Private Equity and Venture Capital Update | July 2018

Written on 12 Jul 2018

Welcome to the latest edition of the Osborne Clarke Private Equity and Venture Capital Update. We hope that you find it interesting. If you would like to discuss any of the content, or have a subject that you would like us to cover in the next edition, please let one of us know. Our contact details are set out below.

Private equity and venture capital | Review of H1 2018

We have seen deal volumes and values remain high during the first half of 2018, reflecting the extraordinary amount of dry powder still available, which echoes activity levels in the wider market. Read more about our notable deals, in-demand sectors – particularly what we have heard from our contacts in PropTech and FinTech – and our experience in ICOs.

Read more here.

Making an exit | Initial public offerings for private equity backed businesses

For private equity houses seeking an exit from a business they have invested in, an initial public offering on either the Main Market or AIM is a long-established and well-worn exit route which has seen a resurgence in recent years. Osborne Clarke advised on 3 of the 17 private equity-backed IPOs in 2017 (Medica Group plc’s £121m main market IPO, Alpha Financial Markets Consulting plc’s £126m AIM IPO and Arena Events Group plc’s £60m AIM IPO) and also advised LDC on the £200m AIM IPO of Team 17 Group plc in May 2018.  

Read more about the recent trends in private equity-backed IPOs.

Read more here.

EMI | EU State aid approval

As reported in our recent Insight, the European Commission approved the renewal of EU State aid for the enterprise management incentive regime on 15 May 2018. HMRC confirmed that the decision means that the EMI scheme continues to operate in the same way as described in HMRC’s current guidance and practice.

A condition of the European Commission’s decision to renew the approval of EMI was that HMRC must comply with the EU requirement to share information on beneficiaries of EU State aid in excess of €500,000. Amending Regulations came into force on 11 July 2018, enabling additional information to be collected and published by HMRC on EMI options. An update on how HMRC intends to deal with its information-sharing obligations is expected soon. For now, we understand that HMRC is of the view that few EMI companies receive aid in excess of €500,000 in practice.

The good news is that, after a short period of uncertainty earlier this year, EMI options remain available as a valuable tax-advantaged arrangement which qualifying companies can offer to incentivise their qualifying employees.

Growth shares | An alternative for companies that do not qualify for EMI

Where unlisted companies or individuals do not qualify for EMI options (for example, because the trading activities or working time requirements are not satisfied), an award of growth shares may be an appropriate incentive arrangement. Growth shares are very flexible and are more tax efficient than unapproved options.

Read more here.

Corporate governance reform | Impact on portfolio companies

The government’s corporate governance agenda – fuelled by a series of high profile corporate failures – took a significant step forward in June 2018 with the publication of draft legislation.  The new legislation is expected to come into force for accounting periods beginning in January 2019, and so companies will need to consider how they are meeting the new requirements during 2019 and be ready to report on them from January 2020.

The changes will impact all medium-sized and large portfolio companies, which will have to make greater disclosures in their annual reports about how they engage with employees.  Large portfolio companies will have to make further disclosures about their engagement with customers, suppliers and other stakeholders.  And for the first time, very large private companies will have to report against a corporate governance code.  The most controversial of the changes – requiring listed companies to report on CEO pay ratios –  does not affect the PE/VC industry directly but shows the direction of travel in terms of transparency of workforce data.

Read more here.