PRINT THIS PAGE Later-stage venture capital investment in Europe rises to highest point in three years, fueled by improved IPO market26/07/2006. Source: Ernst & Young, Dow Jones VentureOne.
Ernst & Young/ Dow Jones VentureOne Quarterly European Venture Capital Report finds annual median deal size grows to €2m - the highest median since 2000. Driven by an improved liquidity market in Europe, later-stage venture capital investments grew to euro 1.76 billion in 2005, the most invested to this round class since 2002. But overall venture capital investing into European companies slowed compared to 2004. In total, 1,020 financing rounds were completed and euro 3.60 billion was invested, which translates to a decline of 16% and 5%, respectively, from the preceding year, according to the European Venture Capital Report released by Ernst & Young and Dow Jones VentureOne, the publisher of VentureSource.
The 2005 decrease in Europe stands in contrast to the U.S., where capital investment increased 2% over 2004 and deal flow held steady. However, because capital investment in Europe did not decrease as much as the number of rounds, the median amount invested in a financing round rose to euro 2 million in the fourth quarter and the year overall, making it the highest annual median since 2000.
On a quarterly basis, there were 247 financing rounds in the fourth quarter which raised euro 892.3 million -- holding fairly steady with both the deal and investment activity in the third quarter of 2005 and surpassing the capital investment in the second quarter of the year.
Among the notable trends in 2005 was the significant increase in investment in later-stage rounds. As a percentage of the total investment in 2005, later-stage capital represented 49% -- the highest allocation to this round class since at least 1999. In addition, later-stage financing rounds made up 40% of the total deals that were completed in 2005, up from 33% in 2004.
"The focus on later-stage activity is being driven by the movement in the liquidity market, in which European companies are increasingly finding public market exits. For example, the number of European venture-backed companies that had successful IPOs in 2005 reached 60, about one-third more than occurred in the U.S.," said Steve Harmston, director of global research for VentureOne. "As a result of the current market climate, investors are focusing their attention on existing portfolio companies, supporting them with larger, later-stage rounds in the hopes of achieving liquidity."
In contrast, the number of seed and first-round deals completed in 2005 dropped to 31% of the total deal activity, down from 33% in 2004.
As in the U.S., European investors directed capital to an increasingly diverse range of industries in 2005. For example, the amount invested in the products-and-services industry, euro 350.0 million, increased 10% over 2004, despite 16 fewer deals. This category includes consumer and business companies as well as retailers. In addition, the amount invested in medical device companies, euro 310.9 million, was the most annual investment to this segment since 2001.
"New activity appeared in a range of emerging industries in Europe, such as alternative energy which saw investments increase 25% to euro 50.3 million in 2005. This was likely fueled by the success of several venture-backed energy IPOs around the world last year, including Europe's largest, Q-Cells (XETRA: QCE), a solar cell developer which raised euro 313.2 million in its public offering," said Gil Forer, global venture capital advisory group leader for Ernst & Young. "The investor focus on emerging areas of innovation in Europe helps to ensure a robust pipeline of future market leading companies in sectors such as alternative energy, the Internet and life sciences."
The capital invested overall in European health-care companies was euro 1.54 billion -- relatively stable with the euro 1.57 billion invested here in 2004, although deal flow was down 13%. The largest segment of this category, biopharmaceuticals, declined to 177 deals and euro 1.16 billion in investment, decreases of 12% and 7%, respectively.
The largest deal of the fourth quarter was the euro 26.5 million investment in Trigen (London, U.K.) a developer of drugs for cardiovascular diseases. The largest deal of 2005 was also a biopharmaceuticals deals: the euro 46.2 million investment in Oxagen (Abingdon, U.K.) a provider of advanced genetic analysis.
The information technology industry had the most significant decline of all industry categories, but within the IT industry, there were bright spots.
The information services category -- which includes a number of online businesses -- had 43 deals and euro 113.2 million invested, the most capital invested in this segment since 2002. The semiconductor segment also had an uptick with euro 284.7 million invested in 2005, the most venture capital since 2001. Investment in electronics companies rose 3% to euro 169.7 million. The largest IT deal of the year was the euro 25 million investment in NemeriX (Manno, Switzerland) a developer of semiconductors for GPS solutions.
Regionally, investment in France remained relatively steady over the course of 2005, although deals declined by 4% and capital invested dropped 2% to euro 650.0 million. In Germany, deal flow declined 26% and capital investment was down by 5% to euro 512.3 million. The United Kingdom remains the most active country in Europe but deals were down 9% and capital was down 11% to euro 1.04 billion.
Some smaller countries in Europe saw increases in investment. In Switzerland, capital investment rose 39% to euro 267.9 million, although there were five fewer deals. In Ireland, deal flow was also off by 12 deals, but investment increased 4% to euro 114.4 million. In Norway, deal flow decreased by eight deals, but the amount increased 42% to euro 103.8 million.
Dow Jones VentureOne, a unit of Dow Jones Newswires, has been the leading provider of finance and investment data to the venture capital industry for almost 20 years. Dow Jones VentureSource, a sophisticated electronic database on the venture capital industry, is published by VentureOne.
Ernst & Young, a global leader in professional services, is committed to restoring the public’s trust in professional services firms and in the quality of financial reporting. Its 106,000 people in 140 countries around the globe pursue the highest levels of integrity, quality, and professionalism to provide clients with solutions based on financial, transactional, and risk-management knowledge in Ernst & Young's core services of Audit, Tax, and Transaction Advisory Services. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives.
|
