Season 1 · Episode 385
Private equity funds – capitalists or leeches?
Morrisons faces cuts as the acquiring private equity fund tries to recoup losses they incurred buying the company. Is that how capitalism is supposed to work?
Debunking Economics - the podcast · Steve Keen & Phil Dobbie
January 10, 202432m 24s
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Show Notes
As you’ll hear at the start of this week’s podcast Warren Buffet isn’t a big fan of private equity firms. He says they lie, so they are not a good choice for investors, like pension funds, for example. But they are even worse for the companies being acquired by private equity funds. Morrisons is an example. A successful supermarket chain with a long, distinguished history, acquired by a US private equity fund, who bought out shareholders. Then, in true private equity fashion, employers are told that there will have to be savings made to cover the debt – the debt that was created by paying out shareholders for the acquisition. How is that fair on anybody, except the executives of the equity fund who benefit from the increasing equity in their portfolio, which they can enjoy at lower tax rates than a business out to make a profit. Is that how capitalism is supposed to work?
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