EMI disaster reveals the truth about private equity's 'magic sauce'

Guy Hands' disastrous buyout of EMI is an embarrassment to all concerned. And it lays bare the myth of private equity - that you have some kind of 'magic sauce' that turns tin into gold.

Guy Hands. What was he thinking? There was no way he could have come out of his court case well. Even if it had been proven somehow that David Wormsley, chairman of Citigroup's British broking team and once a close friend of Hands', had tricked him into buying EMI, the case would have shown that he has no more negotiating skill or emotional neutrality than the rest of us have when confronted with our dream house and a dodgy estate agent.

During the case, he more or less admitted that he was so desperate to own EMI that he upped his bid for the firm by a billion or so based on a couple of last-minute phone calls, in which he says Wormsley told him that a rival bidder was in the running. The price he paid was then based not on a rational calculation of what EMI's current and future earnings stream might be worth, but on a need just to beat the other bidder and have the firm at all costs. This can make sense when it comes to dream houses. But it never, ever makes sense in business. Which might explain why Terra Firma codenamed the deal Dice.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.