I recommend reading the works of Harvard Professor Josh Lerner, or perhaps Andrew Metrick(Wharton Professor) on how these firms actually operate and their resounding impact on the society's in which they operate. It is completely irresponsible for you to make ill-informed claims with no facts to back-up your cause. You have wasted enough of my time and others.

Nah the writer of the OP was bang on the money. So to speak. The people you quote simply teach others how to profit from this usorious industry. Err in case you haven't noticed, this is a libertarian communist site, what makes you think your view would reach an audience. And how dare you claim to speak on behalf of other site users on your first post which is clearly a troll.

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Rob Ray
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Jul 21 2008 11:48

I like how "knowledgeispower" chose to post this over a month after the event took place. timelinessisuseful...

KnowledgeIsPower
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Jul 21 2008 19:35

To Saii, posted over a month ago yes, however the event in question took place 4 days ago, in your clearly well educated opinion is my comment still relevant.. nevertheless at least attack the content of my argument not something as irrelevant as the dating of the initial post. Not sure if you're even capable of such a posting. You have basically lost all credibility on this debate/argument/waste(yet it is rather exciting) of my time.

To Lone Wolf:

Very good point, clearly I stumbled upon this site (via google news) and did not even realize it is a libertarian communist site. Shame on me. Makes perfect sense though.

Ok. I believe people like you, Saii and camille (created initial post) are ignorant in your approach to private equity. I have no idea why, perhaps the company you worked for was taken-over and you were fired (god-forbid an unproductive employee be let go!) but I would be curious to know the motives behind why you think this way. Maybe you just love conspiracy theories; I mean it's proven that Bush knocked down the towers right?!?

I would like first to point out that you et al make statements such as:

1)"Use debt servicing as a rational for cutting wages and staff, sell off assets, cutting costs and 'increasing' profit - hence are able to provide high returns with little risk to the investors. Before fleeing the wreckage taking their profits with them"
and...
2)"Nah the writer of the OP was bang on the money"

Before explaining my point I find it relevant to mention I have read 'A Worker's Guide to Private Equity Buyouts' put forth by the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations. In this poorly thought-out piece of literature I have found many facts such as "The Private Equity buyout business is geared towards extremely high rates of return, averaging 20 to 25%, with the biggest funds promising a staggering 40% return to investors." Hey that's great! but wait there's more... Such 'Facts' are followed by such claims as:

"As the bitter experiences of our members has shown, these astronomical returns can only be achieved by a short-term drive to extract huge sums of cash from the acquired companies"
and...
"By their very nature, private equity buyout firms cannot have a long-term perspective that recognizes the rights and interests of union members"

I mean, i fail to see how high rates of returns can only be achieved by a short-term drive to extract huge sums of cash from the acquired companies? Upon exit, many of the firms re-enter the public market via an IPO. If these companies were so worthless after being acquired by a PE firm, how could they enter the market at high valuations which (sometimes) earns PE investors "a staggering 40% return..." ?? Is wallstreet stupid? Is the public in general stupid? Furthermore, there are a multitude of academic studies which clearly display how after an IPO, previously PE backed companies go on to outperform the market. (you do have to do some research to make such claims, well if you actually did any research you wouldn't make such claims, but I digress).

Now, I believe you are intelligent (no way to verify but i have faith) but ALL the above points made by said opponents are entirely subjective. This means unsubstantiated by fact. The way debates(arguments, intelligent blogging, etc.) should go(can't say usually as this is my first time) is to state what you believe and why you believe it, which is typically backed up by fact. What my problem is with this movement and people like you is you do not have facts to back up anything you say. The union propaganda piece facts consist of the size of PE and how much carried interest the partners get (only after returning their investors portion of the investment; keep in mind "their investors" mainly consist of institutional investors i.e. the pension funds of the working class, now there's a dilemma!). You and they state facts which have no direct correlation to your opinion, thereby making your opinion unsubstantiated.

Furthermore, you claim "Nah the writer of the OP was bang on the money" yet you do not explain why. Either you a)can't back it up with fact or b)have a faulty opinion and choose to be ignorant. Option b) would be where Saii is. He or she makes irrelevant points that have nothing to do with the discussion because he or she is incapable of engaging in an intelligent conversation.

Regarding Metrick and Lerner. They are academics (at highly liberal institutions if this counts for anything) who observe the private equity industry. There writings do not consist of any material that would better enable a private equity organization to "screw the system" as you so believe. You have no facts (would bet you've never read much of their work, perhaps a case study or two) to make the claim that "The people you quote simply teach others how to profit from this usorious industry." Clearly you believe this to be the case, i cannot change your mind, i can point out that you have no proof of this. 1) they are academics with no monetary obligation with any private equity organization. 2)You will not find a single piece of their writings which suggest their main goal is to profit from the industry. Granted they write books and make a profit but again they compute statistics(historical i might add) on the industry and interpret the data not act as consultants to PE firms.

