Treasury officials are examining private equity deals to see if they have benefited local regions as concerns grow over the pace of takeovers of British companies, The Times has learnt.
Private equity takeovers of British companies this year have reached their highest level since 2007, and analysts believe that more than 60 companies are vulnerable in this quarter.
Wm Morrison, the grocer, is at the centre of a bidding war between three US buyout companies, while in the past few days, Smiths Group, a FTSE 100 company, has received a takeover approach for its medical division and Tate & Lyle has agreed to sell a controlling stake in its bulk sweeteners and industrial starches division to private equity.
A rush of deals, driven by depressed UK asset prices and the successful rollout of the vaccine programme, has increased fears of job losses and risks to the economy and national infrastructure from private equity ownership.
The Treasury study is understood to include an assessment of private equity deals around the country, including how they have benefited companies and the areas where they are based.
Labour called on government yesterday to introduce a public interest test for takeovers that would allow ministers to intervene if an acquisition has long-term implications for the UK’s economy, national infrastructure and jobs.
Ed Miliband, shadow business secretary, said: “We should welcome inward investment into the UK but other nations do not allow their critical, strategic businesses to be exposed without a proper analysis of the impact on their long-term industrial base.”
Ministers may intervene under the Enterprise Act 2002 where there are issues concerning national security, public health, media plurality and the stability of the financial system. “Private equity takeovers are often leveraged with large amounts of debt, which can end up being owned by the acquired company and can play a significant role in subsequent business insolvencies,” a Labour spokeswoman said.
The last time a big inquiry by ministers into private equity takeovers was conducted by ministers was in 2007, when takeover deals announced in the year to mid-July reached £28.7 billion, close to the £24.7 billion recorded so far this year so far, according to Dealogic, the data provider.
Analysts at Canaccord Genuity have identified 65 listed British companies from 17 sectors as “top picks” this quarter. They said the stocks, which include Dixons Carphone, Halfords and Vodafone, were “low-hanging fruit”, with high free cash flow returns relative to their market value.
Kwasi Kwarteng, the business secretary, has launched a consultation on plans to bring larger private companies within the definition of a “public interest entity”, which would mean that the groups face more disclosures and directors’ liabilities.