Irish private equity investment fell by more than a third last year but has remained broadly steady to date this year, a report from PriceWaterhouseCoopers shows, reports Jane O'Sullivan, Markets Correspondent.
Private investment hit a peak in 2000 when, fuelled by the increase in technology-related investments during the internet boom, it rose by 113 per cent to €223 million.
But, in line with global trends, the Irish investment community reduced its spend last year to €145 million, a drop of 35 per cent on 2000's levels. However, this compared to a global decrease of 50 per cent.
Private investment to date this year has remained at broadly similar levels to last year with most investments in the form of follow-on funding for existing companies with a smaller proportion of funds going into early-stage and start-up companies, the report said.
According to Mr Joe Tynan, venture capital partner with PriceWaterhouseCoopers, this year and last year have been a period of consolidation when investors have re-evaluated their investments.
"As this process comes to an end, and with a significant number of new funds becoming available, particularly those funds which have been seeded by Enterprise Ireland, 2003 holds the promise of further growth in the Irish market," he said.
The report, which was prepared with venture capital group 3i, found that the Irish private equity and venture capital market has been growing at more than four times the global average in recent years.
Coming off a low base, it recorded a compound average growth rate of 64 per cent between 1997 and 2001 compared to a global average of 14 per cent.
The only two countries growing at a faster rate are Denmark and India while a mature market like the US has been recording growth of 10 per cent, the report said.
The report also sees scope for further growth. It noted that Irish private equity and venture capital investment represents just 0.13 per cent of gross domestic product (GDP) compared to a worldwide average of 0.32 per cent.
It also found that the Republic is heavily dependent on the technology sector with 81 per cent of all investments going into technology-related companies compared to a global average of 53 per cent.
However, Mr Clive Austin, director of 3i Ireland, believes that the balance between early-stage venture capital and private equity investment will shift.
"While historically more than 80 per cent has gone into early-stage technology-related business, 3i Ireland perceives a significant opportunity in the more traditional sectors of the Irish economy," he said.
"Buyouts, privatisations, development projects and private placings - all of these provide attractive opportunities for the private equity investor operating in Ireland."
In global terms, the report found that total private equity investment fell to $100 billion (€102.19 billion) last year from an all-time high of $199 billion in 2000. "Whilst this is a significant decrease, put into a historical context it is still the third highest year for global investment," the report said. The US suffered the most marked decline last year with private equity investment down by more than half while the Asia Pacific region was least affected with private investment down by just 3 per cent.
