Weekly round-up: Fatca's impact in Europe

With Fatca looming, a false sense of security prevails among European private equity players without US investors; but with regulation now a national matter in practice, European GPs must not rest on their laurels. Speaking at a recent seminar held by Ipes in London, Julio Castro, principal at KPMG's US tax practice, outlined the origins of Fatca: "The initial reaction to Fatca was that it was madness. But, over time, funds and banks have been discussing the new rules with their own authorities, as local governments must assist institutions with compliance. The UK found the proposed ruling interesting and wanted to do the same." With more than 30 inter-governmental agreements now in place and a further 40 in the pipeline, the net has been thrown wide – a charge for non-compliance threatens those GPs that fail to heed the incoming regulation.

A marked difference in the popularity of public markets among private equity players exists across the Channel: while London has witnessed a spate of flotations, mid-cap listings remain elusive on the Paris bourse. "The public market has consistently proved unable to match the valuations offered by private equity houses and corporates in the mid-market. Given the constraints faced by a business once it goes public, mid-cap GPs do not even entertain the idea of listing their portfolio companies," says Fabrice Scheer, head of the corporate advisory group at UBS France. At the larger end of the spectrum, where listings are seen as more viable, private equity sponsors will no doubt keep a keen eye on Elior's stock performance following its pricing last week. Though with the IPO expected to value the firm at €2.4-2.8bn – significantly lower than the rejected €3.7bn offer tabled by Ardian and Caisse de Dépôt et Placement du Québec in 2013 – just how profitable a route the public market represents remains a pertinent question.

After a two-year slowdown of deal activity in the Nordic region, GPs may have reason to celebrate after a strong first quarter in 2014. The exit market has proved particularly resilient, with the opening of the stock market expected to sustain divestment dealflow. After a period of uncertainty surrounding taxation of the industry, Sweden's upcoming elections could threaten private equity, particularly regarding its relationship with the welfare state. Industry professionals predict a possible introduction of restrictions on profits in the sector; though the sun may have set on taxation, challenges remain on the horizon.

Italy's most active investor, Fondo Italiano di Investimento, has ramped up its activity in the local market, diversifying its offering to include funds-of-funds serving the venture capital and debt markets. With €180m still to be invested from its direct investment vehicle, and another such fund expected in 2016, Fondo Italiano's reach is expansive. But is the GP targeting the correct segment of the local market, or is overcrowding becoming a feature of the lower mid-market?

That's all from me this week but if you have any comments on this week's analysis, please send your thoughts to amy.king@incisivemedia.com.

You can continue to follow me and the rest of the unquote" team via @unquotenews for all the latest private equity and venture capital updates, and of course on unquote.com.

Amy King
News Editor, unquote"

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