Hedge funds and Private Equity - PES

As mentioned earlier, PE-funds, in most cases LBOs, operate with heavy leverage of funds,
according to David Bernard from Thomson Financial. To get the real picture of money/funds available
for acquisitions from a LBO point of view, we must use a factor of 6, i.e. multiply the amount
of funds raised by six. So in 2005the new funds available really amounted to 432 b Euros.
All indicators tell us that this trend will continue in Europe. For funds raised, UK is top with
€46bn or 64% of the total. France accounts for the next largest percentage at 16% (€12bn
raised) and Germany is third with 4% (€3bn raised). Among the 7 biggest Member States in
terms of funds raised by management location, the ranking is the following:
€bn
80
70
60
50
40
30
20
15
10
5
0
UK
2.6 LBOs become dominant
Funds raised by management location (2005)
France
Germany
The Netherlands
Looking at the total funds raised for private equity funds it is striking to see the dominance of
LBOs. In Europe the proportion of buy-out investment made has continued to increase in recent
years, reaching over 68% of amounts invested in 2005. In contrast the amount of venture capital
investments only represents 5 %. This is more worrying bearing in mind our need for long-term
investments to realise the Lisbon goals.
Italy
Spain
Denmark
Source: EV CA/PWC/Thomson Financial
PE: Stage Distribution of Investments by Amount invested in 2005
4,8%
21,8%
5,2%
68,2%
Buy-out Capital
Expansion Capital
Replacement Capital
Venture Capital
PE: funds
raised
by manager
location
Part I – Hedge funds and private equity funds – how they work
69