How Private Equity Ate Britain

Next month’s UK election will likely be a reckoning for Prime Minister Rishi Sunak, the Conservative Party and its handling of the aftermath of Brexit and the pandemic. It turns out both events have already played a key role in shifting control of some of Britain’s best-known brands to foreign hands. High Street retailers like Morrisons, Byron Burgers, Wagamama and others have all been scooped up by US private equity firms in recent years. And the debt they owe, compounded by high interest rates may be endangering their financial resilience while putting employees at risk.

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00:00 - Introduction
1:00 - Leveraged buyout, explained
2:10 - Morrisons takeover
3:30 - Impact of Brexit and Covid
4:05 - Private equity piles into UK
4:45 - Rising cost of debt
5:50 - Jobs, consumers and consequences

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[mayoite]

Just imagine how bad something has to be for Bloomberg to call it problematic

[shellyperera]

The worst thing is that private equity own children's care homes in the UK. They have local authorities over a barrel as local authorities have a legal duty to house and care for children who cannot be left with their families. PE is literally draining money out of local authority budgets while providing the worst, neglectful, minimal "service" in these care homes. Why is this not more widely publicised?

[mabeSc]

Literally everyone loses but the private equity companies and members. Also, it's funny how even in the US they are trying to change this because of how anti-competitive it can get.

[augustoliver]

It’s sad. Private equity and Wall Street also ruined America because profit is more important than people and communities.

[gonubi]

Private equity has bought the dental lab where I work in Dorset. (We make dentures and crowns that your dentist fits). Within a year of them taking over, they increased prices three times, made 20% of my colleagues redundant, and we have not received a pay increase in the last 24 months!!! (We were a team that focused on quality for our clients... not any more...)

[chunglin_tang]

I still don’t understand why transferring the debt into the acquired company is legal at all

[chrispenn]

Private equity doesn't bring money into the economy - it acquires viable companies and then loads them with unsustainable debt, asset strips and runs away with the proceeds - usually avoiding any tax through complex ownership trails offshore. It's disgusting that UK government has allowed this to happen on such a massive scale for so long.

[hydrolifetech]

This is how Manchester United football club ended up with leaking roofs massively flooding the stadium when it rains and with equipments that have never been upgraded for two decades. The Glazers borrowed the money to buy the club and put the loan on the club! Between servicing the loan and the Glazers taking some of the revenue the club generates, nothing is left to make renovations to clubs facilities ending up with waterfalls off the leaking roofs and the club premises not even getting cleaned regularly

[conconmc]

They need to regulate where the debt comes from and how much. How come when I buy a house I am stress tested for up to 7-8% rates but firms aren't?

[kyrirhcp]

So buy a company at 100% value, borrow against it's "projected value" pay huge wages to single individuals, bankrupt, get a payout, walk away with the bank having the risk, but keeping the assets, i.e. the brand name, individual sectors, and physical assets, and the bank passes on their debt to their customers via inflating borrowing interests retroactively. The government then protects the bank with payouts to protect the customers. Fantastic. Money for nothing.

[henk-]

this seems like something that should be illegal. You should not be able to buy a business and then load it up with debt so the company has to carry the burden and the risk while you drive off into the sunset with all your money.

[JSmith]

But they haven't 'spent' £200Bn buying these companies. They've borrowed £200Bn to buy these companies and when it goes pop we have to pick up the pieces. It isn't investment when we're ultimately on the hook for it with bailouts and austerity when the house of cards falls down

[Neojhun]

Way past late stage capitalism. This is necrotic capitalism.

[davidbentley]

Sometimes PE can really turn a business around but 9 times out of 10 they just take a business pump it full of debt fuelled growth and flip it before the business model becomes unstable.

[sevenhenson]

The problem is leveraged buyouts. That came with higher interest payments saddled on the troubled businesses. Regulations need to stop this practice. PE can buy all they want but with their own debt

[blissds-gimb]

Saved up $332k in my emergency fund, ready to dive into investments...but after watching this, private equity sounds like a shark tank with no life vest. Any advice on where to start without getting eaten alive? 😂

[NickLea]

Private equity and supermarkets go back longer than Morrisons. Back in the late 1980s, Gateway was the third largest supermarket chain in the UK in terms of sales and actually largest in terms of square footage. Then in 1989 it was bought out by a private equity group known as Isosceles plc. It was loaded up with debt - around US$2.1 billion (probably the equivalent of US$5.5 billion today).

Of course, it struggled to repay that debt. They later merged with Kwik Save and were eventually sold to the Co-op in 2008 for £1.5 billion

[johnmckiernan]

All the fools who thought Britain was being colonised by the so-called "EUSSR", when the truth is that it's being taken over by American private equity. Not to mention the fact that a deliberate attempt to liquidate UK industry, under Thatcher, in favour of services, has led to 3 million people working directly for US employers. The figure for US-employed French is 250, 000 people. 51st state? Second Puerto Rico, more like.

[kkmuthu]

Finally I have understood why corporates have so much debt

[pfoe]

Amazingly depressing but a much needed insight