On 14 October 2009, Simon Walker, CEO of the BVCA submitted the following letter to the Secretary of the Code Committee on the Takeover Panel regarding the Panel's consultation on amendments to the treatment of management incentivisation arrangements under Rule 16.
Dear Sirs
The BVCA is the representative body for venture capital and private equity in the UK. London is the European centre for the industry, comprising 60 per cent of the market, and is second only to the USA globally.
We have had the benefit of reading the submission made to you by the Takeovers Joint Working Party of the City of London Law Society Company Law Sub-Committee and the Law Society of England and Wales' Standing Committee on Company Law (the "Takeovers Joint Working Party").
As you are aware incentivisation arrangements for management are an important element of acquisitions made by private equity firms, whether those acquisitions are private acquisitions or public bids. In many cases it will be essential for the private equity firm to ensure that key personnel are retained following the acquisition and that they are appropriately rewarded for delivering value to the new owners of the business. These arrangements may involve the issue of equity in the new holding company, the grant of options, and new salary, bonus, pension and other arrangements.
Within the context of public bids we understand the critical importance of General Principle 1 and the need to ensure equality of treatment for all shareholders. As the submission from the Takeovers Joint Working Party makes clear, however, the amendments proposed in PCP 2009/2 in relation to Rule 16 would provide for regulation of management incentive arrangements which goes beyond the scope of General Principle 1. We believe that is inappropriate and extends the application of the Code into areas which are governed more appropriately by other legislation.
We do not set out in detail a response to Question 2 but, in short, we agree substantially with the views set out in the submission made by the Takeovers Joint Working Party in so far as it relates to Question 2.
Yours faithfully
Simon Walker
Chief Executive
BVCA
