Excerpts
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The nursery I visited is backed by private equity, a surreptitious and tremendously powerful realm of finance that now has its hands on just about everything. Private equity funds and related asset managers own water companies, apartment blocks, student accommodation, care homes, children’s homes, funeral parlours and more. The titans of this industry have perfected a cradle-to-grave model of investment focused on the places we live, work, grow old, and eventually die, capturing these core services and squeezing them for profit.
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I’ve spent the last four years researching private equity, and during that time I’ve been blown away by both the sheer scale of its involvement in our lives, and by what it reveals about how power and wealth now operate. A clue lies in its name: private equity deals in companies that are private. Unlike publicly listed companies, private equity-owned firms publish as little as possible about their activities and accounts, making it hard to follow the money and see how your childcare fees are spent, or whether a company is loss-making or not.
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The term itself is a kind of camouflage, involving no mention of the vast amounts of debt involved in most of its deals. The basic mechanism at their heart involves something known as a “leveraged buyout”. It works like this: you, a fund manager, buy a company using a sliver of your own money and borrow the rest. Then, you load this debt on to the company you just bought. If the deal goes well, you pocket the winnings. If not, it is the company, not you, that is on the hook. In theory, this debt is supposed to create leaner, meaner, more efficient businesses. In practice, it can have disastrous effects on public services. In the case of nurseries, despite amassing vast debts, private equity-backed nursery chains have done little to address the shortage of childcare places, and may be more vulnerable to collapse. This leaves parents without childcare and workers without jobs.
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