BVCA plans cash drive to fund private equity fightback

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The British Venture Capital Association, the private equity lobby group, is set to drastically increase membership fees to fund a new campaign to improve the sector's image.

The BVCA will raise fees by as much as three times for the largest firms to pay for a radical organisational overhaul as it prepares to defend the industry against a fresh onslaught over tax and questions over whether it damages the economy.

"My fees are going up from £15,000 to £45,000," said the head of one UK private equity firm. According to buyout firm sources, the lobby group has yet to formally propose the increase in annual duties, but a major rise is expected to be the top of the agenda for Simon Walker, the recently appointed chief executive who will take over leadership of the organisation on 1 November.

The fee rises, which are likely to be more acute for the biggest members, are part of a major overhaul of the lobby group. Most practitioners acknowledge it does not have adequate resources to represent an industry that has experienced explosive growth in recent years.

This deficiency was most acutely exposed last summer when Mr Walker's predecessor Peter Linthwaite dramatically resigned after putting up what many saw as a weak defence of the industry in the first of a series of damaging public hearings by the Treasury Select Committee.

Buyout sources consulted about the fee rise said they would be broadly willing to pay more if it meant the BVCA would be better equipped to fight the industry's corner. "You get what you pay for, don't you, and Simon Walker is certainly going to be getting paid more than [Mr] Linthwaite" said another source.

In the midst of public outrage directed at the industry last summer, the organisation was forced to raise an emergency fighting fund from the nation's biggest buyout groups, asking the top 20 firms to contribute £50,000 each to wage a counter-campaign.

The fee increases could be smaller, with a final decision not expected until after Mr Walker takes over. A BVCA spokesman said: "Fees are under review but no figures, details or targets are set. This is being examined in the context of the structural reorganisation of the BVCA and will be done in consultation with our members."

The revelations come at a sensitive time for the BVCA. Next week, the Chancellor Alistair Darling will publish the Government's pre-Budget report and Comprehensive Spending Review. The Government is under pressure to address the low tax rates paid by private equity professionals.

The Tories have also brought into focus the tax treatment of non-domiciled workers in the UK, many of which work in the buyout industry, and have suggested a crackdown is necessary. Sir David Walker is also set to conclude a six-month review into transparency and communication when he publishes final recommendations in the next few weeks.

The BVCA is considering revamping its organisational structure, hiring more staff and examining whet-her to divide the organisation into three operational groups: one set up to look after the very largest buyout funds, another dedicated to mid-market firms, and the last focused on venture capital groups. Firms pay fees according to the amount of funds they have under management.

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