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Overview: Global Solutions Ltd

INTRODUCTION

Global Solutions Limited (GSL) was formerly the section of Group 4 covering prison and court services, immigration detention centres, education contracts, meter readings and 'outsourced services'. In May 2004 it was announced that GSL was to be bought by two venture capital companies1, Englefield Capital and Electra Partners Europe. GSL is especially proud of its work in the Private Finance Initiative (PFI) and Public Private Partnership (PPP) sectors i.e. work with government bodies on privatising, or 'outsourcing', public services such as schools, hospitals and prisons claiming to be 'a leader in the provision of critical support services for public authorities and corporate organisations internationally'2. The company operates prisons and detention centres, and an increasing quantity of other services, in Britain, Australia and South Africa.

GSL's mission statement:

'Through a policy of openness, reliability and integrity, we will become the service partner of choice for government and corporate organisations, and the preferred employer of their staff.'3

In 2005, Britain has the most privatised prison service in Europe and an increasingly hostile attitude towards asylum seekers. Despite receiving heavy criticism from detention industry workers, the prison ombudsman, prison inspectors, visitors to detainees, many organisations which work with detainees and the BBC, GSL is still likely to benefit from the government's increasingly draconian immigration policy. It is also set to gain from the growing trends all over the world for more privatisation of services4, and is at the forefront of exporting prison privatisation.

Within the UK prison industry, the role of private companies is changing and becoming more prominent. The Correctional Services Bill, discussed in parliament in 2004, will if it goes through give private prison directors statutory powers over prisoners in the same way as their public sector counterparts. The implications of this are alarming5.


HISTORY



For the history of Group 4, which owned GSL until 2004, see Corporate Watch's Group 4 profile6.

On its website GSL records its own history in terms of prison privatisation, showing that this was a significant factor in its growth. In 1990, under the Conservative government, the Prison Service invited private companies to bid for contracts to manage prisons. In 1991 GSL, then still owned by Group 4, won the first ever UK private prison contract to manage HMP Wolds in Yorkshire7. In 1994 the company won the UK's first ever PFI prison contract - to build and manage HMP Altcourse, a prison in Liverpool with the capacity to hold 900 people. Altcourse opened in 1997. Since then GSL has expanded to work in more sectors, categorised euphemistically as 'outsourced services', 'care and custody' and 'operational support'8.

In July 2004 GSL was bought by two venture capital companies, Englefield Capital and Electra Partners Europe, in a 207.5 million deal. Both companies make it clear that their interest in GSL stems largely from the current atmosphere of increasing privatisation in many sectors which were previously publicly run. At the same time as selling off GSL, Group 4 merged with Securitas9.

GSL's new owners

Englefield Capital is a relatively new company. Officially launched at the beginning of 2003, it already has an annual turnover of over 9 million and before-tax profits of over 6 million (figures from 2004). It describes itself as 'a private equity fund with assets under management of 700m making European private equity investments in buyout and development capital', i.e. it buys companies, or stakes in companies, which it thinks will make profits, then sits back and watches the money come in. The majority of board members have CVs including experience at financial companies and investment banks such as Warburg Pincus, Morgan Stanley and Merril Lynch.

On the company website, Englefield identifies movements in the European business environment and makes conjectures about what the effects of these may be as a rationale for its investment choices. It suggests that shifts in European socio-economics, such as an aging population, are likely to put pressure on traditional state provision of services and propel a shift towards the private sector.

Other companies listed in Englefield's portfolio are:
  • Canopius (formerly Trenwick Managing Agents Ltd), a general insurance company operating in the Lloyd's insurance market in London. Canopius was Englefield's first investment in 2003.
  • Cognita, an independent schools company created especially by Englefield in October 2004 and chaired by former Chief Inspector of Schools Chris Woodhead. Englefield says that it hopes Cognita will become 'the leading independent schools business in the UK'. Cognita already has twenty schools and is 'actively seeking further acquisition opportunities'.
  • Resolution, a commercial property company. Other investors including Warburg Pincus have also committed to invest in Resolution.
  • TIBH, a financial services company based in Amsterdam but mainly operating in Central and Eastern Europe. Englefield has a 17.2% stake.
  • Zephyr Investment Ltd, another venture capital company.

