Jon Moulton, the maverick managing partner of London-based private equity firm Alchemy Partners, has never been afraid to speak his mind.
Sometimes this has attracted controversy – like the time when he ran an advert in the Financial Times immediately after 9/11 declaring that his firm was still open for business; or his combative approach to negotiations during his high-profile but ultimately unsuccessful bid for UK carmaker Rover in 2000.
But at a time when private equity is facing an unprecedented level of hostility from politicians, trade unions and the media, Moulton's readiness to speak out loudly in the industry's defence – while many of his contemporaries have favoured a head-in-thesand approach – makes a refreshing change.
Moulton certainly has all the right credentials as industry defender. After learning his trade as an insolvency specialist, he has spent nearly 30 years in the asset class, helping to build three of the powerhouses of European private equity – CVC, Permira and Apax – before setting up his own firm in 1997. Despite operating at the smaller end of the buyout market, his readiness with a newsworthy soundbite has kept Alchemy very much in the press. “It's a cheap form of marketing,” as Moulton himself puts it.
This year he landed a starring role in the UK Treasury Select Committee's enquiry into private equity, where his summons resulted largely from his outspoken comments in the press. These included an attack on “the enemy within” – a veiled reference to industry grandees who had publicly attacked the industry's favourable tax treatment.
However, Moulton himself has not exactly toed the industry's party line on tax. During his appearance before the Select Committee, he insisted that “in some cases people are abusing what is already a generous tax regime”, although later on he did seem to back off slightly: “Drawing a line is really difficult in tax… There is white, there is grey and there is black – different people have different views on where it lies.”
Sir Ronald Cohen (his former boss at Apax) and Nicholas Ferguson of SVG Capital both recently criticised the rules that currently allow buyout executives to pay as little as 10 percent tax on their carried interest – an arrangement that Ferguson infamously described as allowing buyout executives “to pay less tax then their cleaners” in a Financial Times interview in May. Moulton has steered clear of this topic – although since his firm charges its investors just 10 percent carry – half the going rate – he could already be said to be occupying the moral high ground on the issue.
The Committee actually came down quite hard on (non-domiciles); they realised people have been getting away with it
Instead, his criticisms have largely centred on the way that some people in the industry are taking advantage of offshore fund vehicles and lax domicile rules to avoid tax. On the morning of his appearance before the Committee, he told the FT that buyout firms “are stacking up cash offshore in ways that look bloody wrong to me”. When asked to elaborate by chairman John McFall, he suggested that the current rules governing non-domiciles “allow people who have lived here 50 years in some cases still to claim they are not liable to UK capital gains tax”. He added: “However many times I look at that I find it hard to say that is correct.”
When PEI meets with Moulton a few weeks later, just a couple of hours after the Treasury has published its initial 40-page report, Moulton has already read it. The text contains relatively few concrete recommendations, but he believes there are more to come. “There's not much in this report, but they'll be back. I'm sure they'll come after tax again,” he says. The domicile rules are likely to come under the spotlight, he says. “The Committee actually came down quite hard on (non-domiciles); they realised people have been getting away with it,” he suggests. He also supports a simplification of the capital gains tax regime, which he describes as “hideously complicated”.
We move on to transparency, the other hot topic of the year. I ask Moulton whether he believes the initial recommendations proffered by Sir David Walker will make it through the current consultation phase. “You mean: Is Walker a runner?” he asks, while grinning. “I think most of it will go through, because there's no real spirit of opposition to it – it will only really affect the big buyout guys.”
It seems clear that Moulton has little sympathy for practitioners at the LBO firms, who he considers largely to blame for private equity's recent travails. “There is some frustration about the large buyout guys,” he admits. The campaign against the industry has developed so quickly because of high-profile buyouts and large-scale job cuts, rather than the work of firms like his own, he believes. “That's what created the adverse public response. If we had no funds bigger than £1 billion, there'd probably be no bad publicity.”
Besides, Moulton believes that Alchemy, which already publishes an unusually large amount of information about its fund terms and investor base, is well ahead of the curve on transparency. “We continually ask our investors: is there more you want? And they say ‘no’.” The firm has only ever had one complaint about its website – which came, bizarrely enough, from Sacha Baron Cohen, the UK comedian famous for the Borat character. The offending article was a spoof interview between Moulton and Ali G, another of Baron Cohen's comic creations, which the comedian somehow tracked down and had removed from the site.
Moulton appears to be one of the few people in the industry who actually seems to have done rather well out of the last few months. Business is booming, especially in Alchemy's recently formed special situations unit (see “Seizing the Moment”, below) while the huge increase in public scrutiny has done his own profile – and that of Alchemy – no harm at all. He insists that his outspoken comments have not lost him any friends in the industry – “I've had no negative comments at all”– and claims to be keen to get back to his real job of doing deals. “I think everyone's just looking forward to having all this political hoo-ha done and dusted,” he reflects.