The political trends for private equity to handle: Flint's view

We interviewed Flint Director Joe Jones and Flint Manager James Hill about how the PE practice has grown, the current political and regulatory landscape for the private equity sector and how they find life at Flint. Joe worked as an Account Manager at WA Investor Services before joining Flint, where he worked with investors focusing on political and regulatory due diligence. Prior to Flint, James worked as a due diligence specialist at another consulting firm.

What are the key political and regulatory risks and opportunities for the private equity sector? 

James: The biggest current challenge for private equity is handling the potential fallout from the increase in PE activity over the last year or so. 

The government is keen to welcome investment and recognises many firms have needed to access capital during the pandemic, but with the National Security and Investment Act set to come in next year it will have more potent tools to intervene in deals. Previously the government could hide behind the claim it was constrained in what it could do but the NS&IA changes that.  

It also has a new electoral coalition to keep happy which has a more nationalist and interventionist tinge. The government may on occasion find it difficult to resist the pressure to block deals – particularly when the asset has strategic value. 

The issue for PE is managing a process where government has both more ability and possibly greater incentive to scrutinise deals, but also wants to show what a great place the UK is to do business post-Brexit. It’s here where the PE sector needs to engage and demonstrate value. 

Joe: There’s also an issue for PE that as more capital is allocated to it, it becomes a more important part of the financial framework of the economy and attracts more attention as it purchases larger assets. The instinct of PE investors has been to not engage at a political level or with the public, instead seeing themselves as pure investors looking to grow companies above the fray. 

This is a hard position to maintain, and I think firms are coming round to the idea that they need to engage with government over the political realities they and their portfolio companies face.  

This can also lead to a wider payoff where, as we have seen in some countries, the barriers to pension funds, for example, investing in PE have been reduced. This allows PE to further cement itself as a crucial part of the financial and economic system. 

How do you find working at Flint? 

Joe: It’s a great place to work. It’s full of lots of very clever people who are fun to work with. There’s a great deal of diverse thought and expertise for you to draw on, which you don’t find in a lot of other consultancies. 

James: One of the best things about Flint is that it’s full of genuine experts in their field, they really know what they are talking about. When you go into a client or business development meeting with them, you’re completely confident. You know the people on the other side of the table are getting something they couldn’t get elsewhere. 

Flint’s also a great place to learn. Many people have decades of experience across government, regulators and in industry, and they are more than willing to share their insights. 

You have both recently been promoted, how has the PE practice grown and what are the next steps? 

Joe: Flint is quite a permissive place if you want to be entrepreneurial. If you can come up with a good strategy and business rationale for something you will be given the green light and resources. This is essentially what happened with the PE team.  

Flint had done some PE work, but we made a decision to do more in the sector. We believed we had the expertise and knowledge to provide a range of products PE firms would find useful. 

We wrote a strategy, we went out to talk to people and the practice has grown organically.  

James: With the growth Joe mentions comes the ability to offer more to our clients. This involves offering support at all stages of a deal, from origination to transaction clearance and due diligence, through to working with assets post-completion on their engagement with government.  

Given the depth of expertise we spoke about earlier at Flint, we can also work over a wide range of sectors and markets. The PE team is the way into that pool of knowledge for investors. 

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