Yes, it's those lovable 'locusts'. Buyout firms start to spin

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The Independent Online

A public profile that alternates between "buccaneering asset strippers" and a "swarm of locusts" is one few would covet.

These are just a couple of the more colourful terms that have been used to describe private equity firms - the investment groups that have large pools of cash to buy companies, restructure them and then sell on for massive profits.

This lowly image is due in large part to the industry's long-standing approach to public relations, which up until now has equated to sticking its head in the sand. But now private equity giants may be about to step into the limelight.

Faced with the spectre of tighter government regulations and an increasingly bad press, the UK's biggest private equity players have quietly formed a new trade group to put a friendlier face on this notoriously secretive sector, The Independent on Sunday has learnt.

Under the aegis of the British Venture Capital Association, the new buyout committee is a first: the largest firms in the industry have never come together in a formal way before.

Members comprise Permira, Cinven, Blackstone, Carlyle, Apax, Bridgepoint Capital and Kohlberg Kravis Roberts, among others. The collective had its first meeting in November and will convene again next month. The purpose of the group is to create a "co-ordinated voice" for the industry as well as to face down the spectre of increasing regulation of their activities.

The initiative is a reflection of the evolution of the industry. Once a niche sector, it is now dominated by massive organisations employing millions of people in companies such as the AA, Kwik-Fit, clothing retailer New Look, and Southern Cross, the UK's largest nursing-home operator.

It is a crucial time for the sector. Buyout groups have come under heavy criticism from the public, and from governments around the world, as their reach grows. Last year private equity firms raised $401bn (£204bn) globally, a record that shattered the $311bn raised the year before, according to research firm Private Equity Intelligence. Mark O'Hare, managing director of PEI, predicts that 2007 will be an even bigger year.

The industry's growing influence has also drawn the attention of regulators. The Financial Services Authority has an ongoing review into private equity's impact on the UK economy. There is also a separate inquiry into the favourable tax treatment received by the sector.

"It's no big secret that a whole lot more attention has been focused on big buyouts than there was even two years ago, or certainly five years ago," said one member of the new group, speaking on condition of anonymity. "Our view is that we should now start being more forthcoming and transparent."

The move echoes a similar initiative from America's four largest firms. Last year, Carlyle, Texas Pacific Group, Kohlberg Kravis Roberts and Blackstone set up a new trade body called the Private Equity Council to better represent their interests in the US. The Department of Justice has opened an inquiry into possible collusion between firms to reduce competition on some deals.

Yet there is still a lot of work to be done before the public and the government learn to trust the industry. Damon Buffini, head of Permira, gave a rare newspaper interview earlier this month as part of the firm's new-found desire to manage its image. Just five days later, the GMB union branded Permira "buccaneering asset-strippers" following an announcement that a plant at one of the companies it owns was to be shut down. The factory was for Bird's Eye, the frozen food maker that Permira bought five months before.

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