In March Ernst & Young announced Simon Perry as its first global private equity leader, something the firm described as “a new role demonstrating Ernst & Young’s commitment to the industry”. While Perry will obviously act as the external face of the firm’s private equity focused business lines, he describes his role inside the firm as: “being an advocate to how important private equity is to us as a business and making sure that we get the high quality people allocation that this demands.”
This is a somewhat different approach to KPMG, which organised its private equity activities under Oliver Tant in the summer of 2002. KPMG’s private equity group is a distinct group, staffed by separate personnel, rather than a marshalling of resources within existing groups within the firm as Ernst & Young is proposing. (Although the KPMG group can obviously draw on duplicate resources not housed under the private equity discipline.)
Tant, however, has since moved up the KPMG food chain having been made global head of financial advisory services this time last year. As the title suggests, his remit still includes private equity, but the day to day functions Tant was responsible for have now been taken on by Ruston Kharegat, who was previously head of the group doing larger LBO transactions at Deloitte & Touche that jumped ship to KPMG. (That team having ended up at Deloitte’s following the Arthur Anderson collapse.)
Deloitte continues to do private equity work across the disciplines without perceiving the need for an overarching head or dedicated group along the lines KPMG has put in place. Likewise PricewaterhouseCoopers has not succumbed to any such reorganisation of its private equity focused activities. It’s not to say that these firms are doing anything wrong, in fact only time will tell whether KPMG or Ernst & Young have reaped the benefits. KPMG believes it already has, although from an external perspective the jump in KPMG deal flow can be attributed to Kharegat & Co’s defection from Deloitte. But perhaps the very attraction in that move was to be part of a dedicated private equity offering?
Externally it’s almost impossible to know what impact these internal repositionings have had, as that will be judged on things like an increase in business done across disciplines, even if those disciplines (transaction support, tax advice, corporate finance and so forth) sit within one team. Anecdotal evidence suggests some private equity firms like the private equity approach, be it across disciplines or as a distinct group, and the firms that have instituted this approach say it has been done in response to client demand. Other private equity firms are naturally hesitant, especially perhaps those not frequently operating across international borders, where a uniformity of approach can be positively reassuring. Instead these others can be exasperated by the cross selling of products such set-ups within these firms necessarily seems to entail.
What’s not up for debate, however, is the fact that those providing support services, whether it be across the accountancy product spectrum, legal services and beyond, ignore or are perceived not to prioritise their private equity client base at their peril. It’s easy to see why. Private equity last year accounted for just over 50% of all M&A activity in the UK alone, which still represents the largest market in Europe. And the private equity industry is not short of funds, far from it; 2006 is expected to equal 2005 in terms of funds raised by the industry for investment. So in all likelihood, and it’s a point on which most pundits appear to agree, private equity will grow its share of the total M&A market, a position also expected to be replicated across continental Europe, albeit at a lower rate.
Law firms, like SJ Berwin, which have long seen private equity as core to their product offering, have notably reaped the benefits of doing so, both in terms of work undertaken and profile in the market. It only went to underscore the importance of private equity work to such firms when earlier this year Marco Compagnoni, head of private equity with the corporate finance team at Lovell’s, announced he was quitting for rival US firm Weil Gotshal & Manges. The second the news hit the wires, Lovells PR machine swung into action announcing that Leah Dunlop, who helped set up the firm’s private equity practice back in the 1980s, would be taking on the role as an interim measure.
Her previous involvement in the group was cited as giving her credibility both within and outside the firm to carry out such an important role, even though she has been based in Italy, where she intends to remain, for the past five years. Lovells will no doubt announce a longer-term solution in a similarly speedy fashion given that it moved swiftly at the end of last year to replace Oliver Felsenstein, head of its German private equity practice, who departed with four associates to Clifford Chance. Joachim Habetha now fills Felsenstein’s role.