Private-equity raiders scrutinised as they carve up high-street names

London Briefing:The City of London has been at its brutal best - or worst - over the past 48 hours of frenzied deal-making.

Records tumbled as Alliance Boots yesterday became the first FTSE 100 company to fall into private-equity hands, with an £11.1 billion (€16.3 billion) bid from veteran US buyout firm Kohlberg Kravis Roberts (KKR). And on Monday, Barclays unveiled the biggest-ever bank takeover, with a £45 billion offer for the Dutch bank ABN Amro, creating a group with a stock market value of £85 billion.

Unlike the Alliance Boots move, the Barclays deal has yet to be secured but, if it goes through, it will propel the combined group into fifth place in the global banking league. It will also put as many as 23,600 jobs at risk around the world, many at Barclays' headquarters in London's Canary Wharf, as the British bank moves its head office to Amsterdam.

Of the 23,600 jobs destined to go, some 12,800 will be axed completely, while a further 10,800 will be exported to cheaper locations such as India.

Despite assurances that the new private-equity owners intend to invest in the business, jobs are also a worry among the 100,000 employees of Alliance Boots, especially at Boots headquarters in Nottingham.

The frantic pace of takeover activity that has ignited the London market in recent months is reminiscent of the deal-crazy 1980s - only now the stakes are much, much higher. Yesterday's dramatic finale to the six-week battle for the business certainly demonstrated the huge financial power of the private-equity industry.

KKR swept into the stock market to secure its victory by buying up some £1.3 billion of Alliance Boots shares within a matter of hours. Following an old-style "dawn raid" on the shares, KKR had taken its stake through the key 25 per cent level by lunchtime, including the 15 per cent held by Alliance Boots deputy chairman Stefano Pessina, who is backing KKR.

That was enough to force an admission of defeat from rival private-equity bidder Terra Firma, headed by City financier Guy Hands, who had teamed up on the bid with the medical charity Wellcome Trust and banking group HBOS.

When KKR and Stefano Pessina launched their shock move on Alliance Boots in early March, they offered £10 a share for the business, a deal swiftly rejected by the independent directors of the group. Their improved £10.90 a share bid, launched last week, won the board round.

Fortunately for shareholders, Terra Firma intervened just hours later with an offer of £11.15 a share. Yesterday's knock-out blow from KKR saw its terms upped once again, to a heady £11.39 a share.

It was a dramatic - and for shareholders, lucrative - end to a hard-fought battle for one of the best-known names on the British high street.

But claiming its first FTSE 100 scalp also marks a watershed moment for the increasingly powerful private-equity industry. Not only is it the first time one of Britain's blue-chip companies has fallen into private-equity hands, it is also Europe's biggest-ever private-equity deal.

With cash flooding into ever-larger private-equity funds at an unprecedented rate, more deals on the scale of the £11.1 billion Alliance Boots takeover - and above - are inevitable.

At the same time, the Alliance Boots bid, along with private equity's recent unsuccessful tilt at Sainsburys, has opened up the notoriously secretive industry to unprecedented publicity.

The unions, with their repeated accusations of asset-stripping and job-losses, have made their views well-known. They do not welcome the Alliance Boots takeover and remain fiercely opposed to private equity generally.

While there has been some attempt by the industry to defend itself in recent months, there remains a huge public mistrust of the private-equity "barbarians" and their debt-fuelled spending spree.

That is particularly so in the case of a household name company such as Alliance Boots. Although it was formed just nine months ago through the merger of Boots with the wholesaling company Alliance UniChem, the Boots side of the business is a much-loved national institution.

Founded by herbalist John Boot and his wife Mary in 1849, Boots is one of the oldest, and best-known names on the British high street, with a chain of 2,600 pharmacy stores.

As KKR celebrates its victory, it must know that the acquisition of such a high-profile target will have changed the rules of private-equity ownership for good.

The secrecy under which the industry has operated in the past is no longer acceptable. Alliance Boots will shortly be withdrawn from the stock market spotlight but, as its new owners embark on their financial engineering, they will find themselves under unprecedented scrutiny. Withstanding that will prove the real victory for the private-equity industry.

Fiona Walsh writes for the Guardian newspaper in London