BVCA reveals impressive year for UK private equity

The BVCA today released its report on investment activity in 2007, which revealed an increase of more than a third in terms of total investment by UK private equity firms and a substantial rise in cross-border transactions.

The report, compiled by PricewaterhouseCoopers, showed that a total of £31.6bn was invested by BVCA member firms worldwide, an increase of 45% on 2006's total of £21.9bn. However, this was due in part to an increase in the number of member firms from 192 to 214, with the like-for-like increase standing at a still impressive 37%. In terms of geographic focus, there was a definite shift towards overseas investments, with close to £14bn invested in Continental European businesses (up from around £10bn in 2006) and £5.6bn invested in companies based outside of Western Europe (up from £1.6bn in 2006). The value of UK investments also increased but at a more modest rate, rising from £10.2bn to approximately £12bn.

As would be expected, given the headline grabbing transactions that occured in the UK in the early part of 2007, buyouts continued to dominate UK investment activity and accounted for £7.7bn of the UK total. Expansion-stage deals also saw a moderate increase, up from around £3bn to just over £3.8bn. Conversely, early-stage investments more than halved in value from £946m to £434m despite the number of transactions remaining stable, indicating a significant drop in the average value of investments.

Funds raised in 2007 reached £29.3bn, down from £34.3bn in 2006 but still higher than the £27.3bn raised in 2005. The majority of this capital continued to be provided by pension funds, which accounted for 23% of the total, though only 4% of this came from UK based funds. The amount of capital coming from funds-of-funds increased from 16% in 2006 to 21% a year later, while the proportion coming from banks saw the largest shift, rising from just 10% in 2006 to 19%.

The total value of divestments by UK private equity firms reached a record total of £13.6bn, up from £13.1bn. In line with figures released by the EVCA earlier this week, the proportion of this total represented by secondary buyouts saw a dramatic increase from 10% to 28% and rose above trade sales for the first time, which increased from 19% to 27%. Flotations, on the other hand, decreased and only accounted for 3% of the total figure, down from 11% in 2006.

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