PE Tech Report

NEWSLETTER

Like this article?

Sign up to our free newsletter

Lowest recorded deal count dampens modest investment growth in European VC-backed companies

Investors put EUR1.1 billion into 182 deals for European companies during the first quarter of 2011, marking an 18% increase in investment but a 35% drop in deals from the same period last year, according to Dow Jones VentureSource. This represents the lowest quarterly deal count for Europe since VentureSource began tracking the region in 2000. The median size of a European venture capital deal also declined, falling 5% to EUR2 million in the first quarter of 2011 from EUR2.1 million in the same period last year.

 

“Liquidity is scarce and fund-raising has lagged. Without capital coming in from exits or limited partners, Europe has retrenched to a smaller number of key deals in core industries such as healthcare and promising industries such as consumer information services, which includes social media, search and entertainment companies,” says Anthony Sheldon, research manager, Dow Jones VentureSource. “As a result, Europe has failed to match the robust gains made in the US venture capital industry.”

Healthcare again led the way, representing 34% of overall investment in the first quarter of 2011. Companies in this industry collected EUR368 million for 39 deals, 5% more capital but 47% fewer deals than the first quarter of 2010.  

The Biopharmaceuticals segment took the lion’s share of the industry’s investment (79%) and deals (62%), raising EUR290 million for 24 deals. This represented an 8% increase in capital invested but a 50% drop in deals from the same period a year earlier.

The Information Technology (IT) industry recorded its lowest quarterly deal flow and capital investment. Deal flow declined by 38% to 49 completed deals, while capital investment fell 38% to EUR153 million.

Software again accounted for the largest share within the IT industry, attracting 80% of deals and 83% of investment. Investment in the segment increased by 46% to EUR127 million but deal flow declined by 7% to 39 completed deals. Small Number of Big Deals Boosts Consumer Services.

The Consumer Services industry, which is driven by investment in consumer Web companies, was the star performer in the first quarter of 2011 as investment rose almost fourfold to EUR345 million, marking the highest quarterly total since the fourth quarter of 2000. However, deal activity saw a more modest 7% gain to 47 completed deals. The industry’s largest deal was an EUR88 million round raised by the Barcelona-based online shopping company, Privalia.

According to the data, 34 European venture-backed companies raised EUR1.1 billion through merger or acquisition during the first quarter of 2011, representing the lowest first-quarter M&A count since 2000 and a 48% drop in funds raised from the same period a year earlier. The median amount paid for a company was EUR25 million, 64% more than the median paid in the first quarter of 2010. To reach liquidity, companies raised a median of EUR11.4 million in venture capital, easily the highest median on record.

The UK remained the favourite destination for venture capital investment in Europe, seeing its share of investment rise to 44% from 38% a year earlier. Investment increased by 35% to EUR485 million over the same period. Deal flow, however, fell by 37% to 52 completed deals, the country’s lowest quarterly count on record.

France was the second-favourite destination for venture capital investment despite declines in both investment and deals. Investment fell 13% to EUR111 million, while deal flow declined 12% to 44 completed deals, the lowest quarterly count recorded.

Just behind France in terms of investment were Spain and Denmark, in third and fourth place, respectively. On the back of the EUR88 million Privalia deal, Spain recorded an almost ninefold increase in investment to EUR110 million with deal flow rising by 50% to 12 deals. On the back of the EUR100 million Symphogen deal, investment into Danish venture-backed companies increased almost 11 times to EUR108 million though the number of deals fell to five from eight.

Germany came in at fifth place by investment but third place by deal flow. Investment declined by 61% to EUR50 million and the number of deals fell by 52% to 22.

Like this article? Sign up to our free newsletter

MOST POPULAR

FURTHER READING

Featured