Dutch buyout industry plays down political storm

Dutch private equity insiders have played down concerns about proposed legislative changes, after leading alternative asset managers were called to the Dutch parliament to defend themselves against accusations they were “plundering” the country.

Leading private equity firms and hedge funds in the Netherlands have played down concerns from Dutch politicians that financial investors are plundering the country.

UK-based private equity firm CVC Capital Partners and US group Cerberus were among those summoned to the Hague yesterday to be questioned by a cross-party group of Dutch MPs. The debate came amid growing concern over the role of alternative asset managers in a number of high-profile deals – described by one politician as “this ransacking of the country”.

The panel, which was examining the effect of hedge funds and private equity firms on the country, has suggested several legal changes to curb shareholder activism, according to the Daily Telegraph newspaper. These include forcing any shareholders with a stake of more than one percent (rather than the current five percent) to identify themselves, banning “contracts for difference” (which allow investors to boost their vote by borrowing shares), and changing the rules so that investors need at least 66 percent support (rather than the current 51 percent) to dissolve boards.

However, Dutch industry insiders believe the proposed changes will have limited relevance for buyout firms in the country. One source said: “Any such legislation probably won’t change anything for private equity firms, but it could have a negative effect on hedge funds and activist shareholders.” This is because typical private equity transactions in the Netherlands are generally far larger than the proposed thresholds, he explained.

Marco de Lignie, a partner at law firm Loyens & Loeff, said: “I don’t expect domestic measures because everyone is wise enough to understand there are so many interests involved in keeping current businesses growing.  If measures should be taken to meet the demand for more transparency, they should be taken on an EU basis rather than at a national level.”

Much of the controversy about the role of private equity and hedge funds in the Dutch economy has been caused by just two cases: the buyout of publisher PCM by Apax Partners, which resulted in a number of job losses, and the continued attempts to break up Dutch conglomerate Stork, which has generated prolonged media interest.

De Lignie said such measures were sometimes necessary in order to improve the balance sheet of a company. Moreover, these decisions were general business practice and not confined to private equity, he added.