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This is an audio transcript of the FT News Briefing podcast episode: Bridgepoint’s hidden executive pay

Marc Filippino
Good morning from the Financial Times. Today is Monday, September 6th, and this is your FT News Briefing.

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Marc Filippino
The amount of dealmaking in 2021 could break records. And what direction might Japan go in now that its prime minister stepped down? We’ll take a look. Plus, Bridgepoint went public earlier this year, but the FT found that the UK private equity firm has kept some executive pay hidden.

Kaye Wiggins
When a company goes public, you can expect to see how much money its top executives make, right? That’s kind of a really important principle of capitalism. But now we’ve got a company that’s listed. We can’t really see the whole picture.

Marc Filippino
I’m Marc Filippino. And here’s the news you need to start your day.

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Marc Filippino
2021 has already seen nearly four trillion dollars worth of deals, and at this pace, total M&A activity this year is set to pass the all time high set in 2007. That’s when 4.3 trillion dollars worth of deals were announced. So which companies are getting busy? Well, tech, financial services and real estate sectors have all seen booms. Companies are trying to take advantage of super cheap financing because of low interest rates. And we told you about that last week, that investors and dealmakers are expecting a corporate debt binge this month, that’s so companies can lock in those low rates to potentially do even more deals. And there have been a few groups that have benefited from all this activity. Wall Street banks have seen their revenues boosted because of all the fees. Then there are employees. The M&A boost has created a premium for talent, which means salaries for some employees have increased.

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Marc Filippino
Yoshihide Suga last week announced that he will step down as Japan’s prime minister. It took the country by surprise, given that Suga had only taken the role last year. Now compare that to his predecessor, Shinzo Abe, who led the country for more than eight years. So his popularity nosedived after he was unable to rein in the country’s covid-19 outbreak and pushed through with the locally unpopular Tokyo Olympics. He also lost the confidence of key party members. So what could Japan’s leadership look like now that Suga won’t seek re-election this year? The FT’s Tokyo correspondent Kana Inagaki says there are some more investor-friendly options than others.

Kana Inagaki
So there are a couple of contenders. So one declared runner, Fumio Kishida. He’s a former defence minister. So he’s considered a candidate that would actually symbolise continuity and also investors like him, because when he declared his bid, he suggested that he might roll out a massive economic stimulus package to address the fallout from the pandemic. And another candidate is Taro Kono. He hasn’t officially declared his bid but he’s the current vaccine minister and he’s very popular within the public. So there is hope that if he becomes LDP leader, then he may be able to bring victory for the LDP and perhaps stabilise politics as well.

Marc Filippino
Kana, why are people more broadly concerned about Suga’s resignation?

Kana Inagaki
Yes. So with Suga’s resignation, which came just, you know, one year after he was appointed, there is concern both among, you know, investors in Japan and also among corporate executives as well, that Japan is going to return to an era of political instability. And, you know, perhaps the revolving door of premierships as well, which was a characteristic of Japanese politics before Shinzo Abe came to power. There is concern that if it’s going to lead to political instability, it could drive away investors. And there’s also concern about whether there’s going to be a leader who can actually compile a long-term vision for the country and a long-term economic measures to address the pandemic as well.

Marc Filippino
So what’s next, Kana?

Kana Inagaki
Next up on the schedule is there’s going to be a leadership race for the ruling Liberal Democratic Party. And whoever wins this race will basically become the prime minister and lead the party in the upcoming general election, which is expected sometime before the end of November. With Suga stepping down, it will open up to people who were not planning to run if Suga was running. So it’s going to be interesting to see who’s going to raise their hands for the LDP leadership race.

Marc Filippino
Kana Inagaki is the FT’s Tokyo correspondent.

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Marc Filippino
When a company goes public, they’re supposed to disclose all kinds of financial information to their investors. That’s why it’s called going public. But there’s a private equity company that went public in London this summer and is still keeping some critical information private. The FT’s Kaye Wiggins has been digging into the story. Hi, Kaye.

Kaye Wiggins
Hi, Marc.

Marc Filippino
So what’s so eyebrow-raising about this? Why did this catch your eye in particular?

