Private Equity Takeovers

Lord Browne of Ladyton Excerpts

Thursday 21st October 2021 Lords Chamber

[Lord Callanan (Con)]

The UK’s merger regime, which I remind the noble Lord was put in place by the last Labour Government, recognises that overseas investors play a major and positive role in the UK economy, and that many UK sectors have benefited substantially from takeovers and mergers. Such transactions can help to boost UK jobs, increase management efficiency and support businesses to grow on the world stage. We benefit from being an open and accessible economy.

[Lord Browne of Ladyton (Lab)]

My Lords, I am sure that the Minister is aware of the latest Bank of England financial stability summary, which specifically warns that the current level of debt-fuelled US equity takeovers poses a growing threat to the UK economy. Bearing that in mind, what assessment has he made of the US National Bureau of Economic Research’s academic study, which found that when private equity firms buy up public companies, employment shrinks 13% in two years after the acquisition, and the fact that that has prompted senior Democrats to introduce the Stop Wall Street Looting Act to prevent private equity funds forcing companies they purchase to take on new loans to extract dividends they could not otherwise afford? Does he appreciate the irony of the potential of that Act becoming law in the US?

[Lord Callanan (Con)]

My Lords, of course we look at all transactions closely and there are specific grounds to intervene, set out by the Government that the noble Lord was actually a member of, as I said. We recognise the need for greater accountability for large private companies, including those owned by private equity. We published plans to do just that in our proposals on restoring audit and governance.