Industry leaders outline challenges at BVCA summit

At the BVCA's 25th Anniversary VIP Summit, run in association with unquote", market leaders discussed the major challenges facing the industry in the year to come.

Richard Lambert, director general of the CBI (pictured right, at the summit), stressed the importance of demonstrating the strength of private equity's business model. He explained that three major drivers of private equity returns - high leverage, rising asset prices and the business model that removes the agency problem which plagues many listed companies - were now effectively whittled down to just the latter in today's financial market, and as a result would become of utmost importance this year.

He also urged professionals to prove that private equity ownership was compatible with corporate responsibility, saying that although he believed this to be the case, it was important to spread the message. He pointed to the widely anticipated raft of corporate failures to come, saying that the industry's reaction and behaviour surrounding this would serve as a good litmus test.

Another challenge was put forward by BVCA chief executive Simon Walker, who said that the guidelines set out in the Walker Report should be implemented effectively. "Flexibility is key in today's market. If we cannot make self disclosure work, the case for black letter legislation will be back in the next year," he said.

Finally, the importance of being vocal was stressed, in particular by Douglas Lowenstein, president of the Private Equity Council. He stressed that this communication must come not solely from the GPs, but also from the portfolio companies themselves, since they are what the public are familiar with. Lowenstein said: "You want Burger King to stand for private equity since your typical American has a better relationship with Burger King than with TPG."

He further revealed that of 13 member buyout houses in the PEC just two had dedicated, in-house investor relations professionals, and just one had a public affairs person. "The world is different now and private equity needs to catch up with its intellectual awareness," he said of the need to ensure greater communications strategies. "The will is there now, the infrastructure must now get up to speed."

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