To my overriding objection to you as a person. If you will not accept what Metrick and Lerner do for a living (99.999% probability of this) then how about an organization such as Ernst & Young who did a comprehensive study titled 'How Do Private Equity Investors Create Value?" [can be downloaded at http://www.ey.com/global/Content.nsf/International/Transactions_-_Private_Equity_Value_Study]

Here are some of the facts this study produced: Again these are Facts, not merely opinion:

-Enterprise Value of a U.S. business grew from US$1.2 bn when acquired to US$2.2bn when exited (+83%)
-Europe EV went from US$800m to US$1.5bn at exit (+81%)
-Average annual Enterprise Value growth rates were 33% in the US and 23% in Europe, compared to the public
equivalent of 11% and 15% respectively
-Profit Growth: In US and Europe, EBITDA grew by US$6.1bn, a global average annual growth rate of 15%: This growth rate is 17% higher than for public companies.
-Two-Thirds of the growth in EBITDA came from BUSINESS EXPANSION [Wait according to Camille PE firms strip portfolio companies of assets and fire everyone??] This figure included benefits of investment in sales and marketing and new product launches.
-Cost Reductions WERE and important element of EBITDA growth in both US and Europe, accounting for 23% and 31% respectively of total growth in EBITDA, with half achieved by improvements in operational efficiency.
-BUT WAIT! "Employment levels were the same or higher at exit in 80% of US deals and 60% of European deals" "A more detailed look at Europe showed that employment in business owned by Private Equity grew by an average 5% per annum across the UK, France, and Germany, where two-thirds of the deals took place, compared to about 3% for equivalent public company benchmarks." [I thought they reduced wages or fired everyone?]

I mean it took me 5mins to find this article (arguable that more research would have further proven your ignorance, I say it would, you say bollocks) and there are MANY out there with supporting evidence. I see several possible reactions to my post:

1) You reply with an intelligent argument supported by relevant facts which may contradict the facts I used to base my opinion, which in all possibility could change my opinion of these organizations (highly unlikely). You can see the difficulty in doing so when organizations like PECAN clearly make no effort to produce evidence (stating that a GP is wealthy does not mean a PE backed-firm fires all employees, strips the assets, and burns the buildings to the ground, no matter how badly you want it to).

2) You lower yourself to the level of Saii and reply with something completely idiotic (however clever it may be; no Saii your response was not clever, based on your vapid response think you are a complete waste of a life) and just go on believing that private equity is an evil institution set-out to ruin the little guy and then point out a some mispelling in my post which must then prove what I say does not hold up (yes I purposely spelt 'mispelling' incorrectly because i am so very smart).

3)You and everyone who belongs to PECAN can do nothing because you are incapable of overwhelmingly proving me wrong.

Before I bid you adieu, I think it pertinent you know I am not employed by a Private Equity firm. I can only image you reading everything above saying to yourself "Self, I bet this evil person works for a PE firm and wants to protect her own ass. Yes I am clever and will attack this person for being a minion of these monsters."

Do I think I will change anyone's opinion here? Absolutely not. People like you only believe what you want to believe. Facts and reason mean nothing. I have spent time responding as I enjoy embarrassing minutiae (such as yourself) as well as clearly (in)significant hosts of intellectual thought such as Libcom.org. The Saii side of me would love to say "Not sure if you realised it yet but communism has proven to be a failed policy time and time again hah hah hah" but find it obvious and bland to do so. Rather I should point out that cradle-to-grave entitlements worked very well for_________ (fill in the blank) But, perhaps I misunderstand the fundamental beliefs of your unimportant ideology? If this is the case, forget everything detailed above, I clearly must not be capable of well-reasoned thought.

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Rob Ray
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Jul 21 2008 22:15

Look at the dateline again. It happened on the 14th of JUNE. Jesus christ are you this thick all the time or is it just in the month of July that your mental faculties desert you?

Quote:
I believe people like you, Saii and camille (created initial post) are ignorant in your approach to private equity.

You'd believe wrongly, I've been published more than once on this very subject. But quite frankly I have better things to do with my time than 'debate' with you, I can smell an ideologue a mile off and the chances of getting anything to sink in would be remote. Hence the flippant comments.

edit: Actually, just to link to a short overview I did a while back, for the casual reader.