Industry associations 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 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: namely 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 of the five countries actually showed an increase, with the UK being the odd one out.
At the risk of committing death by data, there are also major differences in where firms in these five nations seek to raise commitments. In Germany, corporates are the most active LPs, while in Spain it is the banks. The UK, meanwhile, relies most on pension funds. And while France, Spain, Italy and Germany garner on average less than 10 percent of their commitments from institutions from outside the EU, the corresponding figure for the UK is 59 percent.
No question: these are different markets, at different stages of maturity with different priorities.
Against this backdrop of diversity, the EVCA is currently undergoing a significant evolution. When the industry was thrust into the limelight by the threat of a regulatory backlash last year, the EVCA was not equipped to deal with the situation. The association had originally been set up by the European Commission to promote investment in venture capital and had been operating as a service provider to those in the industry who were interested.
It was not equipped to drive a public affairs agenda and had never meaningfully engaged with the individual national associations. This latter point made it difficult to present country-specific viewpoints to Ministers of European Parliament who are primarily interested in the country they represent, and need to be engaged, therefore, on a country-specific basis.
In light of this, in October last year the EVCA gathered a diverse representative group of European participants – comprising both EVCA members and non-members – to debate and agree on a communications strategy and mandate the EVCA's public affairs executive. Under this informal arrangement, closer cooperation with individual national associations was fostered and this diverse industry was represented with a single voice.
Members of the EVCA are now consulting on proposed changes to the association's governance structure, which would, we understand, formalise the structure put in place in October last year and give everyone participating in the market their chance to be heard.
This is good news. If there was any doubt as to whether the new system has been working effectively, a look at how the EC's proposed directive treats hedge fund managers – considerably more punitively than those in private equity – should show that the industry message is seeping through to a demanding audience. 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.