June 27, 2007 / 9:41 PM / 12 years ago

Unions vow to crank up the heat on buyout firms

NEW YORK, June 27 (Reuters) - After years of quietly reaping windfall riches, private equity managers now find themselves under siege by bond buyers, hard-bargaining stock holders and lawmakers seeking higher taxes.

And now labor unions are jumping in.

While more than a hundred bankers and investors attended a dealmaker conference at the New York Stock Exchange, two union groups on Wednesday brought a handful of people to protest the growing and, in their view, unchecked power of these well-heeled and secretive investment firms.

“America is waking up to the fact that private equity is everywhere and it has huge impact not only on the economy but workers and communities,” said Andrew McDonald, director of the private equity campaign for the Service Employees International Union, or SEIU, which represents 1.8 million workers.

The service workers union, together with the labor-affiliated Working Families Party, plan to host protests this summer, raise awareness of deals they say hurt workers and issue critical reports about investment firms like Bain Capital.

Buyout firms have been active for more than 20 years, but in recent months they have become a kitchen table issue.

The billions of dollars of wealth generated by Blackstone Group (BX.N) for its founders during last week’s initial public offering and the takeover of iconic companies like Chrysler have helped raise the public profile of close-to-the-vest investors.

“It can’t be private anymore. It has to be public,” said Dan Cantor, executive director of Working Families Party, during the demonstration on the corner of Broadway and Wall Street.

The SEIU in April unveiled a report highlighting its concerns about buyouts, which can lead to job cuts, the elimination of pension plans and cut backs in health coverage.

Among its initial targets is the $4.7 billion Clayton Dubilier & Rice takeover of ServiceMaster Co. (SVM.N). The union officials said they would host a demonstration at the shareholder vote on Thursday in Chicago.

This summer, the campaign will host student town hall meetings to scrutinize the takeover of SLM Corp. SLM.N, the student loan giant better known as Sallie Mae, by JC Flowers & Co., Bank of America (BAC.N) and JPMorgan Chase & Co. (JPM.N)

The unions also will issue a report this summer focused on Bain Capital, the private equity firm and former employer of Republican presidential nominee Mitt Romney.

“What we’re saying is what is happening in private equity is critical to the future of America and we need to have a conversation about how we make sure that workers and other people aren’t left behind by the buyout boom,” said Stephen Lerner, assistant to the president of SEIU.

The union groups complained that in buyouts, firms often extract tens of millions in fees, float bonds to pay themselves a cash dividend and charge management fees to portfolio companies. At the same time, employee benefits at these same companies are eliminated or stripped down.

“We are determined over this summer and the next year to shine a light on them. They like to operate in private. We need them to operate in public. The number of workers’ lives affected is enormous,” Lerner said.

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