He was a punk when EMI shot the Pistols. Now he's the boss and they're all gunning for him

Guy Hands is lauded for sprinkling stardust on failing businesses, but his rock 'n' roll employees don't want to listen. Simon Evans reports

Guy Hands likes a challenge. Lost causes are his thing. Terra Firma, the private equity firm he founded, specialises in buying and reviving ailing businesses. Now, though, he owns the legendary music label EMI, where talk of restructurings and job losses has offended the artistic sensibilities of the star names on his roster. Venerated in the City for having the Midas touch, he is finding it tougher in the record industry to go gold.

The irony is that Hands, although derided now as part of the system, is a one-time rebel who is in a sense revisiting his roots. Thirty years ago, when EMI was jettisoning the Sex Pistols because of the band's notorious behaviour, the self-confessed punk lover spent his gap year punting encyclopedias on the streets of north London. Of the 460 doors he knocked on, Hands made just a single sale.

Similarly, an early foray into the property arena taught him some harsh lessons ,with a nasty lease and a collapsed building costing him £40,000.

Although academically gifted – he studied at Oxford – Hands also suffers from chronic dyslexia, a factor that he says cemented his stubborn streak.

Certainly, his early travails set him in good stead for a career masterminding business turnarounds across a range of industries. He has garnered one of the most enviable track records in private equity, turning sows' ears like William Hill into silk purses.

Terra Firma has invested more than €£11bn in companies since its inception in 2002, primarily in Britain and Europe, and the successes have outweighed the failures.

An anonymous financier he is not; Hands basks in the spotlight. While at the Japanese investment bank Nomura, he flirted with the idea of buying the Dome. It brought him plenty of column inches although the venture never amounted to anything.

"I would have liked to have been a writer or even an actor but my pronunciation is bad too," Hands has said in the past. "So instead I decided to make money."

For a self-styled outsider who despises the influence afforded to the old school tie, Hands is now very much part of the business establishment. Former Tory leader William Hague was best man at his wedding, while invite lists to what are said to be raucous, indeed outrageous, parties at his Sevenoaks home read like a who's who of business and politics.

In splashing out £3.2bn for EMI, he also acquired a who's who of the record industry, but this is an altogether different arena in which to play.

Attempting to revive the fortunes of an ailing music marque is without doubt his most audacious and potentially hazardous project to date. His reputation is on the line.

Last year Hands said: "We get really happy if it's really, really bad. We're just hoping EMI is as bad as we think."

Initial reaction to his turnaround plans suggest his wish could be granted. And some.

Sir Paul McCartney has already defected, as have Radiohead, whose much-derided "pay as much as you think it's worth" internet experiment with the recent In Rainbows album has proved a roaring success. Rumours suggest Hands offered Thom Yorke and Co £3m for the album but they still weren't tempted. Had he succeeded, he would have lost money, which illustrates the enormity of the job he faces.

Reaction from EMI's other lead acts, including The Verve, Robbie Williams and Coldplay, has been damning. So far, Sir Cliff Richard has remained silent.

Last Thursday the Rolling Stones, whose perennial farewell tours are a cash cow for the business, revealed that an album of live performance is to be distributed through rival Universal rather than EMI. Hands' PR representatives were quick to deny that the move was a precursor to a full defection but it doesn't look good in the long term. The timing must surely be more than coincidence.

EMI currently has around 14,000 acts on its roster, but just 15 per cent of releases from this vast stable yield a profit for the company, Hands said last week. So a cull would seem in order. "We cannot provide meaningful support for that number and everyone suffers as a result," said Hands in an address to staff.

As many as 2,000 jobs are on the line at the group, with Hands' team seeking to reap cost savings of as much as £200m. But while that doesn't amount to the kind of hack-and-slash approach for which private equity firms are often attacked, it is perhaps not surprising that staff and acts alike are spooked by Hands.

EMI's previous boss, Eric Nicoli, shied away from the necessary restructuring, instead tinkering around the edges. So it comes as a rude shock when Hands comes up with plans such as injecting more corporate relationships into his stable. "Can you imagine Coldplay posing in Barclaycard T-shirts on their next album cover?" one critic mocked.

Of course not. But protestations that musicians and corporates are like oil and water are laughable. Some of the world's most prominent brands – Pepsi, for example – have cosied up to bands over the years, yielding fat profits. Wanting to get in on the act seems very sensible.

As the dust settles and his arguments and suggestions are examined in more detail, many will appear spot-on. Streamlining a fractured business along more cost-effective lines is something that should have been done years ago. And developing EMI's digital presence is clearly a must – although whether it will be too late is open to debate.

"There is some wisdom. There is some strategy. And for that I support him," was the take of one industry blogger last week. "Change is anathema to the old guard. But if you don't change, you die."

Nevertheless, voices of support have been few and far between, and crucial to getting wary artists onside will be the appointment of an industry name as chief executive. He cannot be head cook and bottle washer.

After last week's presentation to staff and the wider world, Hands jetted off to America, his precise location unknown. But 10 years ago when he began climbing the greasy pole, he revealed that Hawaii was his favourite holiday destination. "It's the only place they can't get me."

If his audacious plans for EMI founder, Hands might find himself receiving the Aloha welcome rather more often than he would like.

Curriculum Vitae:
Guy Hands - Founder, Terra Firma
Age: 48
Education: Judd's School, Tonbridge; Mansfield College, Oxford
Career: eurobond trader at Goldman Sachs; head of the principal finance group at Nomura; founded Terra Firma in 2002.
Family: married to Julia, chief executive of Hand Picked Hotels, a chain of country house hotels; they have four children
Hobbies: karaoke, wine
Homes: Sevenoaks, Kent; Tuscany; Hawaii
You probably didn't know: Hands is severely dyslexic; William Hague served as best man at his wedding