EUROPE - The medium-term outlook for the private equity industry in Europe has never been brighter, according to a Bank of Scotland sponsored report into the positive impact of legislation and initiatives at both European and government level.
The report, produced by AltAssets, the London based research and information provider to the global private equity market, notes that one major boon is the commitment secured by the European Commission from national governments to create a more efficient venture capital market by 2003 as part of its drive towards a single financial market by 2005.
Through the Risk Capital Action Plan (RCAP), the Commission has outlined the obstacles to raising and investing private equity funds in each member state and made proposals to dismantle them by way of reforms to tax and bankruptcy laws and investment in education for future market players.
At national level, the report says that while countries are moving at different speeds, all the major European economies now rate private equity as a means to improving the continent’s economy and reducing unemployment.
In the UK, the Myners’ Review, reductions in capital gains tax (CGT) and favourable tax reforms have made more capital available for pension funds and institutional investors to start considering alternative asset classes such as private equity.
Tax reforms, CGT reduction and opening up the venture capital market in France are having a similar impact.
In Germany radical tax reforms, the abolition of CGT exemptions and wide-scale pensions reform are expected to trigger an “explosion” of restructuring across the economy.
Tax reforms and amendments to bankruptcy laws are stimulating the Dutch market, whilst in Italy, legislation is giving pension funds more open investment opportunities and is wiping away stifling bureaucracy.
Richard Sachar, chief executive of Almeida Capital, which runs AltAssets says : “Europe is most definitely building the right economic and cultural infrastructure to support solid growth of the private equity industry.”
Ann Robinson, a member of the Myners’ review and a non executive director of Almeida adds: “Other than the Myners’ review in the UK, few people realise that equally important measures are being implemented in other countries that are making European private equity a more important asset class for institutional investors.”