Private equity funds last year went on an unprecedented $725bn (£367bn) global buying spree - a figure outstripping the entire economy of the Netherlands.
Figures out next week estimate that buyout funds, which have cut a swathe through global businesses and now employ over a fifth of employees in Britain's private sector, can draw on a war chest of $2 trillion to fund acquisitions - enough to buy McDonald's 38 times.
Leading the assault is the Carlyle Group, led by Louis V Gerstner, which last year spent $32.5bn on target companies.
The figures are contained in a new report by the IUF, an international union representing food, farm and hotel workers worldwide, who say that no worker is safe from the buyout firms.
The IUF says loading companies with debt means they pay less tax, which places an increased burden on individual taxpayers and smaller firms. They claim that research and development budgets of firms under private equity ownership are slashed so they rarely yield product innovations.
The Workers Guide to Private Equity Buyouts is an analysis of the impact of the sector on investment, company performance, research and development and the future of world economies including the UK. 'What is the future of the UK economy in the face of this assault?' said Peter Rossman, a joint author of the report.
Economic stability was coming under renewed focus as central bankers warned this weekend that highly leveraged hedge funds were creating a risk to the global financial system. A report presented to G7 finance ministers by the financial stability forum yesterday suggested the proliferation of complex debt instruments, such as credit derivatives, meant a number of major banks could leave themselves dangerously exposed.
Svein Andresen, the forum's director-general, said some banks had relaxed their lending standards in a dash to win a share of the hedge fund market.
Sunday, 20 May 2007
No firms safe from private equity
From today's Observer, I'll try and track down the IUF report: