UK saw record deal value last year

Private equity investment in the UK reached a record annual total of £9.7bn in 2004, a 52% rise on the £6.4bn recorded the previous year, according to a new study.

The British Venture Capital Association’s (BVCA) Report on Investment Activity 2004 found a 52 percent rise in total private equity investment in the UK from £6.4 billion (€9.4 billion; $12.0 billion) in 2003 to £9.7 billion in 2004.

The survey, conducted amongst all members of the BVCA, found that firms are taking an increasingly global stance. Investment abroad reached £4.3 billion in 2004 compared with £2.3 billion the previous year, with the number of overseas companies financed increasing 21 percent to 265. Investment in continental Europe more than doubled to £3.9 billion from £1.9 billion the year before.

John Mackie, CEO, BVCA

By contrast to the level of new investment, 2004 was a subdued year for fundraising with only £3.2 billion raised in the UK in total. This compared with a figure of £8.9 billion the previous year and reflected a predominance of mid-market funds that came to market during the 12 months. The figure for 2005 is predicted to show a sharp increase considering the very large funds currently coming to market.

The total amount invested in UK management buyouts increased 58 percent from 2003-04, from £2.4 billion to £3.8 billion. The number of companies financed through buyouts increased over the period from 168 to 237, meaning that the average MBO financing was £15.9 million last year, compared with £14.3 million the year before.

The BVCA also issued its annual Performance Measurement Survey, which showed private equity outperforming total UK pension fund assets and the principal stock market indices over three, five and ten year periods.

A survey of BVCA members showed net returns generated by private equity were 14.8 percent over ten years; 9.4 percent over five years; and 11.5 percent over three years.

The strongest performance in UK private equity fund categories came from mid-MBO funds.

Early-stage and technology funds demonstrated a positive return in 2004 for the first time in four years though their three, five and ten year returns remain in negative territory.

“The performance figures again confirm private equity as an asset class offers consistently superior performance over the long term,” said John Mackie, BVCA chief executive.