Running out of fuel

The value of transactions in Q1 dropped by more than half to a little more than EUR4bn, the lowest quarterly total since Q3 1996. Having shown relative stability between Q4 2007-Q3 2008, investment activity has dropped off dramatically since the Lehman collapse and the Q1 2009 numbers are down by a remarkable 39% in terms of volume and 86% in value against the corresponding period of last year.

Some slight consolation is seemingly offered by the volume total, which has showed a much more modest drop of 18% quarter-on-quarter from 267 deals to 219. However, the reality is that deal numbers have also slumped to lows not seen since Q2 1998, indicating that the aversion to new investments is not merely isolated to one small area of the asset class.

Worst hit are the buyouts which continued to decline at a faster rate than the market as a whole in Q1, with just 49 private equity-backed acquisitions completed over the three months, down more than a third on Q4 2008. The total value of these deals amounted to little more than EUR2.5bn, down by almost two thirds. Compared to Q1 2008, itself a fairly modest quarter in comparison to the preceding year, the period recorded drops of 70% and 90% in terms of volume and value respectively. Notably, there was a complete absence of any deals at the top end of the value spectrum, with the newly defined EUR1bn+ large-cap category recording a decline from the solitary deal witnessed in the final quarter of 2008.

Nordics lead the way

Two of the largest deals in Europe during the quarter were Nordic: Altor and Bure's acquisition of investment bank Carnegie and Max Matthiessen, a deal valued at EUR213m, and Bridgepoint's EUR162m take-private of healthcare group Terveystalo.

Although the region had the slowest deal activity in Europe, with the high value of these two deals the impact on its averages was less profound. In fact, the region has the highest average deal value in Europe, with UK once the largest private equity market in Europe, came last with an average value of only EUR18m.

Early-stage investments

The ongoing downward trend in the early-stage segment continued throughout the first three months of 2009. There were a total of 80 deals completed over the period worth a combined total of EUR362m, representing declines of 17% and 10% in terms of volume and value respectively. However these slides are noticeably less pronounced than the other segments of the market, an observation that is emphasised by the fact that activity is actually as high as it was in Q4 2007, while the value total is actually higher than that witnessed in Q2 2008. The largest deal recorded was in fact Essex Woodland Ventures backing of Symphogen A/S, a Danish biotechnology company, alongside Gilde investment Management, SLS Ventures, Sunstone Capital and Takeda. Despite the slight increase in average deal size, however, it is likely that the coming year activity in this area will decline further, as investors struggle to profitably exit incumbent investments and thus are forced to concentrate on portfolio management to a greater degree.

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• Topics
• Investments
• Nordics
• Healthcare