Trade Unions Say Private Equity Buyouts Threaten a Crash
May 29, 2007 (LPAC)--Labor unions from 35 European countries decided on an international mobilization against private equity "leveraged takeovers" of companies, saying they rob countries of taxes, workers of jobs, and could collapse the same market liquidity they are feeding off. The unions met in Seville, Spain, and targeted the takeovers occurring in Britain in particular.
The London Financial Times reported today, May 29, that these private-equity fund buyouts of corporations are going at a record pace worldwide in 2007. In the United States alone, the Times said, at least $82 billion worth of takeovers--most funded by debt--have taken place in May alone, the highest buyout level of any month in history. This afternoon, another $22 billion buyout was announced (including $10 billion in new debt), of the Archstone-Smith Real Estate Trust, by Lehman Brothers Holdings and Tishman Speyer Properties. Some bankers told the Times they thought the buyout out boom was peaking, before running into a sudden rise in interest rates and a collapse.
One of the leading trade unions in the mobilization against takeovers, the British Trades Union Congress (TUC), said in a statement May 29 that buyouts had taken $100 billion out of Britain's capital markets in just six months, making the private buyout markets bigger than the stock markets. The TUC said the buyout funds were using highly leveraged (debt-heavy) deals to avoid paying taxes themselves or on the companies they take over, citing the loss of $260 million in tax revenue by the British Treasury on just one deal, KKR's takeover of Alliance Boots Corp.