Euro regulators mostly hands-off

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While some in the U.S. Congress are gunning for private equity companies, usually protectionist Europe has been mainly hands-off when it comes to regulation of PE-driven takeovers.

Even the recent change to Britain's tax code, jacking up its capital gains tax from 10% to 18% -- a move that directly targeted PE firms -- provoked little more than mild grumbling from London's big equity players.

In Germany, last year's takeover of commercial broadcasting giant ProSiebenSat.1 by KKR and Permira and Providence Equity's acquisition of cable operator Kabel Deutschland led to calls by politicians to limit the share foreign investors could take in key national assets -- including TV networks and telecommunications -- to 25%.

Protectionist jitters were a main factor behind the killing of a planned €18 billion deal by a PE consortium, including Apollo, BC Partners and General Capital, to take a 30% stake in German telecommunications group Deutsche Telekom.

But despite the rhetoric, European governments have done little to restrict the activity of PE companies. The German government was even directly involved in one of last year's biggest PE deals, the €2.68 billion sale of its 4.5% stake in Deutsche Telekom to Blackstone.

The European Union's antitrust authority, the European Commission, also insists it is unconcerned about the increasing role played by PE firms in the recent wave of takeovers.

In fact, the EU has tried to make things easier for PE funds by pushing for a reform of Europe's current patchwork of national regulations.

EU Internal Market and Services Commissioner Charlie McCreevy told the European Parliament last July that he believed the EU had the necessary regulatory safeguards in place already.

"We all want deep, liquid, dynamic financial markets that act as a real
catalyst for investment and growth, and ultimately bring benefits to all of our citizens," he said. "We all want our regulatory and supervisory systems to be stable, fair and efficient."

Meanwhile, the private equity industry has defended its role in business. "Those who demonize private equity should consider the law of unintended consequences toward Europe's growth companies before attacking an industry that has a much better track record than most in making companies competitive, increasing productivity and facilitating employment growth," said Javier Echarri, European Private Equity and Venture Capital Association secretary-general.
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