Alignment of interests – between investors, fund managers and the management team of the companies they invest in – is the bedrock on which successful PE investment is founded. Now, post financial crisis, there is increasing alignment with European policymakers, who more than ever see PE and VC as a means of meeting their goal to boost investment in small and medium-sized companies, create jobs and stimulate economic growth.
Invest Europe recently welcomed the European Commission’s Vice-President for Jobs, Growth, Investment and Competitiveness, Jyrki Katainen, and Roberto Gualtieri MEP, Chair of the Economic and Monetary Affairs Committee, to a roundtable on the theme “Funding Europe through the economic cycle”.
The participation of two of Europe’s leading economic policymakers is a clear indicator of private equity and venture capital’s importance in supporting investment and growth across Europe, and reinforces the open and mutually beneficial dialogue Invest Europe is promoting between our industry and EU decision-makers.
One of Commissioner Katainen’s responsibilities is delivering the €315bn European Fund for Strategic Investments (EFSI), the public-private platform set up last year to drive much-needed finance into companies and infrastructure across the European Union. This fund is already well over a quarter of the way to its target.
But how is private equity helping the European Commission achieve its ambitions? We organised the roundtable event to debate just this.
Invest Europe assembled a top quality panel of members from across Europe. Private equity fund managers were joined by senior executives from the portfolio companies into which they invest. The discussion centred on how private equity backing has supported their businesses, as well as the challenges and opportunities for investors looking to back high-growth companies in a low-growth environment. The roundtable participants comprised:
• Menno Antal, Managing Partner and co-Head of Private Equity at 3i, with Sander van der Laan, Chief Executive of Dutch online retailing business, Action
• Bill Watson, Managing Partner at Value4Capital, with Mihail Marcu, President of the Board of Directors at MedLife, the largest private medical operator in Romania
• Juha Peltola, Partner at Vaaka Partners, with Mika Sutinen, Chief Executive of leading Nordic pet specialty retailer, Musti ja Mirri
• Rikkert Beerekamp, Chief Financial Officer at Avedon Capital, with Frank Pauli, Chief Executive of 360-degree imagery solutions company, Cyclomedia
• Gerhard Huemer, Director for Economic and Fiscal Policy at SME umbrella association, UEAPME.
The private equity executives and company managers shared with Katainen, Gualteri and the assembled audience how they had worked together to develop the companies into which they had invested.
Avedon Capital’s Beerekamp explained how an economic downturn is a key time to invest in a market-leading company such as Cyclomedia, in order to proactively improve operational efficiency and assess new market opportunities. Meanwhile, Musti ja Mirri’s CEO Sutinen described how it became the largest pet supplies chain across three Nordic countries, with over 200 shops and annual revenues of €220m, thanks to the financial and operational support from Vaaka Partners.
The panel also raised with the policymakers the importance of ensuring the EFSI filters its funding into small and medium-sized companies, and not only start-ups. Value4Capital’s Watson highlighted that Romanian hospitals group MedLife would not have met the European Investment Fund’s criteria to invest in their fund, despite the Central and Eastern Europe region’s lack of equity financing.
Filling the funding gap for SMEs is an issue the Commission has in its sights. At the conclusion of the roundtable it was emphasised that the EFSI is led by market demand and proposals for a new public-private venture capital fund of funds will include financing options for mid-cap companies. Not only that, it was recognised that private equity is a strategic sector to address the funding gap and help companies grow across borders.
The roundtable event was confirmation of Europe’s top financial policymakers’ support of private equity and that their desire to increase the flow of investment into Europe’s mid-market engine room is aligned with that of our industry.
Invest Europe will continue to work closely with EU bodies on behalf of our members to ensure the EFSI and venture capital fund of funds plans meet their targeted aims. As always, we will do our utmost to promote the best regulatory environment for private equity to be able to invest in companies across Europe. And, importantly, we will keep the lines of communication open between policymakers, investment managers, companies and long term investors, to allow us to work towards our shared objectives – to support small and medium-sized companies, create jobs and stimulate economic growth in Europe.