UK private equity industry wants Britain to remain in the EU

11 May 2016

The UK's referendum for the European Union is fast approaching; the benefits and pitfalls of a Brexit are being vigorously debated on all sides, with a range of perspectives highlighting the potential effects on economy, industries and society. According to a new survey on the matter, UK’s private equity industry is keen to stay within the EU.

Over the past months, dozens, if not hundreds, of politicians and business leaders have taken part in a sharp debate on whether or not the UK should remain a member of the European Union. In a bid to understand the sentiment within the private equity (PE) sector in the UK, RSM carried out a survey among 100+ professionals in the industry.

According to the headline results of the survey, 67% of the respondents are intending to vote to stay within the EU, while 22% will vote for exit – 11% are yet to decide. The research found that one of the principal influences on almost the majority (47%) is free trade agreements with EU countries, while 15% said that red tape and regulatory issues would be the deciding factor.

RSM - Private Equity Brexit Survey

Adam Spencer, Associate Director in RSM’s M&A and Private Equity team, comments: “The EU referendum debate is clearly high on the agenda of private equity at this time. If management teams or vendors are commencing a PE fundraising process ahead of the referendum we would urge them to carry out thorough and detailed contingency planning, considering the impact to their businesses in the event of a ‘leave’ result.”

Leaving worse off
74% of the respondents are concerned that a ‘leave’ vote would worsen the conditions for private equity deal making in the first two years following the vote, while, even in 2-5 years following the vote, respondents still expect conditions to be worse than they are today. Around 23% said that the poorer conditions may last up to five years after the Brexit.

“I think there is real concern amongst the private equity community that if the UK does leave the EU, then immediately afterwards we could see deal processes taking much longer, as well as an increase in the cost of transactions. This could result in a lower number of completed deals taking place, as well as increase the amount of pressure on private equity funds to deploy capital – certainly for the short-term,” says Charlie Jolly, RSM’s Head of Private Equity coverage. “Whether this is having an influence on transactions ahead of the Brexit vote is difficult to say, but the uncertainty alone will almost certainly be playing on the minds of private equity professionals and may very well be impacting their decisions over the next few weeks.”

According to a recent survey by Deloitte, held among 120 CFOs of large corporations, 75% of CFOs favour the UK remaining in the EU, up from 62% in Q4 of last year. Advocates state that membership helps UK export performance, and support the attraction of foreign direct investment. Around 70% of CFOs believe that EU membership contributes to the success of UK’s financial services industry.


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Private equity firms ramp up sustainability focus

19 April 2019

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.