Thursday, 14 June 2007
Private Equity; no bark and no bite?
The oddest and most unexpected story of the week deserves a few paragraphs. Peter Linthwaite here has resigned today as head of the British Venture Capital Association. This is after he and his staff put on what the media have termed an atrocious performance in parliament earlier in the week.
This is surprising for a number of reasons, firstly, you would expect the Masters of the Universe to have a good spokesperson and they clearly think they don't That their new choice is the head of the CBI (which as a representative of manufacturing amongst other things, you would not expect to be a natural ally) who is also quite new in the role is bizarre.
Also, my reading of a the exact questions (in the Telegraph here) of the meeting reveals a lot of media spinning here. The group did not say VC's partners were abusing the tax system. This is a spin on a reply they made. Now in the white heat of the meeting, perhaps this slight hesitance is unacceptable. What it says more to me is the way the tide is against the VC's. The media are happy to take the politicians side on this one.
I am no fan of the VC splurge as is occurring at the moment. Whilst there are many successes, the financial methods employed leave the companies in a worse state for the long term, even though they make better short-term profits. Laden with debt, I wonder how some of the companies will be able to pay keep the pension funds full, creditors at bay and shareholders happy as the interest rates go up and the credit market is squeezed. Actually, if you look at PFI and other measures Brown has done the same with our economy, not surprising when Sir Ronald Cohen is one of his chief advisers; a PE turncoat!
However, the government has spotted a victim and intends to eat it. Broon wants a sacrificial victim for the Unions and the VC houses will be it. Destroying the taper tax regime will also wreck what is left of our enterprise culture; more risk and less reward is not something to encourage wannabe business people.
Posted by CityUnslicker