BRUSSELS (Reuters) – Private equity firms are neutral or positive for employee relations, a lobby group said on Wednesday, but lawmakers and labour unions called for tougher regulation of the often maligned industry.
The sector has been accused of asset stripping the firms they buy into, leaving employees on poorer job terms.
The European Private Equity and Capital Venture Association, known as EVCA, commissioned a study that found the sector had no overall negative effect on employee relations compared to before private equity involvement in a company.
The study, undertaken by the Centre for Management Buy-Out Research based at Britain’s University of Nottingham, said the number of companies unionised after a buyout remained static at 71 percent. Real earnings of non-managerial staff rose in just over half of cases, with 47 percent seeing no change.
“As we enter a downturn, the strengthened employee relations afforded by private equity ownership put those businesses in a stronger position to confront the difficult trading conditions across Europe,” said Javier Echarri, secretary general of EVCA.
The survey was conducted earlier this year, during a less severe stage of the credit crunch. It was based on responses from personnel managers of private equity firms with no input from employees or labour unions.
But Echarri said the study would help demystify the sector and that attitudes of labour unions were already becoming less hostile, leaving those of some politicians lagging.
The European Parliament has adopted a report calling for regulation of the sector.
Poul Nyrup Rasmussen, who authored the report, said EVCA would never publish a study critical of its members.
“Other studies paint a rather different and much less rosy picture. A recent study by Probitas Partners shows the high risk of default by private-equity owned companies,” Rasmussen said.
“No amount of rose-tinted industry studies will diminish the need for private equity to be covered by new and better regulation,” Rasmussen added.
The sector has taken a hammering, with the value of deals set roughly to halve this year from 180 billion euros ($233 billion) in 2007.
European buyout firm Permira has made an unprecedented offer to let its backers off the hook for 1.5 billion euros by putting a 60 percent cap on commitments to its 11.1 billion euro fund for investors struggling to meet their planned allocations.
The European Trade Union Confederation criticised the EVCA study as outdated and said firms had been saddled with large debts to obtain 20 percent or more profitability.
“Jobs in such firms will go through a bloodbath and this will actually threaten the stability of the whole economy, jobs and workers in non-private equity firms included,” ETUC economic adviser Daniele Melli said.
“Minimum capital requirements for example would make sure firms are resilient to downturns,” Melli said.
By Huw Jones
(Editing by Dale Hudson)