UK Referendum – A note from LPEA and Invest Europe

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LPEA deeply regrets the decision of the UK population to leave the EU. We stand to discover the national and international extent of this decision’s political consequences over the following months. Some will be positive and others most probably not. From our industry’s perspective, this decision comes a bit as a shock. Our industry owes a lot of its expansion to the UK’s private equity culture. London and Luxembourg operations had been growing in sync over the years, with many of our members operating in both countries. It is difficult to imagine that forthcoming discussions and assessments regarding, among others, the extension of the AIFMD passport to non EU countries would not be affected by this event.

With mounting uncertainty, Luxembourg will be perceived for what it is: a highly stable and reliable environment offering an unrivalled legal toolbox and business friendly environment for the PE-VC industry.

We are glad to share here below the letter that Invest Europe sent this morning:


UK Referendum: how Invest Europe will respond
The people of the United Kingdom have now expressed their desire to leave the European Union (EU). Invest Europe regrets but of course fully respects this decision.

Although the result of yesterday’s referendum does not entail immediate changes to the UK’s legal status, this decision ushers in a period of significant uncertainty about the timing of the UK’s departure from the EU and about the nature of the future relationship.

These issues are of potentially profound significance for the private equity industry with implications for GPs and LPs; for service providers and for portfolio companies. Since the referendum was called, Invest Europe has been following the debate closely, assessing the possible impacts on members and providing guidance and advice on the issues that both investors and fund managers may need to take into account. As we move into this new phase we will continue to represent the interests of all our members, both inside and outside the EU, to ensure that the freedom of private equity professionals to transact their business is preserved, whatever the formal relationship of the UK with the EU.
What happens next?

The timetable for the UK’s departure from the EU may not become apparent for some time, possibly months. In the short term, there will be urgent discussion among EU member states about the next steps. The Presidents of the main EU institutions are meeting today, 24 June, to discuss the immediate implications. This will be followed by a European Council (bringing together EU Heads of State and Government), which is scheduled for 28/29 June but could be brought forward to this weekend. We will pass on any intelligence we gather from these meetings. If it has not already been issued, other EU leaders will seek clarifications from the British Prime Minister about the timing of the formal notification to leave that is required under Article 50 of the EU Treaty.

Once this notification has been submitted the Treaty sets a two-year timetable (which can be extended by the remaining 27 Member States) for the terms of exit to be negotiated.

There is no obligation on the UK to submit this formal notification immediately and the timing of this important step could form part of a pre-negotiation between London and the other Member States.

How can Invest Europe help?

Invest Europe has always represented members from across Europe, from EU and non-EU states, united by a commitment to the private equity model and to ensuring that public policy supports the flow of capital from investors to fund managers and on to portfolio companies. This will remain our mission and with the UK decision to leave the EU the industry is being presented with a new set of challenges to navigate.

During the forthcoming period we will ensure that members are fully informed of the process and timetable for the UK’s exit, enabling firms to plan for the long term. But we also intend to be an active participant in the political and legislative process by which the future relationship between the UK and the EU is negotiated. With our skilled public policy and communications teams, we are ideally placed to do this. All Invest Europe members have a strong interest in ensuring that private equity continues to flourish across Europe and that artificial barriers to the flow of capital are not erected.

With a membership drawn from across Europe, we are in a good position to engage with the EU institutions to represent the interest of the entire industry, without prejudice to its base or location.

How will we do this?

The Public Affairs Executive (PAE) of Invest Europe is ideally placed to coordinate our work with its membership representing not only all four membership platforms (VC; LP; Mid-Market; Large Buy Out) but also the three largest national associations, including the BVCA. Through the PAE we will develop and disseminate a common position on the future relationship between the UK and the EU that will meet the needs of the whole industry. We will ensure that the common interest of GPs and LPs in minimising barriers to fundraising and investing is expressed consistently and authoritatively across Europe.
Kind regards
Dörte Höppner and Michael Collins, Invest Europe

What is LPEA doing and how can we help?
LPEA’s Executive Committee will create a task force dedicated to monitor the impact of Brexit and to support members by keeping them informed. LPEA’s Brexit Task Force will be following developments closely over the next weeks and months and informing about key elements of the process and timetable. LPEA will also invite experts to address the potential consequences for our industry and suggested courses of action.

Paul Junck
Managing Director
LPEA – Luxembourg Private Equity & Venture Capital Association