As I make my way through the lavish crimson-dominated reception of the Chesterfield Hotel, a Mayfair townhouse built in 1740, my fast-paced tech-savvy world at Canary Wharf’s Level39 becomes a distant memory. I slow my pace down, partly to make sure I don’t miss the entrance to the breakfast room, partly because I want to fit in.
It’s 8.50am and sitting across the table from me, a fresh-faced Michael Collins tells me that he’s used to much earlier meals and he’s absolutely ravenous. Michael is a regular at the Chesterfield and moves around the room with such mastery, you’d think he’s in his own home. Between a smoked salmon on toast and a tiny pain of chocolat he sings the praises of the private equity market raising a record €73.8bn in 2016, representing a 38% increase compared to 2015 and the highest level for Europe since 2008. Buyouts alone totaled €56.3bn, mostly driven by larger funds.
The venture capital market, he explains, had a great year in 2016 and is poised for another strong performance in 2017. “Vintage VC funds are delivering good returns to investors – equal to private equity standards” he beams.
“The market has recovered well from the hangover of the financial crisis – and the spectrum of the 2000 dot com era” he explains, “there’s a good number of buyers in the market for tech companies, and what’s good is that private equity funds are helping to sustain many VCs’ exit strategy.”
Collins is a market and policy veteran, joining Invest Europe in 2013 – of which he quickly became CEO in 2016 – from Citigroup, where he was Managing Director for European Government Affairs.
Formerly known as EVCA, European Private Equity & Venture Capital Association, Brussels-based Invest Europe represents Europe’s private equity, venture capital and infrastructure sectors, facilitating the dialogue between those communities, policymakers and regulators across the world. Leading those discussions fits Collins’ profile, having previously worked at the UK Permanent Representation to the EU.
Making the study of markets’ policies a career vocation, he tells me that the recent Chinese interest in European companies’ technology has done more than push up valuations, it has raised an important question. “If you’re an entrepreneur or a VC fund that wants to sell to an Asian buyer, say Alibaba, ask yourself: is there a potential regulatory or political risk component to that transaction? This question wasn’t there in the past, but is now surfacing because of the amount of cash being invested in Europe by some foreign buyers prepared to pay a big premium to get the tech”.
He informs me that the European Commission has already produced a proposal of investment screening in Europe, as a response to the intensifying debate taking place in some European countries, particularly in Germany. “Policy makers have been having these discussions for years. A decade ago the conversation pivoted around Middle-Eastern sovereign funds and Russian energy and it has now shifted a bit more east” he says, “the Commissions’ proposal, could mean that there is now a need to regulate certain transactions”.
While leaving it to individual countries to apply their own domestic regimes, nonetheless the European Commission wants to create a more harmonised framework within which member states can operate. “There is a genuine desire to try and ensure that this doesn’t lead us down the protectionism route.” He stresses that there needs to be well-founded reason for the commission to look over the shoulders of national decision makers to make sure that there are legitimate grounds of public interest when rejecting a foreign investment. “It is still unknown which stance the UK will take on this argument, whether it will share these concerns or focus on attracting investment from wherever it is sourced, We’re going to have to wait and see”.
As he finishes his coffee, I realise my time is up. I scramble through my notes and ask what that future holds for private equity. He reiterates that it has been a great year for PE funds, and with stock markets in a healthy state some people are suggesting that now is the right time to exit. “We all know that this bullish market will come to an end, it can’t last forever, but as Citigroup’s Chuck Prince once said: When the music’s playing, you’ve gotta dance.”
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