CASE STUDY 1: Boots (the pharmaceutical, health and beauty retailer)

admin — Sun, 29 Jun 2008 17:59:05 +0000

The recent purchase of Boots (pharmaceutical, health and beauty retailer) by the private equity firm Kohlberg, Kravis and Roberts (KKR) was financed with £8 billion worth of debt, which allows KKR to deduct around £500 million in ‘interest expenses’ from the net income of Boots. Given that the taxable income for Boots in 2006 was £480 million, KKR now pay no corporate taxes. Before KKR bought Boots, they paid £130million in corporate tax.

While the money not paid in taxes fills a few bank accounts, it is sorely missed in public services like health, education and housing, While the government tells us to prepare for crisis, some people are ready to make money out of it. As the cost of living sky-rockets, it’s tight belts for us and blue skies for a few.

KKR is one of the oldest and largest private equity firms and currently owns well known companies such as Boots and Toys “R” Us. Through its portfolio companies, KKR is effectively the second largest private employer based in the United States, right behind Wal-Mart. With their massive influence on the economy, KKR and other private equity firms are setting the standards and conditions for millions of workers around the world.

CASE STUDY 2: Tenovis

admin — Sun, 29 Jun 2008 17:58:17 +0000

A coalition of private equity firms, including KKR took over German telecom company Tenovis in 2000. Within two years of purchasing the company, they laid off 3500 of the 8000 workers and forced many of the remaining workers to accept a 12.5% pay-cut in exchange for the ‘right’ to keep working. KKR bought the company for US$400 million and sold it for more than 50% more: $635 million.

private equity sucks

CASE STUDY 1: Boots (the pharmaceutical, health and beauty retailer)

CASE STUDY 2: Tenovis