European private equity investment fell 28 per cent in 2008 to EUR54bn, according to EVCA.
European private equity investment fell 28 per cent in 2008 to EUR54bn, according to EVCA.
This was largely driven by a decrease in large and mega buyouts, which decreased around 40 per cent by both number and value of investments.
The value of small and mid-market deals fell by 30 per cent, while the number of companies financed dipped by a fifth.
In terms of quarterly trends, investment levels recovered from a slow start to the year with robust second and third quarters, before a significant drop in the final quarter of 2008.
Meanwhile, early stage venture capital investment remained undeterred by the economic slowdown, with a 15 per cent increase in the number and seven per cent in value of seed-stage and start-up companies receiving finance.
Growth capital investment almost doubled in size during 2008, to more than EUR7bn of equity investment, driven by a greater participation from buyout players. More than 20 per cent of buyout and growth equity was invested into SMEs last year, compared with less than 12 per cent in 2007.
According to EVCA, SMEs attracted a growing majority share of the total number of private equity investments, accounting for 81 per cent of deals, up from 77 per cent in 2007. In total, more than 5,400 European companies received private equity funding during 2008.
While the overall level of investment fell, 2008 remains the third best investment year on record for the European industry after the boom years of 2006 and 2007. The amount invested by European private equity players in the past three years is equal to the amount invested during the previous seven years combined.
In addition, for mid-market and large buyouts, the average private equity contribution to total transaction values was nearly 40 per cent in 2008. In the boom years of 2006-2007, mega deals saw an average ratio of equity to transaction value of around 20 per cent; this increased to 32 per cent in 2008.
Investment in the region by non-European private equity firms remained static by number, but fell 43 per cent by amount.
Exits have slowed significantly since the start of the economic downturn, with European private equity firms exiting from more than 2,000 companies, representing EUR13.9bn at cost. This is close to the 2003 exit level and down by half from 2007 levels.
Despite the financial crisis, overall fundraising levels were sustained, with EUR79bn raised by European private equity firms during 2008, compared with EUR81bn in 2007.
Javier Echarri, EVCA secretary general, says: ‘The economic downturn has adversely affected private equity investment levels during 2008, particularly for larger deals. However, the statistics reveal the continued importance of private equity investment across the whole spectrum of European company finance.
‘Divestment figures show that private equity firms are spending longer with portfolio companies to ensure they are appropriately positioned to face the economic downturn, and refinancing them where necessary.
‘On the investment side, the trend towards the provision of growth capital is welcome in otherwise capital constrained circumstances for Europe’s businesses. In particular the resilience of the early-stage venture capital market is encouraging news for the long term health of Europe’s young innovative companies.’
