Friday Letter: A message from Monaco

Many private equity people are in a rather festive mood these days. And so it was at EVCA’s Annual Symposium in Monaco this week, where more than 600 delegates took the opportunity to celebrate the European industry’s most successful year on record. Such was the crowd’s buoyancy at the conference that a novice to private equity might have been wondering whether this kind of investment activity is somehow immune to the kind of market cyclicality that so obviously affects all other asset classes.  

To be fair, some speakers on stage and delegates in conversation did acknowledge that the great times this business is currently in would not last forever, as tightening financial markets [see yesterday’s PEO story here], growing economic nationalism and regulatory uncertainty start to have a real impact. However, you would have struggled to find anyone at the gathering subscribing to the view that the music could in fact stop any time soon. On the contrary: the consensus clearly was that private equity is bound to carry on dancing for a significant period of time – even as the terrain becomes more difficult to negotiate. Hence the raucous times had by many after Thursday night’s Gala dinner at Monte Carlo’s La Salle des Étoile.

But of course EVCA had some serious messages to get across as well. By far the most intensely debated topic of the conference was the fact that private equity has so far failed to explain its merits to many outside its own investor base. Unsurprisingly, “increasing awareness and understanding of the industry to key stake holders” is one of the declared priorities of new EVCA chairman Javier Loizaga, managing partner of Spain’s Mercapital.

The rehabilitation of private equity has rapidly risen to the top of the agenda in recent months. The task is to move private equity away from being seen as self-enriching and socially irresponsible, and to being recognised much more widely as a superior ownership and corporate governance model, an agent of economic modernisation and a creator of jobs and wealth not just for general partners but for anyone, anywhere provided their pension fund manager has exposure to the asset class.

It is a formidable challenge, partly because the wider public’s suspicion towards private equity has deep roots in many parts of Europe, and partly because too many industry protagonists have been ignoring public relations as a necessary activity for too long.

It is true that industry bodies such as EVCA have been making the case for private equity vis-à-vis third parties for years, and with Loizaga at the helm for the next 12 months, EVCA can be expected to do even more in this regard. However, the trade groups alone won’t be able to sufficiently transform private equity’s public perception. What is also needed is for the industry’s most influential practitioners to enter the public debate as well. Permira, for example, having come under intense scrutiny over its investment in UK motoring services provider the AA, is beginning to understand this. The firm’s European LBO peers would do well to follow suit soon.

One industry leader who in recent months has already positioned himself as a supporter of this mission-critical project is Jeremy Coller of Coller Capital. At last night’s gala dinner, he told delegates to “be proud” of being part of an industry that had become such a powerful catalyst of economic strength in Europe and beyond. But he also urged his colleagues to take seriously private equity’s need for an image makeover if it is to avoid a regulatory or fiscal straightjacket and to continue to thrive going forward.

Coller then asked for the seasonal roof of the Salle to be opened and, amid a deafening fireworks display in the garden, ignited the mighty twin jetpack strapped to his back and in an awesome manoeuvre spun himself off the stage and high into the Mediterranean sky.     

Well, the bit with the jetpack didn’t actually happen – but the roof and the fireworks were for real, and honestly? He could so easily have done it. Monaco – or maybe private equity? – can intoxicate.