Baroness Sarah Hogg, Chairman of 3i, gave an entertaining and thought provoking talk to a CWN group on 15th October. The title was ‘Private Equity in a Changing Market’ but Sarah commented that when choosing the title some months ago, she had no idea of the extent of the change.

Private Equity has come to play an increasingly important part in our economy and the industry profile rose as the huge transactions with household names hit the headlines, peaking with the £11 billion Boots public-to-private deal last year. The media highlighted the issue of both excessive leverage and rewards. Sarah’s point was that possibly they should have been looking at the lenders, not the borrowers; ‘while the Treasury were hyperventilating about Private Equity, a publicly quoted bank blew up’. The positive impact of the higher profile is that it has raised the standard of debate in the industry and should lead to greater degrees of transparency.

Sarah felt there was a need to dispel the notion that Private Equity did not care about corporate governance. They are in for the long haul and cannot get out tomorrow, so they do deeper due diligence than for a quoted stock. Information flow is to 3 or 4 investors rather than to 150,000 shareholders so there is not the need for the numerous rules about communications and dealings with investors, which can leave more time to debate strategy. Private Equity investors have a longer term outlook which can be helpful for companies in restructuring or high growth phases. Investing in quoted companies has however the advantage of an easier exit; ‘you are not locked into a marriage if all you want is speed dating’.