FUNDING THE FUTure SUMMER 2013 JOURNAL The perfect blend? Looking at private equity’s relationship with family-owned businesses Leading the way Talking Turkey Olympic ambitions New BVCA Chairman Simon Clark We investigate what investment How management teams should be outlines his vision for the year ahead opportunities are emerging in Istanbul learning lessons from London 2012 Introduction Contents Welcome to the fourth edition of the BVCA Journal, in which we introduce a new Chairman and a new Director General It is a huge pleasure to write the Finally, I believe there is more the introduction to this edition of the BVCA BVCA can do to help private equity and Journal. It is the first to be published venture capital houses offer a collective since Mark Florman changed role within message to investors about why this is an the association to become Strategic asset class that deserves their attention Adviser and Industry Ambassador and and a significant share of their money. 10 I had the honour of being appointed I have always been struck by the Director General of the BVCA. sheer diversity of our industry and its I have always This internal leadership transition undertakings. This is reflected in the been“ struck by inevitably involves some change but also extraordinary range of activities that the a very considerable amount of continuity. BVCA team engages in. 24 the sheer Under Mark’s leadership, the BVCA has This edition of the Journal reflects sought to broaden the range of actors this, with a focus on private equity diversity of our with whom it connects, both at home investment in family businesses, a and internationally. This is something fascinating feature on the Turkish industry and its that I intend to embed and extend. It is market and an intriguing case study of undertakings no longer enough to assume that being Talaris, a company formerly owned by economically effective proves you’re The Carlyle Group that manufactures ” socially reliable and relevant. cash machines. This edition of the Journal includes An article looking at the recent Budget an interview with Simon Clark, our illustrates that HM Treasury is no longer new Chairman and Managing Partner a cash machine. In my now former role of Fidelity Growth Partners Europe, as Director of Policy at the BVCA, I was who discusses some of the themes that especially proud of our publication The he will spend the next twelve months Growth Initiative, in which 50 private 31 articulating. These are my priorities too. equity and venture capital backed CEOs I am particularly determined to be put forward their ideas for how to revive active in the large part of the United the economy. News Number crunching Well handled Building brands Kingdom that exists outside central This proved to be an influential 04 Private equity news, 20 Exploring the key 31 Examining Carlyle’s 41 Developing a strong London. This is where many individual document not only for this Budget but, I including updates on the budget findings of Somerset Capital’s acquisition of cash systems brand is essential to attracting BVCA members and the majority of UK believe, for the years to come. The BVCA and public procurement rules recent family office survey business De La Rue and then retaining consumers investee companies are located. has placed itself at the heart of economic I also want us to become even closer and social debate in recent times. It must Taking the hot seat Meat and drink Perfect partners Guest columnist to, and to champion, entrepreneurs, who stay there. 10 New BVCA Chairman 23 Why investing in the 35Looking at Interim 42Liam Kennedy looks have little in the way of an organisation Simon Clark outlines his plans leisure and dining sectors is Partners, an executive interim at the potential investment that can speak on their behalf. Tim Hames, Director General and ambitions for the year ahead increasingly attractive management business landscape of the future Asset-based lending Turkish delights Mid-market matters 15 The advantages of 24 Evaluating Turkey’s 37 Why the private equity combining asset-based lending investment opportunities and mid-market has continued to TTY E with a cashflow strip burgeoning economy enjoy robust deal flow Reserve your copy of the BVCA Journal. Editor Barnaby Simons Creative Director Ben Barrett Art Director David Donaghy To guarantee that you receive your copy G HY: Designer Dean Buckley Picture Editor Johanna Ward Publisher Georgina Beach of the next edition, please email rap Generation game Right structure Game changing Rob Hammond at [email protected] G Production Director John Faulkner Managing Director Claire Oldfield CEO Martin MacConnol O Considering the Outlook for top-line How adopting the T O 16 28 38 To advertise in the magazine, please contact BVCA Journal is published on behalf of the BVCA by Wardour, 5th Floor, Drury House, 