Europe struggles to raise cash
THE amount of private equity funds raised in the UK dropped 21% from €36.9bn in 2007 to €29.1bn in 2008.
Meanwhile, European private equity funds only raised an aggregate of €48.9bn in 2008 – representing a 25% decline versus 2007.
The findings are part of private equity study across Europe’s main financial centres by Grant Thornton.
Only France bucked the downward trend, with fundraising increasing to €12.7bn – a 27% increase from 2007 when €10bn was committed to private equity funds due to fewer significant fundraisings.
Banks, insurance companies pension funds and funds of funds are the four main subscribers that represent around 60% of funds collected.
Domestic funding accounted for 77% of the private equity funds raised in Germany while by contrast in UK private equity funds received 76 % of their 2008 funds from non-domestic sources.
Investments in terms of number of companies increased +1% to +18% although in the UK the number of deals fell by 8% compared to 2007.
Italy saw an exceptional surge in amount invested last year compared to all other countries in the study, which saw declining amounts invested.
In France, Germany and Italy buyouts remain the largest stage of investments by value (from 53% to 76%).
Whereas early stage and capital expansion remain significant in terms of number of investment made (from 60% in Italy to 96% in Spain).
In most countries the majority of deals (in excess of 75%) are done in domestic markets. The exception is the UK, where only 43% are UK companies.
However, the average size of non-domestic deals tends to be higher (€37m compared to €8m).
The value of private equity divestments dropped sharply across Europe by value (-20% to -56%) and by number of divestments (-9% to -34%)
The UK recorded a 20% decline to €13.7bn, while France saw a 44% drop to €3.2bn, Germany a 39% drop to €1.8bn and Italy a 55% drop to €1.2bn and the most important drop is seen in Spain by 56% to €700m.
The collapse of initial public offerings (IPOs) and falling appetite for secondary buyouts dramatically curbed the exit opportunities for private equity firms.
Write-offs were a relatively more important means of divestment in 2008 in all countries however with France at 6%, Germany 8%, Italy 13% UK 16%, and an exceptional increase for Spain with 22%.
