'The rights and wrongs of private equity'

On 11 November 2010, Marco Pagni, Group Legal Counsel and Chief Administrative Officer of Alliance Boots, delivered a speech to the audience of the BVCA Summit. In tackling the issue of "the rights and wrongs of private equity," he discussed the benefits that the private equity ownership model has had on Alliance Boots since being taken private by Stefano Pessina (Executive Chairman) and KKR in 2007.

The key highlights were:

Firstly, a consideration of why change was needed. Post the Alliance Boots merger in 2006 and pre-take private the following year, Alliance Boots found that as a public company its ability to change was not optimised.  Decisions were not being made and implemented quickly enough and the company's vision - to be a global leader - was not moving forward at the required pace.

Secondly, an assessment of the benefits of the private equity partnership with private ownership at Alliance Boots: Since being taken private in 2007, Alliance Boots has flourished. The business is being led by a highly engaged and experienced management team which has the direct and daily contribution of the owners, Stefano Pessina and KKR, to create long term sustainable value which is shown by the strength of the Group's recent operational performance.

With investment of over £1 billion across the Group since 2007, Alliance Boots has been able to grow the business, both in the UK and internationally. Furthermore, KKR has supported Alliance Boots' strong commitment to the corporate social responsibility agenda, with an increased scope and intensity of its social initiatives since privatisation.

And finally, to conclude on the question over the rights and wrongs of private equity: While stating that the Alliance Boots experience has seen all of the "rights" and none of the "wrongs" of private equity, the intention is not to portray private equity as a panacea. Indeed, when managed badly, private equity ownership, just as public ownership, can be to the detriment of companies. Whether private equity or public ownership works best depends on the development stage and needs of a company. At Alliance Boots, at this stage in its development, the current partnership between private ownership and private equity works best.