|
AltAssets is the private equity news and research service from Almeida Capital
|
|
|
PRINT THIS PAGE Average investment value up in 2004, but still a disappointing year for technology investment.
22/06/2005. Source:Cobalt Corporate Finance.
With the renewed confidence in the technology sector, the field was set for technology investment in the UK and Ireland to build momentum in 2004. The reality was different, says Cobalt Corporate Finance. From the data collected by Cobalt Corporate Finance for technology transactions over £1m in the UK and Ireland, for the year ending December 2004 there were 100 deals raising £496m which compares to 107 deals raising £392m for 2003. This is a 27% increase in transaction value in 2004 compared to 2003, but the fourth consecutive annual fall in transaction numbers to a new low since 1998.
However the composition has changed. Average deal size in the UK and Ireland has increased substantially from £3.7m in 2003 to £5.0m in 2004. This is a strong indicator that technology investment in the UK and Ireland is recovering. This increase in the average investment size, coupled with a reduction in the number of investments, is due to greater selection. VCs are showing that they are prepared to invest significant amounts into companies with strong management teams, in interesting markets, with compelling propositions and try for the home run.
First and second round investments accounted for 61% of the deals in 2004 in comparison to 51% in 2003. It is encouraging to see the return of early stage technology investments, but these are still down on the highs experienced in 2001 where 69% of investments made were into first and second rounds during a period when common sense was suspended.
This increase in early stage investment is not only due to renewed confidence in investing in earlier stage companies, but also due to VCs achieving exits in 2004 replacing later rounds of investment which was observed in previous years. In addition, the buoyant M&A and IPO market during 2004 provided the less confident funds with the evidence to support further investment during an attractive stage in the investment cycle.
The number of syndicated deals fell to 67 in 2004 from 76 in 2003. As a percentage of the number of deals in the year, this is of a similar level that has been experienced over the last three years. The largest transaction recorded in 2004 was the second round £28m investment made in Microsulis (Micro-wave technology) by 3i, Media2k and Private Investors.
The largest first round investment was Doughty Hanson and Amadeus’ £12m ($19m) first round investment CRLO Displays (silicon based displays). Once again, investment in software applications was an active sector during the year where 31 transactions closed (33%). There was also increase in activity in the wireless sector in comparison to 2003 where 23 fundraisings were closed (17 in 2003).
Regionally, there was a large decrease in the number of Irish deals where 9 deals were closed in 2004 in comparison to 18 in 2003. In Scotland there was an increase in the number of transactions where 12 deals were closed in 2004 compared to 7 in 2003.
The most active investors during 2004 were 3i (17 deals) and Scottish Equity Partners (10 deals). Other active investors that were noted during the period include Cross Atlantic Partners, Doughty Hanson Venture Partners, Benchmark and Accel.
Paddy MccGwire, Cobalt’s Managing Director commented: “Many VC investors are in fund raising mode themselves, which generates increased selectivity as more focus is placed on the precise composition of the portfolio and need for exits, as performance/track record will be under scrutiny. In January NASDAQ lost any gains it had made in 2004, but there are still confident acquirers making strategic purchases that provide the oxygen for the UK and Ireland evergreen technology investments climate. We would expect investment activity in 2005 to be similar to last year until the new funds raised need to be put to work. ”
Cobalt is a TMT specialist advisor in the UK specialising in M&A and providing corporate finance advice to Technology and Media companies.
|
 
|
|
|
