Good for business – or profit at any cost? The controversial side of private equity – a visual explainer
While it can transform firms for better or worse, the use of private equity in essential services is attracting scrutiny. Here we examine some of its more contentious elements in the UK veterinary sector
Private equity could be the two most controversial words in business. For its supporters, it can bring investment, expertise and efficiency to a company. For critics, it is a one way ticket to profiteering, cutting costs and losing staff.
The arguments over private equity are particularly fierce when it is used in the public sector, particularly the NHS.
What is undeniable is that it is everywhere, with one in eight British workers employed by firms funded by private equity.
So what exactly is it? And why do some aspects of it provoke such strong feelings?
To help explain, the Guardian has created a fictional vet practice to explore some of the controversial practices that can happen within private equity.
The example below is illustrative not definitive, and focuses only on some of the elements that have attracted criticism. It is a vast, complex industry that is hard to capture, with a range of financing structures and practices.
But this example may help to explain why these three more divisive aspects have drawn attention.
Responding to criticism that private equity’s use of debt places a burden on the companies they buy, Michael Moore, the chief executive of UK Private Capital, an industry body and trade association, says private equity uses “leverage” responsibly. In finance, leverage is the use of debt to increase returns gained from an investment.
“Responsible use of leverage is about optimising a company’s capital structure to support growth, not placing it under undue strain,” Moore says: “Lenders undertake rigorous due diligence and will not support transactions they consider over-leveraged.”
He adds: “Crucially, private equity firms succeed by building stronger, more valuable businesses over time, so it is firmly in their interests to ensure debt levels are sustainable.”
Moore also says leveraged buyouts are just one of a range of financing structures used by private equity.
When asked about the negative side-effects of private equity’s profit maximisation, Moore says: “Private equity firms professionalise businesses, helping them adapt to the challenges of the energy transition and tech disruption, with both the capital and expertise that makes them competitive.”
He adds: “The UK is an open market and roll-ups bring real strategic benefits by helping businesses that couldn’t deliver those capabilities on their own.
“They don’t take competition out of the market, but change its shape with firms still competing alongside new entrants and under the watch of regulators to make sure standards and choice are protected.”
In addition to the CMA’s recommendations for the veterinary sector – calling for transparency of ownership and more clearly published prices – there is also a legislative push to set up a new independent regulator for veterinary clinics. At the moment, individual medical staff are regulated but not the businesses they work for.
In response to criticism that private equity’s ownership model prioritises short-term financial goals over the long-term health of the businesses it buys, Moore says: “Private equity investment is inherently long term. Private equity firms hold investments for over six years on average.”
He argues that the financial health of the company is critical to private equity.
“Private equity fundamentally needs to create growing companies or businesses with strong growth potential as the more attractive the business, the higher returns it can deliver to investors,” he says.
Previously, the veterinary sector, which comprised of thousands of small businesses run by owners who were also practising vets, had drawbacks for customers and staff, says Dr David Reader, a senior lecturer in law at the University of Glasgow.
“There are benefits to be had from investment from private equity, in fragmented markets [it helps] realise efficiencies,” he says, citing the ability to invest in new medical technology, flexibility and work-life balance for staff, as well as higher pay for some in the sector.
But, in the view of both Dr Reader and Dr Scott Summers, those benefits need to be weighed against the risks. Especially in sectors centred around care.
“The problem with private equity is it sits at odds with animal welfare, which is the core of this market,” says Summers. “So there is a question here, I think, a societal question. Should private equity be involved in those markets? Does it add enough value given it comes with all those risks?”
Words and build: Anna Leach
Design: Prina Shah
Additional programming: Ed Gargan
Read the full story at The Guardian ↗
Private equity—investment firms that buy and restructure companies—is present across the British economy and generates substantial disagreement about its impact. Supporters argue it brings capital, professional management, and operational improvements to fragmented markets. Critics contend it prioritises financial returns over long-term business health and essential service quality. The veterinary sector exemplifies this tension: consolidation under private equity ownership has introduced investment in technology and improved working conditions for some staff, while raising concerns about animal welfare priorities, pricing transparency, and ownership concentration. Regulatory bodies have recommended greater ownership disclosure and price transparency; proposals for independent veterinary business regulation are also under discussion.
Read the full story at The Guardian ↗
While it can transform firms for better or worse, the use of private equity in essential services is attracting scrutiny. Here we examine some of its more contentious elements in the UK veterinary sector
Private equity could be the two most controversial words in business. For its supporters, it can bring investment, expertise and efficiency to a company. For critics, it is a one way ticket to profiteering, cutting costs and losing staff.
