Money talks: the men who really own Britain
The abuse scandal at a Bristol care home has put the shadowy world of private equity in the spotlight. Who's behind these financial titans?
Private equity comes in two flavours: plain and exotic. Plain will be familiar to anyone who has seen Dragon's Den.
It involves buying a stake in a business start-up that needs cash. The exotic flavour has not featured on peak-time TV. It involves raising millions from investors, borrowing billions from banks, and using the funds to buy all the shares in a public company seen as underperforming.
Bank debt is loaded on to the bought company, clever financial engineering is performed, revenue flows are improved and the business is floated on the market again at a large profit. Then the hunt begins for a new target.
Exotic private equity made the fortunes of Stephen Schwarzman and Guy Hands and delivered large chunks of UK enterprise – from Boots, to New Look to the AA – into the clutches of private equity firms.
The jury is out on whether exotic private equity creates value, or if it is a huge con made possible by cheap borrowing and gullible investors.
Wisconsin's Simmons Bedding Company, which was flipped half a dozen times by private equity firms before going bankrupt in 2009, shows the destruction the industry is capable of. Investors in Guy Hands' Terra Firma fund, which had to give EMI to its bank this year, have learned the hard way that some private equity moguls are not as clever as they like to think.
There might be more tears to come as over-borrowed companies need to refinance, or are put up for sale on the stock market.
What is clear is that private equity comes with extortionate fees, little transparency and significant risk. As elderly residents of Southern Cross homes are finding out, you don't have to be an investor to find that you have skin in the private equity game.
Estimated wealth: £2.4bn
Conquests: KKR's company list includes Boots and BMG, which owns the rights to music by Kylie Minogue, below, The Beach Boys and Leona Lewis, right. It has also invested in Kodak, Pets At Home and Toys R Us.
Biography: When filmmaker Robert Greenwald wanted to personify the private equity industry he sought out Mr Kravis. Homes include a $10m (£6.9m) beachfront villa in the Dominican Republic, a five-acre property in Florida, and a mansion where he redesigned a hill to make the slope more gentle.
His lifestyle has been the stuff of gossip columns since his 1985 marriage to fashion designer Carolyne Roehm. For one party, he flew 6,000 flowers from Europe and the smell of coffee was reportedly pumped into guests' rooms.
Estimated wealth: £100m
Conquests Took over Phoenix Inns in 1995, selling 1,800 pubs to tenants and organisations around the UK. Also invested in William Hill and specialist off-licence, Thresher, as well as leading cinema chain, Odeon.
Biography: The dyslexic son of a Kent solicitor, his shambolic air disguises a single-minded determination to make money He decamped to the Channel Island haven of Guernsey two years ago. Terra Firma is most famous for its disastrous period in charge of EMI, the music icon that is home to The Beatles. Hands told its artists most weren't working hard enough, and slashed thousands of jobs in a vain bid to service the £2.6bn of debt he used to buy the company. EMI bankers took over the company this year.
Stephen Allen Schwarzman
Estimated wealth: £3.6bn
Conquests Blackstone's vast portfolio includes the Hilton hotel chain, restaurants Café Rouge, Bella Italia and Strada, biscuit firms McVitie's and Jacob's, Center Parcs, T-Mobile, the Cineworld movie chain and Merlin Entertainments Group.
Biography: When he turned 60 in 2007, Rod Stewart and Patti LaBelle were hired to serenade the gathering – pushing costs to $5m (£3m), it was reported. In a high point for Wall Street narcissism, the huge portrait of Schwarzman that hangs in his living room was shipped to the venue.
He set up Blackstone in 1985 with his former boss at Lehman Brothers, Few have fought as aggressively as he has to protect the tax arrangements that support private equity.
Estimated wealth: £95m
Conquests Permira are major investors in German fashion label Hugo Boss and the Valentino Fashion group, which operates in more than 100 countries. It jointly owns European fashion retailer New Look, which has almost 600 stores in the UK alone. Permira has previously invested in the AA and Birds Eye frozen foods.
Biography: A former business adviser to ex-Prime Minister Gordon Brown, Buffini is credited with turning Permira into Europe's largest private equity firm since leading a management buy-out in 2000. Born to the son of a single mother from Leicester, Buffini was propelled into the public eye four years ago when he was targeted by trade unions after cutting more than 3,000 jobs at the AA and 500 at Birds Eye.
Estimated wealth: Unknown
Conquests Lion controls breakfast cereal Weetabix and underwear range La Senza. It has invested in everything from Kettle Chips, Wagamama and Jimmy Choos to clothing retailers All Saints and American Apparel.
Biography: The 43-year-old once made the claim that he had wanted to work for a private equity firm since childhood. Born in Morecambe Bay, Lancashire, he moved to Africa aged six and spent eight years in Botswana and South Africa before moving to Canada. Based in the firm's London offices, the ex-Goldman Sachs banker is now a partner at the firm, making successful returns from its ownership of designer shoemaker Jimmy Choo, which doubled its stores under Lea's ownership. Lion is aiming to do the same for All Saints after buying the fashion chain for £102m last month.
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