Founded in 1989, the German Private Equity and Venture Capital Association (BVK) is one of the oldest private equity industry associations in the world. With the German private equity industry being the third largest in Europe, the aim of the BVK is to create the best conditions for the vibrant industry. KITE Invest spoke with Executive Member of the BVK Board, Ulrike Hinrichs, to get a better glimpse into the German private equity and venture capital industry.
KITE Invest: The percentage of Germany’s private equity investments based on GDP used to rank below Europe’s aggregate amount. What is the outlook of the German private equity industry today?
Ulrike Hinrichs: Private equity in Germany has a great deal of untapped potential in all segments when measured against the rest of Europe. The future is bright for the private equity investment sector, as German companies in particular proved their outstanding stability and capacity to generate growth during and after the financial crisis. These qualities should pay off moving forward. The attractiveness of the German market is clear from the increasing number of foreign private equity companies that are investing in German start-ups, fledgling enterprises, and SMEs.
KITE:How do you envision the industry in years to come, especially in terms of deal size and sector focus?
UH: German private equity is strongly focused on the SME segment. In Germany there are many global market leaders and high-growth companies. That’s why transactions with SMEs will also play a pivotal role in future. However, it must be said that there will be fewer transactions worth billions of euros. The spotlight in the sector remains on areas in which the German economy is a global leader, including industrial suppliers, mechanical and plant engineering, the automotive, and medical sectors.
KITE: Part of the BVK’s task and objectives is political communication and lobbying on behalf of the industry. Recently the German Government passed an investor protection law. Can you please comment on that and how it affects the BVK members, and ramifications for angel investors and crowdfunding?
UH: The implementation of the AIFM directive marked the creation of a standardised regulatory framework for private equity and venture capital in Germany. The German Small Investor Protection Act (Kleinanlegerschutzgesetz) also has implications for things such as crowdfunding. We believe is it important to create an adequate regulatory framework. The future of a fledgling segment such as crowdfunding shouldn’t be put at risk by overzealous regulation. That being said, there will need to be some form of regulation here moving forward.
KITE: The Association has over 200 full members who focus in venture capital, small and medium-sized enterprise, SME private equity and venture capital companies and large buy-outs. Taking into consideration the range in investment types done by the BVK members, what measures does the Association take to meet the various needs?
UH: Across all market segments, our most important task is to underscore the significance of equity capital as a vital funding alternative in our economy. Our activities are centred on clarifying and informing. We are committed to supporting competitive framework conditions for private equity investment companies in all segments so that these companies can successfully invest their funds in Germany and the companies receiving this backing can generate growth.
KITE:Does the BVK work with investment opportunities / entrepreneurs at all, and if so in what capacity?
UH: We don’t actively operate as a mediator between enterprises seeking funding and investors. Through our website and by means of presentations, we do inform enterprises and other knowledge disseminators of the opportunities private equity presents and the investment companies currently operating in Germany. This gives enterprises the chance to approach the right private equity investment companies more quickly.
KITE:Lastly, what have been some of the defining milestones of the BVK? What challenges still remain and goals to be achieved?
UH:We successfully lobbied for the special characteristics of the private equity sector to be taken into account in the implementation of the AIFM directive. One example is the introduction of a new class of investors – “semi-professional investors”. We continue to lobby for better conditions in Germany. More recently, we made specific proposals in relation to the future German Venture Capital Act, which we published to widespread acclaim. On other hand, we must continue to battle against setbacks in fiscal and regulatory legislation.