ANNUAL REPORT 2007 | 2008 - Gimv

Fundraising
Provisional fi gures from the European Private Equity and Venture
Capital Association (EVCA) show that total fundraising in 2007
amounted to EUR 74.3 billion, which is one third less than the
record fi gure reached in 2006 (EUR 112.3 billion), but still higher
than the 2005 fi gure of EUR 71.4 billion. Striking here is the lack
of any major difference in amounts raised in the fi rst and second
halves. This clearly indicates that the fundraising cycle was independent
from the credit crisis and that private equity has grown
into a fully-fl edged asset class with its own dynamism.
As in earlier years a handful of players dominated the market. No
less than 13 funds each raised over EUR 1 billion in capital, representing
53 percent of total fundraising. The bulk of this money
went to buy-out funds (87 percent compared with 82.8 percent in
2006). Just over 8 percent went to venture capital funds, almost
halving last year’s amount (15.5 percent).
Sector specialist Private Equity Intelligence estimates that right
now 340 European private equity funds are trying to raise no
less than USD 70 billion of fresh money. Given the growing share
of private equity in institutional investor portfolios, it is probable
that in 2008 substantial amounts of money will again be raised.
Only in the immediate future, depending on how the credit market
evolves, more attention may well be paid from the investor side to
mezzanine funds and funds specializing in ‘special situations’.
Investments
Provisional investment fi gures for 2007 come out at EUR 68.3 billion,
putting an end to a run of record years. Based on the fi nal
fi gures EVCA nonetheless expects that the record level of 2006
will still be beaten. Based on the quarterly fi gures published by
Unquote/Private Equity Insight it appears that since the third
quarter the credit crisis has had a clear negative impact on total
transaction volume and that this negative trend has continued
unabated in the fi rst quarter of 2008. Given the continuing problems
faced by fi nancial institutions and the deteriorating economic
prospects, it is unlikely that this situation will improve in the short
term. In addition, after the bursting of a bubble it is always sellers
that are the last to adapt to the new reality that their enterprises
are worth a good deal less than nine to twelve months before. It
comes therefore as no surprise that there are fewer transactions
in the market in the wake of a crisis.
120 000
100 000
80 000
60 000
40 000
20 000
0
Funds raised and private equity investments in
Europe (in EUR million – preliminary fi gures for 2007)
Buy-outs
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
With EUR 56.8 billion or 83 percent of the total invested amount,
compared with EUR 53.9 billion in 2006, the share of buy-outs
again reached an absolute record, despite the credit crisis. Here
again the annual fi gures give a somewhat distorted image. The
quarterly fi gures show that total transaction value has considerably
reduced since the third quarter of 2007. This decline has
continued into the fi rst three months of the present fi nancial year.
Indeed the value of all European buy-outs during the fi rst quarter
of 2008 was just one third of the average value for the three
quarters preceding the outbreak of the credit crisis. On top of
this the UK fi gures for the fi rst quarter of 2008 are fl attered by a
single large transaction (Biffa Waste Services) and a marked rise
in the number of transactions in expectation of a change in the tax
regime that came into effect in April 2008. Another striking evolution
in the fi rst quarter of 2008 is that the total value of small-cap
buy-outs (enterprise value of less than EUR 160 million), was a
full third less than the average for the four previous quarters.
Thanks to a handful of spectacular megatransactions, including
Alliance Boots and EMI, the UK again succeeded in 2007 in
slightly increasing its share of transaction volume. In this way average
transaction volume also increased for the European market
as a whole. Leaving aside Great Britain the average transaction
amount fell by 20 percent to EUR 131 million, back to the 2005
level. This also shows that the fall was most marked in the very
large buy-out segment, which is a direct consequence of the
scarce fi nancing opportunities. In past years, the large funds
collected enormous amounts which had to be used. In the coming
period it is possible that they will increasingly take refuge in
minority shareholdings, transactions involving almost exclusively
capital, or they will head downmarket to the mid-cap sector.
According to Standard & Poors Leverage Commentary and
Data (S&P LCD), the average acquisition multiple in Europe for
2007 amounted to 9.7x EBITDA, compared with 8.8x in 2006.
In the fi rst quarter of 2008 this ratio ratcheted up even further
to no less than 10.7x EBITDA. By way of comparison, over the
past ten years, the average multiple was 7.9x EBITDA. In the
medium-sized buy-outs segment with enterprise values of up to
EUR 250 million the same trend was visible, but with somewhat
lower acquisition multiples (8.8x EBITDA in 2007 compared with
7.6x in 2006).
Source | EVCA
Funds raised
Private equity investments
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