Various members of the corporate venturing industry have contacted Global Corporate Venturing to say they are concerned about proposed changes to European competition law. The European Commission recently consulted on a white paper which could chill venture investing by corporates in Europe.
The European corporate venturing industry is mobilising in an effort to stop legislation hitting corporate venture investing in the continent.
Various members of the corporate venturing industry have contacted Global Corporate Venturing to say they are concerned about proposed changes to European competition law. The European Commission finished a period of public consultation on October 3 on a white paper which proposes that the Commission is notified about acquisitions of stakes in related companies of over 20% or of above 5% under certain conditions.
Market participants have said they are preparing submissions to warn about the low threshold of the proposals, which are likely to need scrutiny from corporate venturing units, as it targets the typical stakes which units are looking to buy.
Doerte Hoeppner, chief executive of Europe’s venture capital trade body the European Private Equity and Venture Capital Association (EVCA), said: “This issue is indeed of concern to our corporate venture capital members. The EVCA is preparing a submission to the European Commission and will ensure that the potential impact is clearly understood by policymakers.”
The UK’s private equity trade body, the British Private Equity and Venture Capital Association, has also said it is monitoring the potential impact of the white paper.
Simon Holmes, a partner at law firm King & Wood Mallesons SJ Berwin, is one of a number of lawyers who have raised concerns about the white paper. Holmes said previously: “If implemented these proposals could have significant effects on corporate venturing in Europe with investors having to confirm, prior to the purchase of a minority shareholding of over 5%, whether the transaction triggers a notification obligation. This could add significantly more cost and delay to certain transactions.”
Paul Morris, formerly a senior member of Dow Chemical’s corporate venturing unit, and now an advisor to the UK government’s UK Trade and Investment (UKTI), said: “This EU proposal to improve merger control rules risks having the apparently unintended consequences of inhibiting CVC investments. The UK government is aware of this EU proposal and is considering its response.”
However, despite the concerns expressed, the European Commission is confident its reforms will be highly targeted. Antoine Colombani , a spokesman for Competition and for Vice President Joaquín Almunia, said in a prior article: “The review system would be strictly limited to certain categories of minority shareholdings, namely transactions of EU dimension that give a certain degree of influence in a competitor or a vertically related company, i.e. which prima facie may be problematic from a competition point of view. This would cover an estimated 20 to 30 cases per year and would leave benign transactions completely unaffected.”
Europe is a region of significant corporate venturing activity.So far this year corporate venturing units have invested in 187 European companies, which have raised venture rounds worth $3bn, according to Global Corporate Venturing analysis. 2014 activity has already over-taken 2013 full year activity with 165 European companies backed that year by corporate venturing units in rounds worth $2.7bn.
The sector invests in many of the biggest deals in the continent. According to Dow Jones Venture Source the overall venture sector in Europe invested in 1534 deals worth nearly €6bn ($7.7bn) during 2013.
Eight companies backed by corporate venturing units have also achieved exits or initial public offerings worth $2.4bn in 2014. There were 14 exits and initial public offerings worth $1bn in 2013. There are 334 corporate venturing units across Europe, as well as many international groups operating in the region.
EVCA’s Hoeppner said: “We invite members of the corporate venturing sector to get in touch to share their views and learn more about the EVCA’s efforts on their behalf.”
Morris, of UKTI, added: “The UK government is actively seeking to support corporate venture capital investing in the UK. A number of round table sessions are taking place where corporate VCs can share their opinions with senior government officials on how to further enhance CVC investment activity.”
This article was first published in September and has been republished to contextualise Intel Capital’s Marcos Battisti’s opinion piece on the issue here.
