Private Equity News & Analysis

Uptick in deals, funds for Europe’s VCs

A mild recovery in the fortunes of European venture capital can be gleaned from the latest set of industry statistics.

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European venture capital saw an increase in both new investments made and funds raised in 2004, according to figures from EVCA, PricewaterhouseCoopers and Thomson Venture Economics, which were unveiled at the EVCA Investors’ Forum in Geneva.

The statistics show venture capital’s proportion of total private equity investment in Europe increased to €9 billion (29.3 percent) in 2004 compared with €8.4 billion (28.8 percent) the previous year. Over the same period, funds allocated to venture capital investors rose to 24.8 percent of the total from 22.4 percent.

“It looks like we have passed the bottom of the cycle with venture capital funds starting to invest again, which is encouraging,” said Keith Arundale, European Venture Capital leader at PricewaterhouseCoopers. “However, the flow of investments continues to move away from high-tech at the early and expansion stages as seen from the reduced expected allocation of funds to this industry segment.”        

In all, €30.6 billion of equity capital was invested in new deals in Europe last year, up from €29.1 billion in 2003. Meanwhile, funds raised by private equity firms decreased from €27.1 billion to €24.7 billion.

Buyout funds saw an increase in amount invested from €20.7 billion to €21.6 billion, but this accounted for a declining percentage of the total, from 71.2 percent to 70.7 percent. Buyout funds also saw their share of overall funds raised fall marginally to 73.1 percent.

The sponsors of the report conclude that the fundraising total in Europe over the last five years has stabilised at between €25 billion to €28 billion. Although the total raised in 2004 was slightly below the bottom end of this range, an increase in fundraising activity is anticipated in 2005.

The report says the value of divestments increased to €14.1 billion in 2004 from €13.6 billion in 2003, while write-offs declined from €1.6 billion to €1.4 billion. Trade sales were the primary exit route, accounting for 25.2 percent of the total, while exits from IPO accounted for 7.6 percent, compared with 5.6 percent the previous year.