European GPs bullish as write-offs tumble

2003 was the year in which confidence returned to the European private equity industry according to preliminary figures from the EVCA.

The confidence of Europe’s private equity firms is increasing according to the EVCA (European Private Equity & Venture Capital Association), which announced preliminary fundraising, investment and divestment figures for 2003 at its sixth annual International Investors Conference in Geneva.

Key statistics included a 55.6 percent fall in write-offs compared with the previous year; a slight increase in fundraising to almost €28 billion; and over €23 billion of investment activity, characterised by a strong second half of the year.

Of particular encouragement was the reduction in write-offs, from €3.2 billion in 2002 to €1.4 billion last year (from 30 percent of total divestments to 15 percent). The EVCA report said sentiment on exits in 2004 was optimistic with a number of successful trade sales and IPOs in the first quarter and more anticipated in the second.

The fundraising figures showed a small increase last year to €28 billion, compared with €27.5 billion the previous year. This made 2003 the third highest year in terms of fundraising since 1990. The majority of funds raised in 2003 were for later-stage and buyout investment.

Investment activity improved in the second half of 2003 after a slow start. The total amount of equity invested was just over €23 billion, 67 percent of which was committed to buyouts.

“The environment in 2003 was tough but, as in the US, the second half of the year saw a noticeable upturn in activity,” said Jean-Bernard Schmidt, EVCA chairman and managing partner of Sofinnova Partners. “The prospects for 2004 are encouraging – we see that investor confidence is returning, with a number of investments and exits completed in all the major economies.”

Other positive trends he noted included increasing momentum in the fundraising market; fewer but better entrepreneurial deals; a recovery on stock markets; and opportunities arising from the expansion of the EU on 1 May.