Private-equity investment into European companies rose to its highest level in five years in 2014, with €41.5 billion going into European firms, a 14.5 per cent rise on the previous year.
A record €37.8 billion was achieved in divestments, as more than 2,400 firms exited in 2014, according to the European Venture Capital Association (EVCA), which recently released its annual venture-capital overview report.
At €44.6 billion, private-equity fundraising reached its second-highest total in five years. In 2013, €54.4 billion was raised, but this was heavily influenced by a small number of large funds raised, the EVCA said.
Over a quarter of all private-equity funding for European companies came from North America, and another 24 per cent from France and Benelux countries. The UK and Ireland contributed just over 10 per cent of funding.
The number of companies being financed also rose. More than 5,500 companies were on the receiving end of investments, an 8 per cent rise on 2013. Over 80 per cent were small to medium-sized enterprises (SMEs), and almost half were getting their first equity investment. Only 64 investments went to large companies of 500 people or more.
Increasing role
“Private-equity and venture-capital play an ever increasing role in Europe’s capital markets. In 2014, we saw a clear pickup of investment and divestment activity across
Europe
, supported by robust fundraising,” EVCA chief executive Dörte Höppner said in a statement.
“Against the backdrop of extremely high liquidity in financial markets, our numbers are proof of a strong and stable private-equity industry which displays no signs of overheating; the industry will continue to play a central role in the European economy.”
The majority of companies were backed by venture-capital investments. More than 3,200 companies receiving funding as investments increased by 6 per cent to €3.6 billion.
In terms of regions, German, Austrian and Swiss companies, as a group, received the most investments, with 911 companies getting seed, start-up or later-stage venture funding. France and Benelux companies were next, with 729 getting support. Some 702 Nordic firms were funded, 427 in the UK and Ireland, 230 in southern Europe, and 210 in central eastern Europe.
However, as a percentage of European GDP, total investments at 0.28 per cent only reached levels seen more than a decade ago in 2002, and were less than half the level achieved in 2006 – 0.60 per cent – the peak of the European market.
Half of the exits came through either trade sales – mergers or acquisitions – at 26.5 per cent, or a sale to another private- equity firm, at 24.3 per cent. Sale of quoted equity made up another 10 per cent. Initial public offerings (IPOs) represented just 18.9 per cent of the total exits. But the number of IPOs more than doubled, from 23 companies in 2013 to 51 in 2014.
By comparison, the US market saw 273 IPOs worth $84.9 billion in the same year, the largest number since the glut of 406 companies in the midst of the 2000 dotcom bubble.
When viewed in cash terms, buyouts again dominated in Europe. Of the €37.8 billion divestment total, buyouts of all types accounted for €32.8 billion.
“Record divestment activity in 2014 reflects the quality of businesses being created by European private equity. While the rise in IPO activity is welcome and demonstrates investor appetite for new share offerings, we must do more to improve public market access for SMEs,” Höppner said.
The number of new funds raised was the highest since 2011 at 298. There were increases in all private-equity segments, including buyouts, growth, mezzanine and venture capital, according to the report.
For the past five years, the largest share of venture-capital funding in Europe has been invested in the life sciences, communications and computer and consumer electronics sectors.
Life-sciences companies were the recipients of the largest cash investments from European venture capital firms.
Ireland at lower end of scale
Ireland is at the lower end of the scale for national markets when investments from all European equity sources were considered as a percentage of national GDP. All private-equity investments from European investors into Ireland represented just 0.074 per cent of Irish GDP in 2014. By comparison, the UK led with investments at 0.720 per cent of GDP, followed by France,
Sweden
and
Norway
.
But Ireland came a joint fifth in Europe with the UK, France and Switzerland, when singling out venture capital investment as a percentage of national GDP, at 0.035 per cent. The European average was 0.024 per cent.
However, when viewed as a destination for all forms of equity including investments coming from outside the EU, Ireland performed much better.
From this market-orientated perspective, Ireland was at the EU average in terms of all private-equity investments seen as a percentage of GDP, at 0.274 per cent of GDP compared with a European average of 0.277 per cent.
Under the same consideration, Ireland ranked third, after Sweden and Finland, when viewing venture-capital investment as a percentage of GDP, at 0.049 per cent. The European total was just 0.024 per cent. Sweden led with 0.066 per cent.
In this market view, Ireland also came third for growth as a percentage of GDP, behind the Baltic countries and the UK.
The EVCA's database monitors 1,963 private-equity firms with €548 billion capital under management in aggregate. The EVCA says the 2014 activity survey covers 91 per cent of that capital and records fundraising, investment and divestment activity for more than 1,200 firms. Data is collected for the whole of Europe, including countries such as Norway, Switzerland and the Ukraine, as well as European Union member states.
