THERE is a new power in the world of business. It links the Savoy hotel with Burger King, combines United Biscuits with National Car Parks, and mixes Kwik-Fit with Debenhams.

The identity of this new power is, of course, the private-equity sector — the secretive investment firms that now own much of the British economy.

Private-equity firms have become Britain’s biggest private-sector employers. Their funds control companies responsible for paying the wages of 2.9m people. Yet despite the breadth of their influence, little is known about the people behind the leading privateequity houses — Apax, Permira, Blackstone, Texas Pacific Group and Kohlberg Kravis Roberts.

From humble beginnings in management buyouts almost 25 years ago, the private-equity firms have grown and grown. These days, it is a rare business that is sold or floated without being given the once-over by someone from the world of private equity.

Looking to come to the stock market? Best run a “twin-track” process and see if you can tempt a buyout house to cough up instead. Thinking of selling a division? Hire an investment bank to run an auction and attract interest from all the private-equity firms.

This month Texas Pacific backed the £2.5 billion deal to buy 1,450 pubs from Scottish & Newcastle, and the £1.7 billion purchase of Debenhams.

According to the Centre of Management Buy Out Research at Nottingham University, there were 620 private- equity deals last year — 468 management buyouts and 152 management buy-ins, worth a total of £15.3 billion. In 1979 there were only 20 deals with a combined value of £23.9m.

The leading firms now have interests in a bewildering variety of businesses. Texas Pacific’s other investments have included Burger King, Seagate Technology, Punch Taverns, Del Monte Foods and the Ducati motorbike business.

Private-equity firms have become the new conglomerates, with fingers in a multitude of corporate pies. But this raises a difficult question.

In the 1970s and 1980s, conglomerates such as Hanson, BTR and Williams were enormously successful as they bought up companies, stripped out costs and improved their management.

But in the 1990s the formula stopped working. There were fewer poorly managed businesses and, as the conglomerates became bigger, it became much harder to find substantial acquisitions that needed little more than tighter cost controls. More specialist management skills were required, and the conglomerates didn’t have them. They came to be seen as corporate dinosaurs and have now largely died out.

What is to stop the private- equity firms succumbing to the same fate? Their focus on cutting costs and cash generation looks remarkably similar to the approach of the old conglomerates. And they similarly lack the depth of specialist management skills.

John Cole, corporate-finance partner at Ernst & Young, says: “Private-equity houses are facing a dichotomy about how they approach their investments — are they just complex bank managers or do they actively engage with the companies they own to drive these businesses forward?” Unsurprisingly, the private-equity firms insist that they are more than just financiers, and that they bring better management to the businesses they buy. Even so, the historically lavish returns from private- equity investments — 20%- 30% a year in some cases — do not stem from smart management. They are more an illustration of the power of gearing, the use of borrowed money to finance businesses that are expected to deliver a sharp improvement in performance.