French buyout bosses join flight to London

Departures prompted by taxes and perceived anti-business sentiment

Several senior private equity executives based in Paris have moved to London, adding to a series of departures of rich individuals from France prompted by rising taxes.

Jean-Baptiste Wautier, who co-heads the Paris office of BC Partners, one of Europe’s largest buyout firms, is planning to relocate his family to London next year, according to people close to the matter. The rising tax rates and a perceived anti-business sentiment under President François Hollande have contributed to Mr Wautier’s decision, they said.

He will follow Bruno Ladrière, a managing director at Paris-based private equity firm Axa Private Equity, and Bertrand Meunier, a managing director at CVC Capital Partners, who both moved to London this year.

The departures reflect the challenges facing French private equity firms to retain or attract staff as Mr Hollande seeks to raise taxes on capital gains and on carried interest, the share of the profit that buyout executives receive as a reward.

They also underline the increasingly fractious debate in France since Mr Hollande introduced a tax rate for the next two years of 75 per cent on people earning more than €1m a year.

“There’s a very nasty atmosphere in France right now towards money,” a private equity executive said. “The 75 per cent rate is just confiscatory, and who can really believe it will be temporary?”

Mr Hollande, who is seeking to raise €20bn in additional taxes to narrow the country’s deficit, has faced a wave of protest from business people, who branded themselves “pigeons” – suckers in French slang – since presenting his first annual budget in September.

Private equity executives warned then of a potential exodus of executives to London because of the threat in the budget of carried interest being taxed as ordinary income, and hence at the 75 per cent marginal rate.

While Mr Hollande subsequently backtracked a little, the tax rate on the carried interest is next year expected to rise from about 35 per cent to about 45 per cent, after taking into account deductions for assets held for more than six years, according to Christian Nouel, a partner at Morgan Lewis in Paris.

Typically, fund managers get 20 per cent of gains when all the assets have been sold above a minimum return.

French buyouts have more than halved this year to €6.2bn, while UK private equity deals were up 33 per cent to €19.4bn, according to data from the Centre For Management Buyout Research.

The departures are not just affecting private equity. Banks have been considering whether to move staff from Paris to London, and entrepreneurs have warned they would set up their companies elsewhere.

The national debate about taxes has turned increasingly sour at times, with actor Gérard Depardieu recently being labelled “pitiful” by the French prime minister, Jean-Marc Ayrault, for moving to Belgium.

Mr Wautier, one of BC’s nine managing partners, will continue to be a joint head of the Paris office of the London-based firm, the people familiar with the matter said. He plans to commute there every week. BC Partners manages a €6.5bn buyout fund.

Mr Wautier, 43, declined to comment on the reasons for his move. “BC Partners’ commitment to France in terms of resources and staff will be unchanged. The firm believes that while the market has been challenging this year, there will be more attractive deals in the years to come,” he said.

Mr Meunier, a former top executive at French firm PAI Partners, moved from Paris to London in May to join CVC Capital Partners as managing partner. He is in charge of French deals.

Mr Ladrière of Axa Private Equity, one of the largest European investors in private equity funds, moved his family to London primarily to get closer to the large international banks to secure funding for new deals, a person close to the matter said. Axa Private Equity’s planned spin-off from Axa has been delayed until next year because of the fiscal uncertainties.

Astorg Partners, a Paris firm which manages a €1bn fund, opened an office in London this year, when it hired a senior executive from Intermediate Capital Group, François de Mitry, who was previously based in London. Other firms are weighing ways to optimise their taxes.

Paris-based PAI, which owns assets including United Biscuits, is monitoring legislation in Luxembourg to see whether it would make sense to move its headquarters there, while keeping its main office in Paris, a person familiar with the matter said.

“The first budget was outrageous, but the private equity industry has managed to take the worst parts off and so far there hasn’t been an exodus,” Christian Nouel, a partner at law firm Morgan Lewis in Paris, said. “But taxes will rise nevertheless and the pigeons’ story may not be over yet.”

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