PRINT THIS PAGE Management buyout and expansion investments lead 2004 technology investment trends In Europe
29/06/2005. Source:PricewaterhouseCoopers.
Technology private equity investments in Europe rose by a healthy 19% to €6.4 billion, according to PricewaterhouseCoopers' Money for growth: the European technology investment report 2005. In total 4,563 investments were made in the technology sectors in 2004, down by 5% from just over 4,800 in 2003. Technology represented 45% of all private equity investments in Europe by number, similar to its share in 2003. The number of investee companies (at 2,972) was down by 11%.
This is on the back of the best year ever for the European private equity industry as a whole in 2004 when €36.9 billion was invested in over 10,000 deals across all sectors and stages of investment. Following the relative gloom of recent years the figures suggest that the technology sector has turned the corner.
A close look confirms that the recovery has been driven by a handful of sub-sectors, rather than being evenly spread across the spectrum as a whole, with nearly all of the increase in activity at the management buyout and expansion stages of investment with only a minor increase in early stage investments.
Computer Software investments surged by 81% to €1.7 billion, consolidating its position as the most active sub-sector, and accounting for more than a quarter of total technology investment. Software also led in terms of number of investments (29%) followed by Biotechnology (17%) Communications Carriers was the second largest sector for investment with an increase of 14.5% (to €936 million).
In contrast, investment in several other areas of technology declined and e-commerce investment collapsed by 73%, led by a 95% fall in the UK.
Other “Money for Growth 2005” highlights included:
92% of technology investments by number were made at the early and expansion stages, representing 57% of the total amount invested in technology companies.
Investment in technology MBOs and MBIs rose by 26% to €2.6 billion. As a result, the proportion of technology private equity investment going into buyouts rose from 39% in 2003 to 41% in 2004.
Investment in technology expansion investments rose by 34% to €2.2 billion, now representing 34% of technology private equity investments by amount. Early stage investments rose by just 1% to €1.5 billion (23% share).
The UK, again, led the way in terms of European private equity investment in technology, with total investment rising by 32% to €2.7 billion, up from €2.0 billion in 2003. France remained in second place with €870 million, down from €954 million in 2003. Germany, with €626 million, claimed third place ahead of the Netherlands with €531 million.
Technology accounted for 71% of the total amount invested in e-commerce, up from 61% in 2003. However, e-commerce investment as a whole slumped by 3.5 times to €343 million in 2004.
New funds raised in 2004 for early stage and expansion investments fell by 3% to €2.5 billion, representing 9.0% of overall total European funds raised.
In 2004, the USA’s total investment in venture capital deals in the technology-specific sectors was €14 billion, almost four times the amount invested in Europe.
Looking ahead to 2005, Keith Arundale, European Venture Capital Leader, Global Technology Industry Group, PricewaterhouseCoopers, commented: “Whilst the increase in European technology investment as a whole in 2004 is encouraging, the figures on new capital raising sound a note of caution, for while new venture funds marked for technology early-stage and expansion investments remained almost steady in 2004, they continue to lose ground as a proportion of total venture capital fundraising. This raises the possibility that if the increase in venture capital investment (as seen in 2004) continues, there will be a gap between the funds needed and funds available for investment. However the best early-stage technology propositions can and will get venture capital backing, though it remains an extremely tough climate”.
Methodology - the analysis of European private equity and venture capital in the technology industry is based upon the results of a detailed survey conducted by Thomson Venture Economics (TVE) and PricewaterhouseCoopers for the European Private Equity and Venture Capital Association (EVCA). This research involved around 1,600 private equity and venture capital firms in 20 Western and Central European countries, plus seven additional Central European countries which are currently treated as pilots and are not included in the overall data. The survey results represent participants in the industry, regardless of membership in EVCA or any national venture capital association.
PricewaterhouseCoopers (http://www.pwcglobal.com) is the world's largest professional services organisation. Drawing on the knowledge and skills of more than 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance in an Internet-enabled world.
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