The BVCA

The BVCA was founded in 1983 and is the representative body for the UK private equity industry. The UK private equity industry emerged in the late 1970s, since which time private equity investment in new and developing businesses has continued to grow dramatically and it now accounts for over 50% of the European Private Equity Industry. Total Investments by BVCA member firms started at just £190 million and has now grown to over £19 billion and over 1,300 companies received private equity investment in 2006/2007.

BVCA Mission Statement

"The BVCA represents the vast majority of private equity and venture capital in the UK. We are committed to promoting the private equity industry for the benefit of entrepreneurs, investors, practitioners and the economy as a whole. The BVCA works with member firms and the individuals within those firms to enhance their performance and professional standards".

The BVCA, operating through an elected council, represents the vast majority of private equity in the UK. The BVCA has around 200 full members, 200 plus associate member firms, including lawyers, accountants and other professional advisers. Full member firms represent the vast majority of private equity and venture capital firms operating in the UK. These firms are active in making long-term equity investments, primarily in unquoted companies, and are funded mainly by institutions (such as pension funds and insurance companies), their parent companies (such as banks), or both. Recent years have also witnessed the listing of management companies such as Fortress and Blackstone.

There are four categories of associate membership - investor, financial, professional and academic. Investor associates include secondary purchasers, gatekeepers and direct investors into private equity funds. Financial associates include companies that invest directly in private equity, but for whom this is not their principal activity. Professional associates are advisory firms experienced in dealing with both private equity firms and those seeking private equity. Academic associates are educational or research organisations closely associated with the private equity industry.

Definitions

The term "private equity" is the term generally used in Europe to cover the industry as a whole. "Venture Capital" is a sub category covering the start-up to expansion stages of investment. Private equity describes equity investments in unquoted companies (which can involve the 'taking private' of a public company) often accompanied by the provision of loans and other capital bearing an equity type risk.

Below are descriptions of the different stages of private equity:

Stages of Investment- Venture Capital

Seed
Finance provided for the development of a business concept, perhaps involving the production of a business plan, prototypes and initial research.

Start-up
Financing provided to companies for use in product development and initial marketing. Companies may be in the process of being set up or may have been in business for a short time, but have not yet sold their product commercially.

Other early stage
Financing provided to companies that have completed the product development stage and require further funds to initiate commercial manufacturing and sales. They may not yet be generating profits.

Expansion
Sometimes known as "development capital" provided for the growth and expansion of an established company. Funds may be used to finance increased production capacity, product development, provide additional working capital, and/or for marketing.

Stages of Investment- Private Equity

Refinancing Bank Debt

Secondary purchase
Purchase of existing shares in a company from another private equity firm, or from another shareholder or shareholders.

Rescue/turnaround
Financing provided to a company in difficulties or to rescue it from receivership.

Management Buy-out (MBO)
Funds provided to enable current operating management and investors to acquire an existing product line or business.

Management Buy-in (MBI)
Funds provided to enable an external manager or group of managers to buy into a company.

Institutional Buy-out (IBO)
The purchase of a company by a private equity firm following which the incumbent and/or incoming management will be given or acquire a stake in the business.

Leveraged Build-up (LBU)
When a private equity firm buys a company as principal with the aim of making further relevant acquisitions to develop an enlarged business group.

Mezzanine Finance
Loan finance sitting between equity and secured debt, often provided as part of a private equity package.

Public to Private
Finance provided to take a quoted company into private ownership.

What are Private Equity Firms Looking For?

Private equity firms essentially look for a company with high growth prospects and a good product or service with a competitive edge or unique selling point, or companies that are failing to maximise their potential under their current ownership/management or structure, one of the most important requirements, whether as MBO, MBI or venture capital is a management team with direct experience of the product and its market. The management team must demonstrate a strong commitment in addition to self-confidence and a real ambition to turn their business plan into reality. Most private equity firms' investments take the form of capital equity. Their (and the mangement team's) reward lies in the growth of the companies in which they invest, ideally resulting in the sale of the company or its flotation on a stock market.

