Labour: Regulate vulture capital firms, limit leveraged buyouts
The Dutch government should prevent firms from loaning private equity companies money to use for business acquisitions, PvdA Member of Parliament Henk Nijboer said on Thursday. The Dutch labour party MP announced on Thursday he would submit the initiative to the parliament the following month.
“The draining of enterprises should be legally restricted,” Nijboer said. He claimed he knew “dark and despicable sides” of private equity that needed to be restricted.
This concerns cases when private equity firms would strip companies of their assets and earn a profit through the difference between asset value and the amount of money borrowed for the acquisition, whether or not the debts are ever paid back. Nijboer mentioned the cases of NRC Media and child care company Estro to exemplify his argument. American private equity firm Sun Capital also raised eyebrows for similar practice at Dutch retailer V&D.
The liability of directors and auditors should be increased when they make an irresponsible decision aimed only at satisfying their shareholders, said Nijboer.