Can private equity halt EMI’s decline?

Amid the acres of coverage devoted to the 40th anniversary of Sergeant Pepper’s Lonely Hearts Club Band, the most celebrated record in pop history, one irony has been overlooked. The album was considered as ephemeral as any other when it came out, but has grown mightier and mightier; the company that made it, on the other hand, was rightly regarded as one of the giants of British industry back in 1967, but has never looked weaker than it does now.

Indeed, by the time the Sergeant celebrates his half-century — not to mention the palaver when he hits 64 — EMI may have shuffled into the history books, at least as far as being a public company is concerned. It has already agreed to a takeover bid from Guy Hands’s private equity firm Terra Firma. It may yet face a rival offer from Warner Music or other private equity bidders. Whatever happens, its days as a quoted entity look numbered.

Within this story there is a cautionary tale for the British economy. We pride ourselves on the idea that we may not make much stuff anymore but we still have a lead in ‘creative industries’ — and there is no corner of creativity in which the UK is more dominant than pop music. Yet Britain’s one major player in the recording business, EMI, has spent the last few years stumbling from one disaster to another. Maybe we’re not so good at this creative industries stuff after all.

Despite its illustrious history, EMI needed a long period of relative calm to rethink its business from top to bottom in the aftermath of the digital revolution. The City was never willing to give it that kind of space. Will private equity ownership be any better? This will be a fascinating test of the claim made by private equity bosses last week that they can nurture businesses through a period of change better than the public markets.