The arguments over private equity are particularly fierce when it is used in the public sector, particularly the NHS.
What is undeniable is that it is everywhere, with one in eight British workers employed by firms funded by private equity.
So what exactly is it? And why do some aspects of it provoke such strong feelings?
To help explain, the Guardian has created a fictional vet practice to explore some of the controversial practices that can happen within private equity.
The example below is illustrative not definitive, and focuses only on some of the elements that have attracted criticism. It is a vast, complex industry that is hard to capture, with a range of financing structures and practices.
But this example may help to explain why these three more divisive aspects have drawn attention.
Responding to criticism that private equity’s use of debt places a burden on the companies they buy, Michael Moore, the chief executive of UK Private Capital, an industry body and trade association, says private equity uses “leverage” responsibly. In finance, leverage is the use of debt to increase returns gained from an investment.
“Responsible use of leverage is about optimising a company’s capital structure to support growth, not placing it under undue strain,” Moore says: “Lenders undertake rigorous due diligence and will not support transactions they consider over-leveraged.”
He adds: “Crucially, private equity firms succeed by building stronger, more valuable businesses over time, so it is firmly in their interests to ensure debt levels are sustainable.”
Moore also says leveraged buyouts are just one of a range of financing structures used by private equity.
When asked about the negative side-effects of private equity’s profit maximisation, Moore says: “Private equity firms professionalise businesses, helping them adapt to the challenges of the energy transition and tech disruption, with both the capital and expertise that makes them competitive.”
He adds: “The UK is an open market and roll-ups bring real strategic benefits by helping businesses that couldn’t deliver those capabilities on their own.
“They don’t take competition out of the market, but change its shape with firms still competing alongside new entrants and under the watch of regulators to make sure standards and choice are protected.”
In addition to the CMA’s recommendations for the veterinary sector – calling for transparency of ownership and more clearly published prices – there is also a legislative push to set up a new independent regulator for veterinary clinics. At the moment, individual medical staff are regulated but not the businesses they work for.
In response to criticism that private equity’s ownership model prioritises short-term financial goals over the long-term health of the businesses it buys, Moore says: “Private equity investment is inherently long term. Private equity firms hold investments for over six years on average.”
He argues that the financial health of the company is critical to private equity.
“Private equity fundamentally needs to create growing companies or businesses with strong growth potential as the more attractive the business, the higher returns it can deliver to investors,” he says.
Previously, the veterinary sector, which comprised of thousands of small businesses run by owners who were also practising vets, had drawbacks for customers and staff, says Dr David Reader, a senior lecturer in law at the University of Glasgow.
“There are benefits to be had from investment from private equity, in fragmented markets [it helps] realise efficiencies,” he says, citing the ability to invest in new medical technology, flexibility and work-life balance for staff, as well as higher pay for some in the sector.
But, in the view of both Dr Reader and Dr Scott Summers, those benefits need to be weighed against the risks. Especially in sectors centred around care.
“The problem with private equity is it sits at odds with animal welfare, which is the core of this market,” says Summers. “So there is a question here, I think, a societal question. Should private equity be involved in those markets? Does it add enough value given it comes with all those risks?”
Words and build: Anna Leach
Design: Prina Shah
Additional programming: Ed Gargan
Read the full story at The Guardian ↗
One in eight British workers are employed by private equity-backed firms Private equity can bring investment, expertise and efficiency to companies Private equity represents a pathway to profiteering, cost-cutting and job losses Private equity use in public sectors, particularly the NHS, attracts particular scrutiny Private equity firms use leverage (debt-funded investment) to increase returns Private equity firms hold investments for over six years on average The veterinary sector previously comprised thousands of small businesses run by practising-vet owners Private equity investment in fragmented markets can realise efficiency gains including new medical technology and staff flexibility Private equity ownership prioritises short-term financial goals over long-term business health Private equity sits at odds with animal welfare, which is the core concern of veterinary markets The CMA has recommended transparency of private equity ownership and clearer published prices in the veterinary sector Proposals exist for independent regulation of veterinary businesses, separate from medical staff regulation
Read the full story at The Guardian ↗
- Private equity funds about one in eight British workers and operates across sectors including veterinary care, attracting ongoing debate about its effects
- Supporters cite efficiency gains, investment, and expertise; critics argue it prioritises short-term profits, uses excessive debt, and cuts costs and staff
- The UK veterinary sector has fragmented into private equity-backed chains, prompting calls for ownership transparency, price disclosure, and independent business regulation alongside existing medical staff oversight