The $35+ billion bid for BCE resulted in Teachers’ pension fund securing a majority stake in the company. Over the next year or so, Teachers’ and its minority US private equity partners will have to turn the company around to find stronger returns. This means two broad decisions: what areas of the business to make large investments in and how to boost margins.
There is no doubt that the latter decision could mean large job cuts, and BCE’s unions have already signaled their intention to put up a fight. The principles of private equity buyout are to reduce the company’s business to its core operations (landline, wireless and cable) and cut costs (jobs) as much as possible. This buyout likely won’t involve the third principle, having the company take on big debt, as Teachers’ has already indicated they’re interested in the investment for the long term.
In the last few years, Teachers’ big equity plays involved international assets. In many respects, it’s easier that way — they can reduce labour costs and widen profit margins without risking criticism from the workers that fund the pension. No doubt unions and their pension funds will be closely watching Teachers’ relationship with BCE’s unions as it looks towards job cuts. Will Teachers’ act like capital and adopt “slash and burn” tactics, or will act as “union capital” and limit the impact of small scale job reductions?
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