The chief of Europe’s sixth-biggest PE group EQT urged his peers to “focus more on building companies than avoiding taxes” if they want to keep their licence to operate amid greater regulatory and political scrutiny of the sector
November 22, 2013 Leave a comment
November 21, 2013 5:29 pm
Private equity groups told to alter focus
By Anne-Sylvaine Chassany in Paris
The chief of Europe’s sixth-biggest private equity group has urged his peers to “focus more on building companies than avoiding taxes” if they want to keep their licence to operate amid greater regulatory and political scrutiny of the sector. The plea made by Conni Jonsson, EQT’s managing partner, on Thursday at a conference in Paris was received with a warm round of applause, as private equity companies both in Europe and in the US face criticism from politicians and unions that they exploit tax loopholes to boost their returns.“We should ask ourselves: is it prudent to use those aggressive tax schemes that we’re using? Is the benefit of that worthwhile? Is that acceptable in the communities we operate in? In some cases, yes; in many cases, no,” Mr Jonsson told an audience of private equity investors at the SuperInvestor conference. “Money was saved, for ourselves and investors, but it comes with a cost.”
As governments in Europe battle with high unemployment and budget deficits, private equity groups must engage with regulators, unions and the general public, according to Mr Jonsson, who co-founded EQT, Sweden’s largest buyout fund manager, two decades ago.
They must “move from being skilful investors to responsible owners of companies,” he said.
“If you work in a sector that is tax-financed, you better make sure that you work well with the regulators and tax authorities,” Mr Jonsson said. “We need to work with unions, not against them. We might not like them, but if we invest in sectors where they are allowed to be, then we have to work with them.”
Mr Jonsson also pointed to the lack of diversity within the industry. “Less than 10 per cent of senior private equity professionals are women, in the US and Europe. There’s a lot to do there.”
EQT and its Swedish peers have lately been the targets of the country’s tax authorities, which are asking them to pay millions in retroactive taxes on profit. This year the group, which has raised €18.6bn of funds over the past decade – the sixth biggest amount in Europe – reorganised its operations under one Sweden-based umbrella company.
Becoming better citizens would deliver stronger returns, Mr Jonsson said.
“I’d like the employees of our companies to be proud of us. I don’t want them to hide that when they go to cocktail parties – that is the way it is today,” he said.
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