Not everybody wants to give the industry a pat on the back, but private equity is booming.
In the 90s private equity was something of a cottage industry, which involved a few firms buying up faltering small businesses and turning them around.
Now private equity firms regularly bid for blue chip companies, as KKR did Sainsbury’s (albeit unsuccessfully). Often they succeed, as was the case with Foxtons, Boots, Homebase and Debenhams.
Sam Elshafey in the Unlimited offices
Private equity firms raise funds from wealthy individuals as well as from financial institutions and pension funds. The number of people with immense wealth – and we’re not just talking a million here, because being a millionaire is no longer exceptional in the era of £1m semi-detached London houses – has increased dramatically. According to Tulip Financial Research, Britain now has some 135,000 ‘high net-worth’ individuals with liquid assets averaging £6.4m.
Unlimited network
A company recently set up to offer unique investment opportunities to wealthy individuals is hoping to exploit not only the growth of private equity opportunities, but the growth in the number of its potential customers – people with vast wealth to invest.
Providers of private equity investment opportunities are usually public pension funds, banks and financial institutions, insurance companies, endowments, family offices and foundations. Unlimited International wants to offer its high net-worth members a chance to invest through them, growing their money through investment opportunities in an invite-only ‘Unlimited Network’.
An unlimited network works by leveraging the collective financial muscle of its members, in order to offer unique, bespoke investment opportunities. The network will also be a forum for members to share contacts, wisdom and other products and services they may own or have access to for mutual benefit.
Investments will typically range from blue chip opportunities to international property developments to venture capital for start-up businesses. After due diligence, the company will put only the strongest, most lucrative proposals forward for consideration by its members.
Founder and CEO Sam Elshafey, who is a former director at Accenture and dunnhumby, believes he is offering something unique and valuable to his customers.
“We’re aiming to change the landscape in this market by offering a very different type of investment opportunity for a very different type of investor. Our mission is to deliver only the elusive and the exclusive for the elite, providing unique and one-off lucrative investments that will help our members to enjoy and grow their wealth”.
The organisation also aims to acquire luxury assets for the business or personal use of its particularly discerning members, such as yachts, jets, helicopters, prestige properties, fine wines or jewellery. This start-up for the super-rich again anticipates the collective buying power of its network to get the best deals with suppliers.
Unlimited International, which is aiming to be a ‘one-stop-shop’ for it’s super rich clientele will also offer a multi-lingual, international concierge service, complex event management and services in travel, retail, health and beauty and entertainment.
The private equity industry was given a mauling by the Treasury Select Committee last week, which questioned whether the tax breaks it receives are justified. To many Labour MPs and trade unions, private equity firms buy undervalued companies with large amounts of debt, which they pay off by closing offices, factories and shops, and laying off workers. They also point out that they do not have to be as transparent or accountable as public companies.
But to advocates of the industry, private equity firms help turn around failing companies by installing new management and introducing more efficient management practices. Risking large amounts of their own capital, they understand the value of money and cancel unproductive pet projects of complacent former CEOs who had no capital at risk.
Writing in the Independent, Dominic Lawson pointed to a study by Nottingham University “of 400 private equity deals, which showed that while employment in the acquired companies fell in the first year after a leveraged takeover, it rose strongly thereafter, with employment levels in those companies 26% higher after five years.”
Away from the debate regarding their social good, it is clear that the industry’s resurgence is a sign of a growing class of super rich. Their thirst for new and more interesting ways to invest and spend their cash is unquenchable, and provides myriad opportunities to entrepreneurs.
