March 13, 2009
According to data published by the EVCA and Thomson Reuters, Private Equity returns in Europe dropped 25% in 2008. Large-cap buyouts were hardest hit over the short-term, with a fall in net asset value of 27.1% to year-end, while mid-cap buyouts were 17.9% down for the year.
That being said, there’s always a silver lining. Despite the slump in so-called short-term horizons, annualised private equity returns or the internal rate of return (IRR) – which tracks returns from the funds’ inception to December 2008 – were up 10.3% in 2008, with buyout funds returning 14.2%.
March 13, 2009
According to the EVCA, European Private Equity funds raised €65.3 billion last year, a fall of 20% when compared to the €81.4 billion they raised in 2007. For the year, 128 funds reached a final close, down from 144 in 2007. Average fund sizes also tumbled, from €496.9 million in 2007 to €425.7 million in 2008.
Venture and Growth Capital proved to be fundraising bright spots as 47 VC funds reached a final close (compared with 37 the previous year), with an average fund size of €84.7 million. For Growth Capital, ten funds raised nearly €3 billion, compared to nine funds raising €2 billion in 2007.
The number and value of buyout funds fell from 62 funds that raised €56.5bn in 2007 to 53 funds raising €44.4bn last year. And in terms of the sources of capital raised, pension funds were by far the largest contributor, accounting for 23% of all funds raised or €15.2bn, compared with 17% and €13.9bn in 2007. At the same time bank commitments halved from just over €9bn to €3.8 bn.
Additonally, the EVCA included numbers on exits which, when measured at cost, were reduced by halve in 2008, from €26.6 billion in 2007 to €13.1 billion, with trade sales and secondary buyouts representing two-thirds of the exits. Unsurprisingly, the public markets were effectively closed with only nine IPOs occuring, six of which were venture-backed companies and three buyout-backed.
February 26, 2009
The European Commission Conference on Private Equity and Hedge Funds met today (Private Equity was the focus today, hedge funds tomorrow. It’s a least a step in the right direction that Internal Market Commissioner Charlie McCreevy got the commission to recognize that the two industries are in fact unique and separate…although I’m sure there are still quite a few socialists in denial about that bit of reality).
The EVCA is offering to accept an oversight and enforcement regime for a regional code of conduct as the industry has apparently recognized the need to move to a “supervisory model” from a system of self-regulation.
The EVCA also submitted a report that found that private equity and venture capital can help overcome the current funding crisis and contribute to the recovery of European economies (amen! There’s been much talk concerning this in the US, see any of the recent debate about Thomas Friedman’s editorial from this past weekend just for starters, and yet Europe has been slow to see the situation in the same light. Am I surprised by this? No. But come on Europe, it’s time to wake up) that the industry is already highly regulated at national and EU level and does not pose systemic risks, and that private equity is a distinct type of investment and is markedly different from other investment strategies, particularly hedge funds.
The submission concluded that the regulatory framework should consist of unified professional standards and an effective enforcement regime with oversight by the appropriate EU or national supervisory bodies.
Many national Private Equity associations have adopted guidelines of their own, however the problem has been, as with much else in Europe, a resulting effect of 27 different approaches with varying degrees of success. And given the bewildering level of attention that a certain Scandinavian leftist member of the European Parliament wishes to attract on this subject, this is an issue that’s far from over!
February 25, 2009
Here’s the report that the EVCA submitted as the industry’s response to the European Parliament and the European Commission hearings today:
December 10, 2008
A new study, conducted by CMBOR (the Centre for Management Buyout Research) in association with the EVCA, argues that private equity ownership rarely harms employee relations and, in many cases, actually improves it. The most positive effects were seen in liberal free market economies (UK, etc.), while heavily regulated economies typically reported that the effect of private equity on employee relations was neutral.
Post buyout, real earnings of non-managerial employees increased in over half (51%) of cases, while 47% experienced no change. The amount spent on non-managerial employee training increased in 45% of cases, and fell in just 3% of instances.
Employee best practice was seen to improve, with regular team briefings up from 71% of cases to 90% post-acquisition, while the presence of a consultive committee also rose from 50% to 63% of firms. The number of companies with a unionized workforce post-buyout remained static at 71%.
(Apologies for the links to the reports lately instead of enabling direct downloads. Since wordpress updated their dashboard a couple of days ago there have been a lot of bugs and glitches. I’m trying to bypass a few of the problems and hopefully they’ll fix it soon).
October 18, 2008
The EVCA has set up a taskforce to act as a unified voice for the industry in Europe to react to a report recommending regulations concerning private equity that was passed by the European Parliament and suggested to the European Commission.
October 9, 2008
Break out the champagne and foie gras!!! France has been declared the most favorable market in Europe for Private Equity according to a benchmarking study put out by the EVCA in conjunction with KPMG. France has slowly worked it’s up the rankings over the course of the three past studies before finally claiming the #1 ranking this year. The overall tax and legal environment in France is very favorable, according to the study, with more initiatives on the way.