Private equity law unto itself, warn unions

Private equity firms, which own an increasing number of UK food companies, should be subject to the same employments laws as companies under different forms of ownership, union bosses have argued.

In a letter to Charlie McCreevey, Irish Commissioner with responsibility for the Internal Market and Services, Transport & General Workers’ Union (T&G) boss Tony Woodley said he was deeply concerned about a recent report by the Alternative Investment Expert Group (AIEG) of the European Commission’s Internal Market & Services directorate general, which recommends initiatives to make it easier for private equity companies to place funds.

According to the report, variations in regulations across different member states made cross-border capital-raising and the placement of private equity funds more difficult.

This was all very well, said Woodley, but the private equity business model had “no accountability”. He added: “We need to consider regulation of the structure and funding of acquisitions by the private equity industry in order to avoid financial asset stripping, which may endanger the viability of the business and potentially undermine future investment and pension fund viability.”

He added: “In our view, there is a need for greater transparency and a need to consult as we as observe TUPE (Transfer of Undertakings and Protection of Employment) regulations before any change of ownership can take place by private equity. Private equity acquisitions should be subject to the same legal requirements as any UK company in terms of employment legislation, in particular, obligations to consult.”

Liberalisation would establish a “dangerous environment for the sort of private equity funds who take controlling interests in factories and businesses and operate as the strategic management, yet fail to have employer status”, he added.

A clutch of major UK food manufacturers are now owned or partly owned by private equity firms, including: Birds Eye, which was sold to Permira Funds in August; Findus and Young’s (both owned by CapVest; Weetabix, Burtons Foods and Kettle Foods (all owned by Lion Capital); Richmond Foods (owned by a subsidiary of Oaktree Capital Management); and United Biscuits, in which Cinven has a stake.