As schemes and initiatives aimed at standardising documentation in private equity continue to crop up, Invest Europe CEO Michael Collins has questioned the industry’s appetite for adoption.
At Invest Europe’s 2018 CFO forum in Lisbon this week, a panel comprising the CFOs of Cipio Partners, Vision Capital and Gilde Buy Out Partners, discussed the factors standing in the way of universal implementation of standardised documents.
Cipio’s Diana Meyel pointed to the impact of power imbalances between LP and GP as a key obstacle. “When it comes to reporting needs of LPs, it has got a lot to do with negotiating power. If you are a small firm and somebody comes and says ‘we’ll commit $20m, but have certain reporting requirements’, you would not say ‘this is what we have’ – instead you would be open to their wishes. However, if you are an invitation only fund, then you can say this is what we provide people with, take it or leave it.”
In a speech addressing the same topic shortly after, Collins predicted the industry is likely to see more standardisation, but does not believe there is major appetite for adopting a standard currently. “I sense a real mix of opinion in the industry on that issue. If I was to characterise it, I would say that everybody likes the idea of standardisation in principle, but they really like the flexibility to add in their preferred provision or their own particular data field that they’d need to add in at the margins.”
Gilde’s Koos Teule told the audience the current way of doing things is “very expensive”, but did not make clear his support for implementing standardised documents.
Collins concluded his speech by telling the audience “there’s a decent chance” the industry will see more standardisation, but not through templates. “The approach we tend to take at Invest Europe is guidelines rather than strict templates. I think that’s probably going to continue to be the case for the foreseeable future because I just don’t see enough appetite from GPs or LPs for very hard sets of standardised documents.”