How private equity went political

Damon Buffini: the 'man of the people' leading the PR offensive for private equity

"It would take a stony heart not to feel sorry for Damon Buffini," says The Business. The Permira chief has become "the whipping boy" for Britain's trade unions in their campaign to highlight the evils of private equity a traumatic experience for this shy multimillionaire. Yet in terms of profile, the roasting has done Buffini no harm at all. "He's the most important person you've probably never heard of," The Independent said last week; Europe's most gifted money manager; the face of the New City; "the most powerful black man in Britain".

For years, Buffini, 44, personified the mysterious world of private equity, hugging the shadows even as Permira spun out of Schroders in 2000 gained in power. But his life changed dramatically nine months ago, says the FT. Buffini and his young family were confronted by union demonstrators parading a camel outside their church in south London. "We decided to highlight the quote from the Bible about a camel going through the eye of a needle.

We wanted to portray him as a hypocrite," says Paul Maloney of the GMB. "He'd just made thousands of people redundant [at the AA and Birds Eye], but nobody knew about him." Thereafter, Buffini risked heckling at every public appearance. "Buffini sacks disabled people," ran an advertisement taken out by the union in the Evening Standard. Pickets handed out sick bags when he attended a charity event.

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Yet the more we learn about Buffini, the more questionable the union's choice of target seems. As The Sunday Telegraph says, he is "an impressive advertisement for social mobility". Born in a Leicester council flat, the son of a black US serviceman who was never part of the family, he was brought up by his mother Maureen, who worked at a local hotel to put him through grammar school. "If we said Damon was doing well, she would ask how he could do better," his former economics teacher told The Sunday Times. "He was an excellent athlete", but also shone in class. "He was the kind of character who would spark things off." Buffini studied law at Cambridge, graduating in 1984, and after a spell as a management consultant took an MBA at Harvard. It was there that he first encountered Schroder Ventures. When the firm hosted a party after giving a talk about the nascent buy-out industry, Buffini was waiting at the door, recalls one executive. "He said you can't go in until you promise me a job."

Buffini spent ten years cutting his teeth on relatively small deals before taking charge of Schroder Ventures UK in 1999. When Permira was formed, he was the obvious choice for managing partner. Permira is run along collegiate lines, say insiders, but "Buffini's the driving force and he likes getting his way". Often held up as a shining example of the new "classless" City, he lives in Wandsworth with his wife, Deborah, a lawyer. He supports Arsenal, drinks lager and reportedly greets acquaintances, "hello mate". Yet for all his man-of-the-people credentials, he remains "contradictory and complex", says the FT. Kitted out in sharp, tailored suits, he is fond of shooting and sometimes appears "brusque, cold and stubborn". He's also extremely rich: his earnings to date "could easily top £200m". But his decision to emerge as the standard bearer for private equity as it begins the fightback for its reputation comes at considerable personal cost and was rightly applauded by his peers. He might one day become a "business-school case study" in his own right.

Why private equity has become a political football

"In a calmer political climate, the row over whether private equity is dressed-up asset-stripping or progressive asset management would not get much further than the picket line," says The Sunday Telegraph. "But change is in the air: union power is on the march" and the issue has become a political football in the Labour Party deputy leadership contest.

For many in the industry, the backlash has come as a shock; others see it as a chance to put the case that private equity is "a force for good". Permira, for example, may have cut jobs while restructuring the AA and Birds Eye, but it can point to other investments where jobs increased.

Yet there is something "gloriously nave" about private equity's belief "that everything will be fine if only the industry explains itself better", says Nils Pratley in The Guardian. For a start, it's based on the assumption that private equity delivers. Sure, returns have been terrific in recent years. "How much, though, is the effect of souping-up performance by the use of financial leverage, and how much from the grittier task of improving the quality of a business?" The best practitioners do deliver "something genuinely different and creative". But opportunities to turn around underperforming companies are becoming more limited, even as funds under management mushroom. Ultimately, the current "little row" is the least of private equity's worries. "It is in its bubble phase" with "more money than it can sensibly address". As Stephen Schwarzman, head of private equity giant Blackstone, stated a year ago: "When it ends, it always ends badly." Look out for the fall-out then.