UK - Amendments to the UK Pensions Bill will 'kill off' investments in businesses with defined benefit schemes, Simon Walker, chief executive of the British Venture Capital Association (BVCA) has claimed.
Speaking to Global Pensions, Walker said: "The changes proposed are going to be a deterrent to the acquisition of companies with defined benefit (DB) schemes, which are effectively the ones that are most in need of investment."
He added the consultation launched by the UK government on the Bill had many responses, which showed a great deal of concern. He said: "The uncertainty created by the government's intentions is a big part of the problem."
Walker said deals would be stopped as a result of the initial announcement of proposed changes. He said: "We continue to be in a situation in which fewer deals are done in this category because of the advice investors receive. Lawyers are defining deals with these companies as 'dangerous'."
Wyn Derbyshire, partner, SJ Berwin, commented: "A potential acquirer becomes reluctant to buy a company with a DB scheme, because he does not want problems associated with excessive regulator power.
"If then this company becomes insolvent, the pension scheme might fall into the PPF, so ironically these changes are less likely to rescue companies."
Derbyshire said it was difficult to generalise the advice SJ Berwin was giving to acquirers, but he said: "What would be true for any transaction, if the changes are implemented, is a greater need for legal and financial due diligence of the pension scheme.
"This means added complication, added timescale and added cost."
Matt Rees, partner, Simmons & Simmons, said: "The BVCA is very right to say existing regulations are enough. On the other hand, at this stage, I would not recommend a client to avoid a deal because of the enhanced powers the Pensions Bill would give the Pensions Regulator.
"In terms of increased costs, for clients who carry out thorough due diligence, the difference might not be very high."
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