Sir Ronald Cohen, a founder of Apax Partners and Bridges Ventures and a doyenne of the private equity industry, has called for the creation of a pan-European stock exchange to finance high-growth companies.
“EU stock markets remain fragmented and lack the scale to deliver the depth and liquidity of US public
At the current time AiM is not providing liquidity or working effectively.
markets – particularly NASDAQ,” said Cohen in his preface to a report on venture capital investment in the UK. The report, commissioned by the British Private Equity & Venture Capital Association (BVCA), examines how the UK venture capital scene could learn lessons from the more developed markets in the US and Israel.
Cohen – who last year was awarded with PEI Media’s inaugural Private Equity Leader Award – said that governments across Europe need to put in place the infrastructure to let high-growth companies access capital and expand. “It is vital to the development of European high tech venture capital and entrepreneurship,” he said.
This is not the first time Cohen has advocated the need for a European NASDAQ. In the mid-90s he was one of the driving forces behind the establishment of exactly that in the form of EASDAQ in Brussels. In 2001 it was bought by its US counterpart for an undisclosed amount.
Speaking in the same report, BVCA chairman Jeremy Hand pointed to the inadequacies of London’s junior stock exchange, the Alternative Investment Market (AIM). “There is also a need to look again at how successful businesses can tap into the public markets for further growth capital. At the current time AIM is not providing liquidity or working effectively in this regard,” he said.
Hand also pointed to NASDAQ as an example of a public market that provides a valuable exit option for early stage investors.
The UK is the largest venture capital market in Europe, with more than £1 billion (€1.1 billion; $1.5 billion) invested during 2008, but the BVCA report highlights “persistent structural problems” which need to be overcome to ease the flow of capital into early-stage companies.
As well as the creation of a European small to mid-cap exchange, the report calls for the UK government to establish a state-backed fund of funds to attract a greater volume of private capital into VC funds. Countries including Canada and Russia have already pursued the latter approach, while Ireland and Belgium have announced plans to do so.