A study of investment activity in Europe’s five largest private equity centres in 2008 illustrated the damage done to the buyout industry by the credit crunch. But as key figures from Europe’s private equity representative bodies gathered for the launch of the findings, they were more focused on discussing a different threat, that of the potentially very damaging Directive on Alternative Investment Fund Managers.
The European Commission’s proposals were most aggressively criticised, and not for the first time, by Simon Walker, chief executive of UK association the BVCA. He called the directive “shoddily and shamefully drafted”.
“They tacked private equity on at the end and it reads that way. It [the Directive] was produced at no notice and is regarded with contempt by many member country governments because of its methodology,” said Walker.
Private equity’s response to the Directive has led to closer ties between the associations and an unprecedented spirit of co-operation has emerged between EVCA and the country-specific associations.
The heads of Europe’s private equity bodies were fresh from a meeting the night before with EVCA chiefs Jonathan Russell, chairman, and Javier Echarri, general secretary.
Dörte Höppner, managing director of BVK, the German Private Equity and Venture Capital Association, emphasised the importance of the individual country bodies working in tandem with EVCA to maximise the effectiveness of the lobbying process.
“The European process is a multi-national process . . . It makes sense to have the national associations preparing the ground in their own countries,” she said, leaving EVCA to lobby the Commission.
The different European private equity representative bodies have in the past certainly had different agendas and to some extent still do. In contrast to the UK and France, where private equity is already heavily regulated, BVK, for example, is lobbying the German government for some form of private equity legislation, as private equity is not regulated in Germany.
But it seems that the threat from the Directive is great enough for the different associations to find some common ground and work together to champion appropriate regulation rather than that currently proposed.
“Private equity is well-positioned to assist Europe’s recovery through investment in ailing companies as it always has . . . provided you don’t put in inappropriate regulation,” concluded Walker.
When asked, both Walker and Höppner said they didn’t take any particular comfort from the recent European election results. Höppner added that she was glad the election had now taken place because without polls to worry about, BVK could better engage in constructive dialogue with MEPs.
Italian buyouts resilient in 2008
The research focused on fundraising, deal and divestment activity in France, Germany, Italy, Spain and the UK in 2008. For the main part, the data were simply confirmation of the doom and gloom that has characterised the private equity market since the onset of the liquidity crisis in summer 2007.
Some of the findings, however, did stand out. In Italy, for example, investments in 2008 topped those of the previous year by 30%, with €5.5bn invested in 2008. An increase in the number of larger buyouts in the Italian market accounted for this growth – Barclays Private Equity teamed up with Investcorp to complete the €800m buyout of N&W Global Vending, while Bain Capital and Clessidra bought credit checking business Cerved for €535m.
However, Anna Gervasoni, general manager from Italian association AIFI, noted that in spite of 2008’s strong figures, the Italian buyout market had shrunk dramatically in 2009.
Also surprising was that, with the exception of the UK where deal flow dropped by 8%, the number of deals held up in 2008 in the other four markets. With debt scarce, however, it is hardly shocking that in all but the Italian market, the total sums invested in each market were down.
The UK was hardest hit, with the total amount invested by private equity firms down by 37% to €25.2bn, compared with drops of 20% in France and 5% in Germany.
In fundraising, France was the exception. Fundraising for private equity funds increased by 27% in France, with a total of €12.7bn raised in 2008. This contrasted strongly with the situation elsewhere: fundraising fell by 21% in the UK to €29.1bn and by 57% in Germany to €2.4bn.