European private equity investment falls by 59 per cent in Q1

Old economy companies do the biggest deals and France bucks the trend.

Private equity investment in Europe in the first quarter 59 per cent less than in the fourth quarter of last year, according to statistics released today by private equity research company Venture Economics.

Overall, $5.5bn was invested across 270 deals, compared to $13.3bn across 406 deals for the previous quarter.

The big deals were in non hi-tech companies, which received about double amount of money invested in hi-tech firms, but only accounted for about 25 per cent of the deals. Hi-tech companies received just one per cent of all buyout and acquisition finance.

The only industry sector to experience increased investment was the medical, health and life science sector, which more than doubled its money with $249m invested in nine big deals.

However, investment in hi-tech companies as a whole fell by about half – $1.74bn was invested into the hi-tech sector in the first quarter compared to the $3.39bn hi-tech companies bagged in the fourth quarter of last year.

By investment stage, the largest fall was in buyout and acquisition funding. This quarter, only $2.9bn was invested, down 71 per cent from $10.0bn in the fourth quarter of last year.

Early stage investment also plunged. It fell 66 per cent by value: to $290m from $859m, and 44 per cent in terms of activity: only 64 deals were done, compared to 114 last quarter.

“This is likely to be a temporary stall,” said Gillian Middleton, private equity research manager at venture Economics. “Fund managers cannot sit on the money for long. There are going to be some interesting developments.”

The UK was the most popular country for private equity in Europe, attracting 42.3bn in funding, down about 50 per cent on the previous quarter. But it was France that performed best – it managed to attract $1.5bn of private equity funding, 17 per cent more than in the fourth quarter of last year.