34-43 Russell H relationship between private growth is likely to remain weak winning attitude of Team GB can Leon de Bono on +44 (0)20 7420 1853 or at P Street, London WC2B 5HA Tel +44 (0)20 7010 0999 www.wardour.co.uk [email protected] equity and family businesses over the coming years help to strengthen your pitch COVER COVER 2 BVCAJOURNAL BVCAJOURNAL 3 NEWS News Bank-capital rules Taxing issues tackled to affect fixed salaries A revised proposal for a Financial As London is one of the main hubs Transaction Tax (FTT) in Europe of euro-denominated transactions, it is The European Parliament and Council was released in February, following likely that the UK will push back hard of Ministers have reached agreement the rejection of the initial proposal by against this provision in particular. on the Capital Requirements IV package member states. EU taxation files require – containing both a regulation and unanimous support from member a directive – that will introduce new states to become law, and a number A number of countries... held capital requirements and remuneration of countries, including the UK, held “ structures for banks. The conditions significant concerns as to the merit of significant concerns as to the on pay have thus far proved the more the proposal, meaning that it could not merit of the proposal contentious, with a cap on bonuses, or proceed in its original form. “variable remuneration”, set to be applied Eleven member states remained in ” to senior executives in the industry. favour of an FTT and took the decision Legislators hope that by limiting the to re-launch the proposal under a amount a senior banker can receive in legislative process known as “enhanced their bonus package to a maximum of cooperation”. This allows a willing one year’s annual salary (this can be to include the cap in the forthcoming group of countries to press ahead with raised to two years, subject to shareholder Undertakings for Collective Investment implementation of a particular file, approval), we will not see a repeat of in Transferable Securities (UCITS) V provided there are at least 9 Member senior executives incentivised to take Directive for investment fund managers. It States on side in Council. greater risks in the pursuit of ever-higher remains to be seen whether private equity The new proposal is heavily modelled returns. The banks, however, maintain and venture capital will be targeted with on the original and, if implemented, that the most likely outcome will be a the same measures when the Alternative would mandate a 0.1 per cent tax on significant rise in fixed salaries. Investment Fund Managers Directive trades of shares/bonds, and a 0.01 per The rules on bankers’ bonuses will comes up for review in 2017. cent tax on derivatives. take effect in 2014, but momentum The industry will take heart that last However, there are certain is growing for similar measures to year the European Securities and Markets differences, including the inclusion of be taken against the entire financial Association broadly accepted that the the so-called “issuance principle”. This services sector. Indeed, the European carried interest model of remuneration would see transactions covered even Parliament’s Economic and Monetary effectively aligns the combined interests if all parties are located outside the Affairs Committee has already agreed of the investor and the fund manager. countries participating in the FTT. News in brief Private equity companies interviewees believed their Business bank begins to stimulate commercial interest ESG Framework private equity associations and ready for growth private equity backers were The Government’s ‘business and encourage new lenders in the is published 10 leading general partners ock T Private equity houses are more more likely to increase funding. bank’ has now opened for S SME finance market. A new Environmental, Social and (GP). The Framework was likely to invest further finance Respondents were also applications. The programme The scheme is available to Corporate Governance (ESG) developed to help GPs better TTY I / into their portfolio companies bullish about growth prospects, will see £300 million of public E lenders focused on UK operating Disclosure Framework for Private understand why investors want than banks according to a with 90 per cent planning to money invested alongside G HY: businesses, with an annual Equity has been released. ESG-related information, and survey published by PwC. maintain or increase staff levels, private investors to address the rap turnover of up to £100 million and A 16-month consultation to help rationalise the types of G O Flexibility in uncertain times which was up 60 per cent from difficulties faced by many SMEs T who are seeking investment of process involved more than questions that LPs are asking O H reported that 74 per cent of a year ago.