Private equity getting rich off subsidies and tax breaks
An article in the Dirt Diggers Digest this month outlined how private equity barons have made a fortune over the last year.
The article states that Leon Black, the founder and chief executive of Apollo Global Management, received $546 million in compensation. Stephen Schwarzman of Blackstone received $465 million and William Conway of the Carlyle Group $346 million.
These three men are also well-placed on the new Forbes list of the world’s billionaires. Schwarzman comes in at No.122 with a net worth of $10 billion; Black at No. 240 and a net worth of $5.8 billion; and Conway No. 520 with $3.1 billion in net worth.
The site reports that their fortunes are made not only by the recent buoyancy of the stock market but also because of the "favorable federal tax treatment of the revenue they extract from their portfolio companies".
New research by Good Jobs First also recently found that they were aided by government subsidy.
The Digest reports that:
"Of the 50 largest buyout firms on the Private Equity International ranking of the largest players in that field, 30 were found to have subsidized portfolio companies. (Many of the other 20 either don’t reveal their portfolios or don’t do business in the United States.) Those companies had received a total of 1,332 subsidies worth $1.8 billion (dollar values are not available for some awards)."
Here are the buyout firms whose portfolio companies have received the most in cumulative subsidies:
Silver Lake Partners is No. 35 on the list of top parent companies, with total associated subsidies of $482 million. This is mainly a reflection of the fact that Silver Lake took over the computer company Dell, which has received giant subsidies in places such as North Carolina and Tennessee. (We attribute past subsidies to a company’s current parent, since awards often stretch over many years and usually transfer with a change of ownership.)
Onex is No. 45 on the list with subsidies of $388 million, the largest amounts coming from the large packages Spirit AeroSystems received in North Carolina and Kansas.
Blackstone is No. 91, with 141 subsidy awards totaling $203 million awarded to several dozen of its portfolio companies.
Apollo Global Management comes in at No. 111, with 107 subsidies amounting to $158 million. Among its most heavily subsidized portfolio companies are Berry Plastics and Verso Paper.
Other major buyout firms are also on the list, including TPG Capital ($68.6 million), KKR ($54.9 million), Bain Capital ($51.6 million) and the Carlyle Group ($36.6 million).
This story has been added to our corporate database. The database powers all our live product guides, giving the score for each company on our rankings tables. Find out more about how we rate companies.
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