Friday Letter EVCA's new voice

The association is redoubling its efforts to give one voice to private equity firms across Europe.

Industry associations often have a difficult task, representing many different voices, keeping disparate member groups satisfied that their best interests are at heart and all the time justifying their membership fees.

Spare a thought then for the European Private Equity and Venture Capital Association (EVCA). Not only does it have to balance the needs of members from all brackets of the fund size and strategy spectrum; it also has to represent firms from national markets which have about as much in common as a €1 million series A funding round does with a €10 billion leveraged buyout.

Take for example the five largest private equity markets in the EU: the UK, France, Spain, Italy and Germany. Accountancy firm Grant Thornton collaborated with the national private equity and venture capital associations of these countries to this month launch some laudably detailed data showing just how out of sync these markets can be.

You might think that, while the scale of activity may vary from the largest market to the smallest, the trends should look the same across the board for 2008: fundraising down, investment levels down, divestment levels down. Not so.

On the fundraising side, Germany saw the largest proportional slump in capital committed; 2008’s total of €2.4 billion was less than half of the €5.7 billion raised in 2007. The UK, Spain and Italy all recorded slowing fundraising by varying degrees, but France – the outlier – saw an increase of 27 percent to €12.7 billion.

The story is similar for the amount of capital invested in 2008. The expected downward trend was most marked in the UK market, where the total dropped off from a record €39.8 billion in 2007 by 37 percent to €25.2 billion in 2008. Spain, France and Germany all had similar, if less pronounced, declines, but Italy saw a 30 percent increase.

And if you cut the data by the number of private equity investments made, four out the five countries actually showed an increase, with the UK being the odd one out.

No question: these are different markets, at different stages of maturity with different priorities. For a lobbyist to speak for all of them, as well as many other ones as well, is no small task.

EVCA is currently undergoing a significant evolution. A new governance structure has been proposed to foster closer cooperation with individual national industry associations and to better represent and defend this diverse industry in the face of the pending regulatory backlash. And the backlash is already in motion; the draft directive announced by the European Commission in April would, if enacted, hit private equity and other alternative asset managers with an increased regulatory burden that many view as expensive and pointless.

Different EU member states, with their different private equity markets, will have different objections to the draft. The new structure is designed to give everyone participating in this market their chance to be heard. Its basis is a diverse group of industry representatives – EVCA members and non-members – articulating a shared message that can be delivered with a common voice by way of mobilising the EVCA public affairs effort.

Providing the representative group, which could potentially number as many as 50 participants at any one time, can continue to agree on what its common voice should be saying, the new look EVCA could prove a potent force in a post-crisis Europe.