Chief executives of private equity-backed companies should speak out to defend the industry against “misguided” European Union regulation, according to the new head of the European Private Equity and Venture Capital Association.
“For politicians it is all about the real economy, so we would like to see more private equity-owned companies speaking out,” said Richard Wilson, a partner at Apax Partners, due to be unveiled as EVCA’s new chairman on Tuesday.
“There are about 10m employees [in Europe] of companies that have received some kind of private equity backing and who will all be affected if this regulation is introduced,” said Mr Wilson. “That carries real weight with politicians.”
He added that investors in private equity funds should also speak out against the EU directive.
“We would always like to see more from investors as they carry more weight with politicians,” said Mr Wilson. “But this has been improving and I’m aware of seven substantial submissions to the European Commission from investor groups.”
Mr Wilson has seen the backlash against his industry up close after working on the controversial $12bn takeover of TDC, the Danish telecoms group, in 2005.
The EU directive, a response to public anger at the excessive risk-taking that led to the credit crisis, would require many hedge funds and private equity firms to register with regulators and disclose more about themselves and their investments.
They would also have to meet increased minimum capital requirements, hire independent valuators, and comply with limits on borrowing, which have triggered threats from some big UK hedge funds to move overseas.
The directive has provoked growing criticism in the UK, where it is viewed as an attempt to undermine the City of London’s dominance of European financial services.
But left-leaning politicians say the proposals are too weak for hedge fund and private equity groups, which have been branded “locusts” by German politicians and attacked for job-cutting, asset-stripping and tax-dodging by UK trade unions.
The EVCA had hoped that proposed amendments from the Swedish presidency of the EU would make the directive less onerous for private equity.
But at a meeting of the European Council last week, the Swedish amendment proposal was rejected, following demands by the French and German governments, according to people familiar with the talks.