(Englefield's website has links to all these.)

Electra Partners Europe is another investment company. Its core values include 'To maintain a sharp investment focus on chosen sectors' and 'To maximise shareholder value'. The directors' backgrounds and previous experience follow a similar theme to those of Englefield, with previous employers including Pricewaterhouse Coopers, KPMG and Ernst and Young. Electra operates from Paris, London and Frankfurt.

An older company than Englefield, Electra has a longer list of investments divided into the following sections: business support services, consumer, industrial, financial services, healthcare, media. It describes the PFI/PPP market as one with 'strong underlying macro growth trends'.

As an 'investment rationale' for the GSL deal, Electra said:

'GSL is a unique platform in terms of scale, sector and market position. This is a niche growth investment, where organic growth will be achieved through the development of new business both in the public and private sectors. There is also the opportunity to extend the services offered by GSL through targeted acquisitions.'10


MARKET SHARE/IMPORTANCE



On its website GSL describes itself as 'one of the fastest growing companies in [the PFI] marketplace', a view that is clearly shared by its new owners and the companies who considered buying it (see Electra and Englefields' comments about growth above).

GSL was the first company in the UK to manage private prisons11, giving it some advantage in the market. It is clearly proud of what it considers to be an innovative approach to private companies working in the public sector. Today, GSL runs three of the eleven private prisons in England and Wales, and four of the six immigration detention centres12. Other major companies in this market are Sodexho, usually through subsidiary UK Detention Services, and Serco, often through subsidiaries such as Premier Custodial Group.

Internationally, GSL runs the first private prison to open in South Africa and says it is 'at the forefront of privatisation of prisons in Australia'. At the moment it has a total monopoly on Australia's asylum detention centres.

Out of four contracts in England and Wales for managing prisoner transport, GSL has two, one for the north and one for the east. The other two are held by Premier and Reliance13.

GSL wants to 'become a strategic partner for Primary Care Trusts, through which it is intended that more than 75% of all NHS funding will eventually flow.'14 See below for details of the LIFT scheme with which primary care trusts are working.

References
1. An investment company that invests its shareholders' money in new companies and other risky but potentially very profitable ventures. (from www.guardian.co.uk/theissues/article/0,,184657,00.html)

2. From company website www.gslglobal.com/

3. Ibid.

4. See, for example, www.wdm.org.uk/campaigns/past/gats/index.htm

5. Prison Privatisation Report International, May/June 2004, www.psiru.org/justice/ppri62.htm 'Contractors to have statutory power over prisoners'. For more information on this bill, which also merges the prison and probations services into one National Offender Management Service (NOMS), see www.guardian.co.uk/guardianpolitics/story/0,,1230083,00.html 'Firms to take over discipline in private jails', 3 June 2004, and www.guardian.co.uk/uk_news/story/0,,1336819,00.html 'Jails merger in danger, officials warn', 27 October 2004.

6. www.corporatewatch.org.uk/profiles/privatised_services/group4/group4_1.html , profile last updated July 2003.

7. See prison website www.hmpwolds.co.uk/

8. Information from company website www.gslglobal.com/about_gsl/history.asp

9. www.psiru.org/justice/ppri63.htm#GROUP4DEALS, July 2004, explains the sell-off.

10. www.electraeurope.com/admin/Publisher/EPETransactions/uploads/GSL%20Ref%20TU.pdf 'Transaction Update', July 2004.

11. www.gslglobal.com/press_centre/introduction.asp

12. www.psiru.org/justice/ppri63.htm#UNITEDKINGDOM 'Contracts update', July 2004.

13. 'Judge blames prison for court delays', The Guardian, 8 October 2004.

14. P.33, GSL's 2003 annual report.

 
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