New IUF Publication on Private Equity and Collective Bargaining
The global credit crisis has temporarily halted the mega deals which characterized the private equity boom of recent years, but has not eased the financial pressures resulting from leveraged buyouts which can fundamentally transform power relations and collective bargaining at the workplace.
In fact, these pressures risk becoming even more severe.
The buyout business requires two fundamentals: easy access to credit and rising stock markets on which to float public offerings of companies taken private. At present, public equity markets are slumping, and nobody wants to buy paper backed only by a pile of debt.
In The Harsh World of Leveraged Buyouts Has Suddenly Gotten Harsher, published by the IUF in August 2007, we wrote:
An abundance of cheap credit has made it possible for private equity owners to steadily drain corporate cash flow through predatory financing which under normal circumstances would push a company into insolvency. When the exit doors are blocked, and new debt can no longer be obtained cheaply to refinance the old, cash flow is squeezed even harder. The result is likely to be even more pressure to cut costs through layoffs, closures, outsourcing and further reductions in productive investment. Collective bargaining power, already eroded under the buyout onslaught of recent years, will come under heightened pressure. And more company pension funds will face deficits, capping and closure.
For unions in private equity-owned firms, the "transparency" promised by the UK Walker Report, for example, may bring greater general disclosure of the funds' financial operations, but will not deliver the specific information workers need for collective bargaining when the boss is a buyout fund.
Private Equity and Collective Bargaining: Guidelines for Negotiating with Portfolio Companies explains concisely why the financial mechanisms behind a leveraged buyout matter to employees, underlines the importance of full disclosure and union access to financial information for collective bargaining and provides a checklist of the information unions need to negotiate effectively.
To download the brochure (available in English, French, German, Spanish and Swedish) click here.