Friday, August 13, 2010

PEU's Strong Wallet Australia, Middle East & U.S.

Tax uncertainty drives private equity dollars. Carlyle Group's managing director in Australia had this to say about his country's tax environment:

"Our investment committee is facing a global opportunity set and trying to allocate capital on that basis," Simon Moore said. And where there was uncertainty, "you have to take a worst-case scenario as to what the tax outcome will be".

Similar words were offered regarding the Middle East, specifically Arab Gulf states in the Gulf Cooperation Council (GCC):

"We need to see some investments, we need to see the macro environment improving, we need to get the families on board," said Jeremie Le Febvre, partner-in-charge of Middle East and North Africa (MENA) at Triago, a private equity adviser.

"A combination of all these factors will make the Middle East quite attractive because right now the message to investors is quite blurry," he said.

Before the global financial crisis erupted, iconic private equity firms from across the globe such as KKR and Carlyle Group set up shop, attracted by the region's petrodollars and spectacular growth prospects.

The risk now is that without reforms to spur the sector, such firms will go back to viewing the region mainly as a source of capital and not an investment destination.

America rings a similar refrain. Obama's Deficit Commission wants to make the U.S. more competitive in a global economy. That includes tax policy. Erskine Bowles, Commission co-chair, cited his need to make another fortune, having lost his last one. Rest assured that Bowles will do his best to help fellow private equity underwriters (PEU's).