European private equity investment reached its second highest annual level last year, according to data published by the European Venture Capital Association and PricewaterhouseCoopers.
Despite what many saw as a tough year for private equity, a total of E27.2bn was invested in European private equity and venture capital transactions last year, after 2000 this was the second highest ever investment level. However, the situation was less positive for fundraising with only E19.4bn raised compared with the previous year when E38.2bn was committed to funds.
The fact that investment totals were E8bn higher than the total volume of capital raised last year is being heralded as a positive note for the industry, although Keith Arundale, European venture capital leader at PricewaterhouseCoopers, pointed out that there remained a E30bn overhang in funds still to be invested.
Although the total amount of fundraising remained low, the key sources of long-term capital for European private equity (pension funds, banks, insurance companies) remained the same. However the preliminary figures reveal a sharp decrease in fundraising from pension funds, from 27 per cent in 2001 to 18 per cent of total fundraising in 2000.
Unsurprisingly, the trend for investment was heavily weighted towards buyout opportunities. 65 per cent (E17.7bn) of capital was invested in buyout situations, compared with only 45 per cent in 2001. The shift towards a more buyouts-focused investment strategy was also borne out by the fundraising figures; these funds attracted 63 per cent of all commitments last year, against 56 per cent in 2001.
The other significant trait of the market in 2002 was the difficulty faced by private equity firms in achieving realisations on investments. A total of E8.9bn was was recouped via divestments last year, down from E12.5bn in 2001.
Said Max Burger-Calderon, EVCA chairman and executive director at Apax Partners: “2002 was a difficult year. Macro-economic conditions and industry consolidation have caused some shifts of focus, both for institutional investors and for private equity portfolio investments.”