Kaye Wiggins
So normally when a company goes public, you can expect to be able to see how much money its top executives make, right? And that’s kind of a really important principle of capitalism, right? That, you know, once you understand how much money someone’s paid and how they’re paid, then you can understand their motivations, their incentives, how well they’re doing and you know how much of the money that the company makes is ultimately ending up in the pockets of the people at the top. But now we’ve got a company that’s listed in London where you can’t really see the whole picture. And that company is Bridgepoint. It’s a private equity firm, probably best known for owning Pratts, the coffee and sandwich chain. And it’s the first private equity firm to list in London since the 1990s.

Marc Filippino
So did Bridgepoint disclose any information about executive compensation, anything at all?

Kaye Wiggins
So Bridgepoint does disclose the salaries and the bonuses of its most senior people. And it’s important to stress here that Bridgepoint doesn’t appear to have broken any rules. Certainly we’re not alleging that they have, but what it’s done is listed without saying how much money the top people individually receive in something called carried interest, which is a 20 per cent share of profits from the funds that it invests. So in the US, where big private equity firms like Blackstone and KKR have listed, they do disclose that information. They do say the total sum of money that top executives have made from their companies, including carried interest. In a good year when a big sum of private interest is paid out that can just dwarf your salary and your bonus. You know, these can in some cases be life-changing sums of money.

Marc Filippino
What has Bridgepoint said about all this? And what, you know, what have investors said about this?

Kaye Wiggins
So what Bridgepoint says is that it has followed all relevant UK listing disclosure regulations in the prospectus and that their advisors have confirmed that they followed all the relevant UK listing disclosure regulations and that to suggest otherwise is wholly misleading and inaccurate. And, you know, just to be clear, at this point, as I said earlier, we’re not suggesting that they’ve broken the rules and we’re just suggesting that that the fact that this listing has happened in this way raises interesting questions about the level of disclosure that we in the UK require from companies when they go public. Investors haven’t said very much yet. I mean, I spoke to somebody who is an equity analyst following the stock, and he didn’t seem too troubled by this at all. He said, crucially, they do know the total sum of carried interest that is paid out per year across the whole company. But what they don’t know is how that is broken down between particular individuals. And so they were kind of comfortable with that because it allowed them to analyse the remainder you know how much is available for the benefit of shareholders and sort of seemed relatively relaxed about it. So it’s clear that there are different perspectives on this.

Marc Filippino
Kaye, there’s one takeaway for all this. You know, what is it? Why does it matter?

Kaye Wiggins
I think one of the reasons why this matters a lot is because there are lots of other private equity firms in Europe that might consider an IPO. They might consider going public, especially at a time like now when we can see that the shares of a lot of listed private equity firms are trading either at or near and of all-time highs. Now, one thing that has put some private equity firms off going public is that, you know, a lot of senior executives are nervous about the idea that people might know how much money they’re making. You know, often these people are paid a lot more than other business leaders. Some of them worry about getting targeted by politicians you know in the US. Sometimes senior people in the private equity industry have come in for a lot of scrutiny, you know, in some cases criticism about about their pay. And so, you know, in Europe, people are a bit wary of that. So what we have here is a recent London precedent for a way to get the best of both worlds. You can list and you can also not disclose to the whole world exactly how much money an individual person is making in carried interest.

Marc Filippino
Kaye Wiggins is the FT’s private capital correspondent.

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Marc Filippino
And before we go, let’s take a quick look at this Scottish beer group BrewDog. It is known for, among other things, its publicity stunts and unusual beer creations.

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The next step is we’re gonna fry up the bacon to try and bring that out some of the fat. With a lot of maple syrup. And improving the beer...a little bit of maple syrup? A lot of maple syrup...

Marc Filippino
This one time two-man craft brewing operation is now the UK’s largest craft brewer. It has pubs and even hotels around the world. Now its latest move, announced recently, is a partnership with Japan’s largest brewer, Asahi. Asahi will use its distribution capabilities to get BrewDog beers with names like Hazy Jane and Elvis Juice onto Japanese supermarket shelves. The plan to boost BrewDog sales in Japan comes as the brewer is planning for an IPO in London.

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Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.

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