EVCA final results show records for 2007

At its 25th Anniversary Synopsium in Madrid, EVCA published its final results for private equity in 2007, showing strong results on all fronts.

In fundraising, EUR79bn was raised in 2007, which is less than the amount in 2006, but still more than the EUR72bn from 2005. Of this, EUR60bn was allocated to buyouts. Approximately 141 independent funds reached final closing with an average size of EUR490m. However, half of the monies raised were concentrated in 14 funds which closed above EUR1bn, including AAC Capital in the Netherlands. Pension funds (18%), banks and funds-of-funds (about 11% each) continued to be the largest sources of capital for the industry. The US (19.5%) and the UK (16.9%) remained the main source for funds in Europe, followed by Greece (for the first time in the top five), Germany and Asian countries.

A record EUR73.8bn was invested in 2007, representing an increase of EUR2.6bn since 2006. Of the total, 79% at EUR58.3bn were buyouts, although this only represents 23.7% of the total number of deals, with mid-market transactions leading the way and representing a third of the global amount of investments. Early-stage, despite only representing a third of the total amount invested, accounted for a significant 38.9% of the volume. Regionally, the UK market predominates, with over EUR20bn invested in UK-based companies. The Netherlands ranked third place with more than EUR5bn invested in Dutch-based firms. Furthermore, Dutch-based funds invested nearly EUR4bn. These figures confirm once again the strong place of the Netherlands in the European market (see graph).

Significantly, 2007 was also the first year that sales to other institutional investors exceeded trade sales. The total amount divested at costs was EUR27.1bn, an 18.6% drop from 2006, with secondary buyouts accounting for 30.4% of the total against 28.2% for trade buyers. As for the total number of divestments, trade sales accounted for 23.9% and sales to other private equity houses had a share of 13.8%.

Horizon 2020, four scenarios for private equity

A report of EVCA - conducted by Oxford Analytica - offers four potential scenarios for global economic development in 2020. The study relies on macro-economic, political and social trends and drivers, meant as a tool for GPs to plan their fund strategies.

The first scenario, the 'three towers', looks at a world where the geopolitical tensions will create three large regional blocs, in which trade and investment flows are relatively unimpeded. Private equity will outperform public equities and benefit from light regulatory. The second scenario, 'Gulfstream', depicts a world where trade and investment flows are concentrated among wealthy nations and the larger emerging markets. In this world private equity industry will play an important role with cross border M&A and declining protectionism driving industry concentration on a global scale. Venture capital will thrive in a world that encourages innovation. Thirdly, 'trading up' sees global economic integration progressing with strong institutional support. The flourishing multi lateral trading system will prosper and will remain the key support for an economic integration. Venture capital will perform well in Europe where government funding will play a vital role in financing R&D. Individuals are permitted to invest in private equity via personal retirement accounts. The fourth scenario, 'Going East', suggests that China and India will prove increasingly successful at developing cutting edge technologies and increasingly competitive, shifting the centre of gravity of venture capital investment towards Asia, while the US and Europe favour public market as a response to increasing economic and social problems.

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