How do Private Equity Firms Help?

Private equity is not just about providing a source of finance. Private equity firms often aim to provide support - both financial and strategic - to enable growth companies to develop into the major businesses of tomorrow. Private equity firms generally want to become involved in the development of the companies in which they invest. This involvement will vary from firm to firm, but day-to-day management control is not sought. The majority will, however, expect to participate through a seat on the board to enable them to offer on-going support to the management on strategic and policy matters and to represent a broader perspective on corporate development based on their extensive experience with other growing companies. Private equity is a long-term discipline- it is an investment of money but also of time and effort.

Approaching Private Equity Firms

• Ensure that private equity backing is appropriate and consider the stage of your company's development. If in doubt, please consult the BVCA's website which has a number of helpful publications - including "A Guide to Private Equity"
• Prepare your business plan. You may wish to seek professional help.
• Prepare an "Executive Summary". This is a synopsis of your business plan and should be no longer than two pages.
• With the aid of the BVCA Directory or by using the searchable format on the BVCA website (www.bvca.co.uk), you should be able to identify two or three private equity firms most likely to be interested in your proposal.
• Send these firms your "Executive Summary" and business plan.

All BVCA publications can be viewed or ordered on-line on the BVCA's website.

www.bvca.co.uk

About the EVCA

The European Private Equity and Venture Capital Association (EVCA) exists to represent the European private equity sector. With over 1200 members throughout Europe, EVCA's many roles include representing the interests of the industry to regulators and standard setters; developing professional standards; providing industry research; professional development and forums and facilitating interaction between its members and key industry participants including institutional investors, entrepreneurs, policy matters and academics. EVCA's activities cover the whole range of private equity, from seed and start-up to development capital, buyouts and buyins, and the flotation of private equity-backed companies.

The EVCA was founded in 1983 to promote and protect the interests of the European private equity and venture capital industry.

As the only pan-European trade association representing the needs and interests of private equity and venture capital firms and groups doing business in Europe, EVCA sees as one of its priorities the creation of extensive networking and discussion opportunities for its members, as well as the provision of training and education for the industry in order to aid the harmonisation of the industry across Europe. To fulfil these objectives, EVCA has developed a series of varied and tailored events to provide for the differing needs within the industry.

EVCA Membership

EVCA is a 1200-member international network comprised of leading practitioners in the European private equity and venture capital industry. Members include private equity houses as well as key institutional investors, investment bankers and professional advisers.

Full Membership is open to organisations actively raising and investing in private equity and venture capital funds and whose main business is carried out in Europe.

Associate Membership applies to private equity companies from outside Europe, organisations investing in private equity such as banks, insurance companies or pension funds and organisations providing services to the private equity sector such as law firms, consultancy groups, research institutes and universities.

Membership of EVCA offers you and your firm an efficient and effective way to expand your contacts and opportunities within the European private equity and venture capital community. As well as the high calibre EVCA Event programme, EVCA publishes a range of comprehensive information products which as an EVCA member, you receive free of charge. These include unique value-added statistics on the European private equity industry, the annual EVCA directory of members, a quarterly newsletter, press summaries and a wide range of special papers on specific topics and actuality.

Further specific advantages of EVCA Membership include:

•  A listing of your firm and its activities in the EVCA Yearbook and Website
•  Reduced rate access to supplementary information products (including Special Papers prepared by EVCA's committees)
•  Reduced registration fees for all EVCA and EVCA-sponsored events
•  Exclusive access to special member-only events and the EVCA 'members only' Website
•  Exclusive discounts on insurance, software, trade publications and research

As well as these specific advantages the EVCA assists members in staying aware and educated of the changing requirements of an increasing complex regulatory environment, which looks likely to continue to increase as regulators attempt to force greater transparancy on the industry.

www.evca.com