What private equity investments are being made in Europe, who is investing and how are they doing?
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Keith Arundale* is Director of Business Development and Venture Capital Leader for Europe, the Middle-East and Africa for the Global Technology Industry Group (GTIG) of PricewaterhouseCoopers (PwC). He is responsible for the development of marketing strategy for GTIG in Europe and its business development programmes for both multinational technology companies and for the fast-growth technology companies from start-up to post-flotation. Keith leads GTIG’s venture capital programme in Europe, which includes the firm’s surveys on private equity and venture capital for the European Private Equity & Venture Capital Association (EVCA) and the British Venture Capital Association (BVCA). He is the author of the BVCA’s Guide to Venture Capital, which takes business people and their advisers through the various stages of raising venture capital financing. *PricewaterhouseCoopers, No 1 London Bridge, London SE1 9QL, UK Tel: ⫹44 (0)207 804 7973; Fax: ⫹44 (0)207 8041468; e-mail: [email protected]
Abstract European private equity and venture capital investment and fund-raising reached record levels in 2000. The high returns in the industry, outperforming the stockmarkets, encouraged greater flows to private equity funds from the pension funds and other institutions. Technology investments predominated. Drawing from a world overview of the private equity market and the European Private Equity & Venture Capital Association survey, the paper investigates the European scene and the prospects for private equity and venture capital in 2001, concluding that with a significant decline in investments, venture capitalists are exercising a cautious and selective approach in their investment decisions. Keywords: private equity; venture capital; technology; buy-outs; pension funds
Introduction Private equity is usually a relatively small proportion of total asset allocation, ranging from zero up to about 5 per cent or 6 per cent in the USA and rather less in Europe. This is due to its special features of higher risk, limited liquidity, limited information and the long-term nature of its investments. But returns can be considerably higher than other asset classes, and investment into the sector has been increasing considerably in recent years.
䉷 Henry Stewart Publications 1470-8272 (2002)
In the European context, private equity investment has grown substantially over the last three years, reaching record levels in 2000 — despite high profile dot.com failures and corrections in the markets for technology stocks in the second half of 2000. Indeed, technology has been the largest industry category with greater numbers of seed, start-up and expansion stage companies receiving financing. Major fund-raising, in excess of investment levels, has led to a wall of money available for investment going
Vol. 3, 1, 17-28
Journal of Asset Management
17
Arundale
Investments: Annual average growth rate = 35% High-Technology: Annual average growth rate = 114% Funds Raised: Annual average growth rate = 41% 22 5
22 5
Funds Raised
17 7
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