Why is private equity stalking Sainsbury?

What exactly are private equity groups? And why are they interested in Britain's third-largest supermarket? Simon Wilson explains what's going on behind the headlines.

What do private-equity groups do?

They specialise in what used to be known as leveraged buyouts'. Essentially, a private-equity deal involves a group of investors buying up a public firm and taking it into private ownership, usually borrowing massively (80%, or even more, of the price) to do so. Sometimes private equity' also refers to takeovers of firms that are already privately held. Private-equity investors launch a bid because they believe a business, or parts of it, is worth more than its current market value, and that they can release that value (see the box below).

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Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.