The British chemist, whose roots go back to the 1830s in Nottingham, was the first FTSE 100 firm to go private when it was bought for £ 11bn in 2007.
The deal, which still holds the record as the UK’s largest private equity purchase, was backed by Kohlberg Kravis Roberts (KKR) and led by billionaire Stefano Pessina, now CEO of the pharmacy chain.
Boots carried £ 9bn of debt as part of the leveraged buyout, in which KKR and Pessina contributed £ 2.5bn of their own cash and borrowed the rest from the investment banks. Within days of the deal closing, Alliance Boots paid a £ 1.55bn dividend to a holding company, although a spokesperson at the time said the money remained within the company and had not been paid to the new owners. The costs of servicing your debt pile in those first few months were estimated at £ 65 million per month.
The deal also led the group to move the headquarters of its holding company, Alliance Boots, to Switzerland, a decision that has been criticized for costing the UK 1 million in tax revenue, but which the company has denied was motivated. for tax savings. Boots headquarters remains in Nottingham.
The company was eventually sold to the largest drugstore chain in the United States, Delaware-based Walgreens, in a $ 15 billion (£ 10.8 billion) deal that was completed in 2014. Pessina, who invested approximately £ 1.25 billion of his own equity in the 2007 deal, it was previously estimated that he had won 214 million shares in Walgreens, worth an estimated £ 11.5 billion, as part of the sale.
Debenhams was acquired by a consortium of private equity funds (TPG, CVC Capital and Merrill Lynch) for £ 1.7bn in 2003.
Executives installed to review Debenhams were tasked with reducing costs while increasing sales and profit margins. It meant rehiring some of the stores to save borrowing costs and selling 23 stores to British Land in 2005 for £ 495 million, which were then rented out in expensive rental deals for up to 35 years. The proceeds were paid to private equity investors.
The chain also began discounting items regularly to change unsold stock, a move that has been blamed for dragging the brand lower.
The trio made huge profits on their £ 600 million investment, having borrowed most of the money used to close the deal.
They raised £ 1.2 billion in dividends despite owning the company for less than three years, and critics say they benefited from what’s known as a ‘quick turnaround’ – buying a publicly traded company at a low price. price, load it with debt and then refloat it profit. The company, which owed just £ 100 million when it went private, saw its debts rise to £ 1 billion when it returned to the stock market on a float of £ 3 billion in 2006.
Analysts have said that in its weakened state, Debenhams was unable to generate enough income to reinvest in the business, a problem that ultimately led the company to close your doors earlier this year.
EMI was the world’s fourth largest record label and music publisher when Guy Hands’ private equity vehicle Terra Firma bought the company in a £ 4.2 billion deal in 2007. Terra Firma contributed £ 2 billion of its own equity, while Citigroup, which advised on the deal, promised to take on the debt.
The private equity house described EMI, which owned the Abbey Road studios and later housed artists like Kylie Minogue, Norah Jones, Iron Maiden and Coldplay, as an “asset-rich business” that needed to cut costs “substantially” and change your focus. from hit production to music rights management. He continued to make major senior management changes and, in early 2008, announced that he would lay off 2,000 of EMI’s 5,600 employees.
Meanwhile, Hands’ firm found it more difficult to meet credit conditions set by Citigroup, which Terra Firma says became more “burdensome” during the 2008 bank crash. The company’s financial problems intensified and in November 2009 EMI was in a confrontation with the UK pension regulator, which eventually ordered him to pay £ 200 million in the staff retirement plan.
A month later, Terra Firma filed a lawsuit against Citigroup, alleging that it had raised the selling price of EMI by suggesting that there was another stakeholder in the company prior to the sale. But the jury ruled against Hands, saying he didn’t mislead him into paying an inflated price for the business. Hands launched and dropped a second £ 1.5 billion lawsuit against Citigroup six years later, claiming that he personally lost £ 200 million through the settlement.
Hands handed control of EMI to Citigroup bankers in 2011, after failing to keep up with its debts. EMI eventually parted ways and its recorded music unit was sold. to Universal for £ 1.2 billion in 2011and its music publishing division to Sony for $ 2.3 billion (£ 1.7 billion) in 2018.
George is Digismak’s reported cum editor with 13 years of experience in Journalism