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Why is the PE $ still so disliked by UK media?

By Clotilde Gros
26 August 2021

By Clotilde Gros

Since the start of the year, private equity firms have announced 124 deals for UK companies (both takeovers and minority stakes) with a combined value of £41.5bn (source: Dealogic). That was the highest value of deals by this point in the year since the data company started tracking transactions in 2005.  That is not surprising given that Brexit and the pandemic have left UK businesses trading on cheap valuations and therefore, sitting as prime targets to takeovers.

Household names, which have been or are on the takeover list since January, include supermarket Asda, roadside assistance company AA, infrastructure firm John Laing and the insurer LV, supermarket Morrison and defence/security firm Ultra Electronics. Just a couple of weeks ago supermarket Sainsbury’s also came up as a PE target.

The messaging is positive: the deals will support existing strategy - announcements say - covenants will be stronger, R&D will be boosted, jobs will be created and so on. It is no surprise the Government is getting involved. These promises are alluring, and one could argue are "commitments the government could never extract from British companies in the normal course of business".

This PE charm offensive seems to be working. But have we forgotten stories of the past? A question remains as to whether these claims are just another PR ploy to get the deals approved. Have we been too quick to forget PE disasters such as Debenhams, which was left under a large amount of debt once the PE owners had moved on?

It feels like a deja-vu. Alex Brummer's "Britain for Sale: British Companies in Foreign Hands - The Hidden Threat to Our Economy" from 2012 is still relevant today but has different players. Journalists are scrutinising the deals and views are always black or white. What is very clear from all this activity is that "UK for sale" is very much an ongoing theme and it will remain so until the market becomes a lot better valued, and this might take a while. 

What is transparent though from all this M&A activity, is that PE is still regularly viewed negatively, particularly by many in the media. To them it rhymes with job losses, asset stripping, high debt levels, pension issues, etc. One question is whether the UK media would be so hostile if the PE firms bidding for our listed assets were domestic firms?  Either way, there’s still a lot to be done to address all this negativity, and PE firms are clocking on to this, by trying to get the media on side. And one of the best way to do this is work with British players. The latest example is Morrisons, where Sir Terry Leahy, former boss of Tesco leads the charm offensive on behalf of the PE vehicle.

As of February 2021, Morrisons employed 110,000 employees, and served around 11 million customers each week operating from 494 stores (2020) - let's check in on these numbers in a couple of years from now to see who between the media or the new owner was right.