Thursday, 18 October 2007

Private equity & pension funds

It's been a bit quieter on the private equity front of late. Popular wisdom has it that the credit crunch has jammed up the buyout business (which relies heavily on debt) for now. In addition there has been speculation that the numbers behind some recent buyouts have become less rosy.

On such recent case was the takeover of music business EMI by Terra Firma. Although the private equity industry has beeen keen to improve its image of late, and ongoing spat between Terra Firma and the trustees of the EMI pension fund is generating all the wrong kinds of headlines. After what trustees have called fruitless discussions with Terra Firma over contribution rates they have referred the situation to The Pensions Regulator. See this FT piece.

According to the FT:

"[T]he EMI case is thought to be unusual because of the hard line that has been taken by Terra Firma, and the company could be the first to be on the receiving end of tough new powers."

Negotiations between trustees and sponsoring employers over contributions are never going to be easy, but there must have been some serious disagreements for it to get to this. Of course we don't know the ins and outs. Maybe the trustees are being needlessly conservative? But given that private equity prides itself on getting costs under control, what do you reckon?

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