Outside the majestic Wittenbergplatz subway station in Berlin, activist Hedda tells people passing by that the majority of the superrich in Germany inherited their wealth.
Striding back and forth in front of a massive banner accompanied by other protesters and a big polar bear in a pink cape, she cites an analysis that found only one in four billionaires is self-made in the country.
“Which tax can the government use to fairly redistribute this excessive wealth generated by genetic lottery?” Hedda shouted.
“Inheritance tax!” someone yelled back. The activists, who are part of a group that calls itself NoSuperReturn, cheer and someone hands the person a golden chocolate coin.
It’s a lively kickoff to a week of protests around SuperReturn, a private equity conference in the German capital that brings together participants representing more than $50 trillion (€43 trillion) in assets under management, according to its organizers.
The basics of private equity
But why are private equity firms so controversial?
Here’s how they work: First they collect investments from pension funds, insurance companies, banks and wealthy individuals.
With that capital they buy companies with the explicit aim to resell them in three to five years. They promise a massive return — much higher than typical returns on the stock market. But that profit is largely achieved through debt, a method known as a leveraged buyout.
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To buy the company, private equity firms typically finance acquisitions with about 30–40% equity and 60–70% debt. So, the money comes primarily from investors, while the private equity firm only contributes a small share.
In an attempt to further increase returns for investors, the companies bought by private equity firms are often restructured, staff is cut, assets are sold off and large amounts of debt are taken on.
Extracting value and selling high
At the SuperReturn conference extracting value and increasing returns is the centerpiece of every panel — no matter if it focused on medium-sized companies, the defense and infrastructure sector, or volatile geopolitical times.
“In any buyout, they [the private equity firms] have less than one percent at stake, which means that they are playing with other people’s money,” said Rosemary Batt, a professor emeritus of human re
Together with her colleague Eileen Appelbaum, Batt has been studying how private equity operates for more than 15 years. “They’re taking risks with other people’s money. They win on the upside,” she said. “They do not lose on the downside.”
Back at the conference a panelist remarked: “The biggest challenge is how to sell for the highest price.”
It’s a primary objective for private equity, and yet for years they’ve had trouble selling their acquired companies again. At the conference the so-called exit backlog is a frequently repeated concern.
Taking more out than putting back in
Importantly, the way that private equity extracts wealth from businesses can have detrimental effects on companies, workers, clients and the economy more generally, says Batt.
“The profits from companies, from productive enterprises, are going into the pockets of financial actors, not being put back into companies to help them grow and be innovative and compete well in the economy,” she told DW.
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Though private equity is present in almost every market, its practices in the health and elderly care sector are particularly concerning, says Batt, as companies often take out more than they invest.
Alloheim, the largest privately owned nursing home chain in Germany, has been passed twice from one private equity firm to another, for example. First from Star Capital Partners to Carlyle Group, a major private equity firm from the US.
In 2017, Carlyle Group sold Alloheim to Nordic Capital. Later, Nordic Capital began the process of selling the company to an investment bank. This sale was halted in 2024 because of difficult market conditions.
But market volatility, it seems, can also be beneficial.
Private equity and global volatility
“Volatility is our friend,” said one panelist, pointing to different opportunities. It’s a sentiment shared by many participants.
Another panelist compared the past years to the “Hunger Games” with the COVID-19 pandemic, Russia’s invasion of Ukraine, plus the tensions in the Middle East and concerns over the Strait of Hormuz.
One bright spot is the German defense industry. According to the manager of a German private equity fund it’s a boon for investors because of all the government money available right now, which he expects to continue to flow for the next 10 to 20 years. On the same panel, an American, whose firm has been involved in defense contracts for decades, said they tripled the money they invested.
Yet, Batt contends private equity buyouts don’t deliver on their promises of exorbitant returns.
“The median fund has not beaten the stock market since the vintage year 2006,” she said.
According to her, the research also shows that the companies affected by private equity buyouts have around 20% higher bankruptcy rates than average publicly traded companies.
A polar bear, a pink cape and an elephant
On the third day of the conference, the NoSuperReturn activists declared the area in front of the conference hotel a toxic area and tried to prevent attendees from entering.
Some of the activists were wearing yellow protective suits and gas masks. Others were in business suits lying on the road as if dead — the victims of an economic system that prioritizes profit over life. But police moved in almost immediately to clear the area.
“We want a shift in mindset,” said Dominik Lange, a spokesperson for the group. “For an economy that ensures a good life for everyone.”
For their final protest, around 200 people gathered near the conference and made as much noise as possible as the moved through the streets.
Among them a trio dressed up as lobbyists. There was also a dragon puppet, the polar bear with the pink cape and three puffy elephants with a banner that read: “The elephant in the room: Tax The Rich.”
Edited by: Tim Rooks
