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  • Writer's pictureRupert Harding

Private Equity take....

Great article in the Sunday Times today identifying the close relationship between Private Equity buyouts and companies falling into administration.

"Great brands are built over the long term, but private equity takes a short term view and to hell with the consequences...."

Cafe Rouge, Jack Wills, TM Lewin, Cath Kidston, Ask, Zizzi, Pizza Express, Prezzo and many others - two decades of refinancing these excellent companies and creating "hollowed-out husk[s]" as value is removed as dividends.

Debenhams was bought in 2003 for £1.7b with £1.1b of debt and freeholds were sold to help service this debt. Although profits were made in the short term (and presumably taken out quickly as dividends or possibly refinanced to repay the equity in the deal) the retailer fell into administration for a second time in April this year.

Boots was bought in 2007 for £11b utilising £9b of debt. It's profits in 2019 were a mere £167m.

Byrons suffered the same fate having sold in 2013 and one can only believe that the original owners such as Tom Byng, Karen Jones, Roger Myers etc must feel some sense of loss and helplessness and not a small amount of responsibility for the sad fate of these businesses and, of course, their loyal employees left to shoulder the impact of this financial neglect.

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