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European private equity fundraising drops 40 per cent in 2003

European private equity fundraising fell even more steeply in 2003 than in the preceding two years to confirm by far the toughest market since the peak in 2000, according to provisional figures from private equity placement and research firm Almeida Capital. There were a total of 37 final closes in Europe in 2003 worth a combined €17.6bn, down 40 per cent on the 72 closes in 2002 worth €29.3bn.

Chris Davison, head of research at AltAssets, a division of Almeida Capital, said the figures confirmed what had been clear since early in the year. “Capital was in short supply in 2003, which made marketing a pretty brutal experience for all but the very best firms.

“The hope is that the environment in 2004, supported by an improvement in financial and macroeconomic conditions, should be a little easier. There is no reason to expect a dramatic turnaround in the short-term but investor sentiment has strengthened in recent months and that is likely to translate into a pick-up in fundraising as the year progresses,” he said.

Not only were commitments to private equity as a whole down very sharply on the year before but there were also clear signs of enduring risk aversion among investors in the breakdown of aggregate fundraising.

In Europe, buy-out funds extended their share of total commitments to more than 75 per cent and mezzanine funds accounted for almost as much as venture. Buy-out funds in Europe also raised more money in 2003 than their North American counterparts for the first time.

European fundraising for the year as a whole fell less dramatically than in North America but the evidence of the fourth quarter suggested conditions in the US are improving and now enjoying a gentle recovery. Europe, by contrast, suffered its worst period of the year. North American funds announced 66 final closes worth $26.9bn, down 59 per cent on the 113 closes worth $65.4bn the year before.

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