Business View: The City celebs get more publicity than they bargained for

Sir Gerry's looking a tad over-optimistic when he's already cost Rentokil £20m by doing nothing
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The Independent Online

Hardly surprising, then, that Rentokil's chief executive, Doug Flynn, is resisting. Last week he played a masterly stroke against Sir Gerry, announcing that Rentokil had already spent £20m defending the former TV presenter's "approach". Which, when you think about it, is not even an approach. Sir Gerry's belief that he will do a better job running the company than the existing management is looking a tad over-optimistic when he's already managed to cost it £20m. By doing nothing.

He wasn't the only high-profile City flyer left on the defensive, either. Sir Alan Sugar, in between telling us to buy premium bonds and holding televised job interviews, has unveiled poor sales figures of a key product. He also admitted that profits would fall next year, and shares in Amstrad, which he chairs, duly tumbled.

And let's not forget that Vanni Treves, the Equitable Life chairman - and lawyer - was left with £30m costs after the assurer's High Court case against its auditor, Ernst & Young, collapsed. Let me just repeat that: he's a lawyer. So you might have thought he, more than most chairmen, would have had a pretty clear idea about where Equitable's legal battle would end up. But apparently not.

It was not a great week, all in all, for any of the three. But they surely cannot be surprised at the flak. They, and others like them, may well relish the fame and trappings associated with television appearances, may revel in being the names laymen know in an otherwise non-descript sea of City suits. But as any celeb of long standing will tell you, the higher the profile, the bigger the dent to reputations when things fail to go as planned.

Behind closed doors

So, private equity is leading the way in the UK's mergers and acquisitions boom, outstripping straightforward corporate deals for the first time.

It is not that surprising. The collapse of the tech bubble saw deals off all sorts fall away, and many an investor was burnt. But just because deals weren't being done, it didn't mean that all that cash which private equity funds had raised was going to disappear overnight.

And so these firms started looking for ways to spend their money. Retail was a favoured area, and a number of chains disappeared from the market as private equity firms did what they do best: spotting undervalued businesses where they could go in, strip out costs, bolster performance and then get out again, at a profit.

There is, of course, nothing wrong with this. A chief executive who doesn't run a tight ship gets all he deserves.

But private equity does have its downsides. For a start, there is a question of accountability: they may be buying major companies, but their world is a private one.

And when things go wrong, boy can they go wrong. Look at Gate Gourmet. Texas Pacific took on a loss-making company, intending to renegotiate contracts and overhaul labour practices, thereby turning it around. But negotiations with British Airways dragged on, and the workforce did not take kindly to being overhauled.

The fact is, private equity firms are not always the nicest face of capitalism. Look, for example, at Debenhams. Taken private by CVC, Texas Pacific and Merrill Lynch, it is being readied for a return to the market, which should make them a healthy profit. But talking to insiders at Debenhams, I found a sadness about what has happened to a company once held up as a paradigm of retail excellence. Rightly or wrongly, they complain of cost cuts, suppliers' terms being toughened up, attitudes and atmospheres hardening and workloads increasing. For many, it's a sad price to pay for someone else's bountiful return.

a.townsend@independent.co.uk

Jason Nissé is away

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