Europe’s Class War Takes to the Streets

Surprisingly, I managed to avoid the protesters last night at Claridge’s for the BVCA Chairman’s dinner in London. But my deputy editor was not so fortunate in Frankfurt at the Superreturn conference where delegates faced around 300 protestors with leaflets that read: “Texas Pacific Group is behind the aggression on female workers and employees of Gate Gormet.”

The protesters shouted the slogan: “Super Return heisst Super-Ausbeutung! Super Return is called Super- Exploitation.” The event was given major media attention as it was the second protest against the private equity industry in as many months. The first was at a charity fund raiser in London in late January. The papers have been full of mud slinging with Unionists calling private equity managers “vultures” and describing the industry’s pay as “grotesque.”

Last night as I sat in one of London’s most elegant venues and drank Chateau Claymore, St. Emilion 2002 between Brian Larcombe, former chairman of the BVCA who is on at least half a dozen company boards now and Lord Oakeshott of Seagrove Bay, the shadow chancellor of the exchequer in the house of Lords, I began to wonder if I, personally, or we, as an industry, are on the right side of this argument.

To silence the protestors and the voices in my head, I think there are three things that our industry must do:

#1: Invest more into venture capital
In the UK, private equity firms pay tax of 10% versus the 40% paid by other companies. They are given these tax breaks because they are supposed to be investing in venture and funding new businesses. Then why is venture capital in Europe so chronically underfunded?  And if PE managers aren’t investing in venture should they receive any special tax treatment? This is something that the Inland Revenue and FSA will review in 2007.

#2: Behave environmentally and socially responsibly
It is crucial to improve the image of private equity that portfolio companies are run in a responsible way that puts real value on the environment and on employees.

#3: Increase transparency
If household name companies such as Sainsbury’s and Boots are going to be taken private, consumers and investors demand transparent reporting similar to that which would be provided by a public company.
 
Last night the who’s who of private equity in Europe looked nervous and they should because the voices in the street are getting louder and we are still governed by the ‘Labour Party’ after all.