Someone had better pay attention to just who plays with whom, as members of the Canadian Venture Capital Association tee off today at their annual golf tournament.
Tensions are running high within the 850-member trade association as it tries to find common ground on the contentious issue of tax. Among the CVCA members teeing off at the Angus Glen golf course this morning are labour-sponsored funds, conventional venture capital players, and private equity funds that make investments in more mature companies. Anyone who's anybody in the world of venture capital will be swinging a club.
The tension comes from the fact that, of this group, only the labour-sponsored funds enjoy juicy federal tax breaks. Those breaks stem from programs that were put in place in recent years to encourage ordinary investors to chip in to venture capital funds, which are obviously riskier than Canada Savings Bonds but deemed by the government to be helpful in getting fledgling companies off the ground.
The quality of labour-sponsored fund investments is a subject for another day. What's clear, and contentious, is that the tax concessions lower the cost of capital for labour-sponsored funds.
This was annoying for the rest of the industry right from the start. Bickering under the CVCA umbrella grew more intense as the labour-sponsored funds grew in size and scope, started investing in larger deals, and began competing to provide other sources of capital, such as debt-focused mezzanine financing. Billions of dollars has been raised by the labour-sponsored funds, as unions lent their support to a number of proven money managers.
Private equity players, who make up the bulk of the membership in the CVCA, want to see the playing field levelled. They want to see some form of tax concessions for all those who invest in early-stage companies. Or they want to see the labour-sponsored funds lose at least a portion of their privileged standing in the eyes of taxation authorities. It's a sensible view.
For obvious reasons, the labour-sponsored funds want to keep the status quo, as it maintains their advantage. The labour-sponsored funds contribute an enormous amount in fees to the CVCA.
As a trade association, it's impossible for the CVCA to represent both views. Members say there have been a series of increasingly acrimonious meetings on the subject of tax policy. It's not clear that the 40-year-old association can survive this crisis. For the good of Canadian companies that are crying out for capital, let's hope members can find some common ground over the course of 18 holes. Or at least refrain from throwing clubs at one another.
Torys man to Westerkirk
The private equity world has attracted the talents of one of the country's top corporate lawyers.
James Lawson has told his partners at Torys law firm that he plans to move on in the fall, and take the chief executive officer's job at Westerkirk Capital. That's a private investment firm recently established to manage the assets of the Brydson family, who are related to the Thomson clan. Westerkirk starts its existence with a portfolio that includes a stake in Woodbridge Co., the holding company that controls Thomson Corp. and recent acquisitions such as Cosmetica Labs.
Westerkirk will manage a team of external managers and make direct investments on its own behalf, looking for opportunities in the $10-million to $50-million range, with a focus on the hospitality, real estate and energy sectors. The fund also plans to partner with other investors on bigger deals.
Mr. Lawson is one of those lawyers who's rolled out his tool box of skills as both adviser and executive. The 46-year-old first worked at law firm Davies Ward Phillips & Vineberg, then moved into positions at startup telecoms that included XO Communications, with the backing of players such as TD Capital. He joined Torys four years ago as part of the corporate finance team, and is a director at several companies, including Algoma Steel.
Homecoming for Hines
In step with its corporate clients, the world of executive search firms is becoming increasingly global. So it's no surprise to see a successful domestic player in the headhunting field, Hines & Co., decide to merge with international firm Heidrick & Struggles.
This move marked a homecoming of sorts for former investment banker and corporate lawyer Rob Hines. He worked for Heidrick & Struggles after a career that included stints with Midland Walwyn and GMP, then struck out on his own. Now Mr. Hines is managing partner for his former employer's operation in Canada.