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Fundraising and investment activity on the increase for UK private equity industry

The UK private equity industry saw a significant improvement in both fundraising and investment activity in 2003, according to the British Private Equity and Venture Capital Association (BVCA).

Global investment by UK private equity firms increased by 16 per cent in 2003 to £6.4bn, compared to £5.5bn in the previous year. In the UK alone, the number of companies financed increased by seven per cent to 1,274, although the value of investment in the UK decreased by nine per cent to just over £4bn. The UK now represents just 64 per cent of the total amount invested, down from 82 per cent in 2002.

The amount invested in technology sectors in 2003 increased by 50 per cent to £817m from £546m in the previous year, an encouraging increase after the substantial decrease in 2002 of 67 per cent. The volume of technology companies financed by private equity increased by nine per cent, with 701 companies financed, compared to 641 in 2002.

Communications companies were the largest category by amount invested, with 32 per cent of the technology investment at £260m, up four times from £62m in 2002. Investment in biotechnology companies increased by 45 per cent with £84m invested in 80 companies compared to 75 companies backed in 2002 with £58m invested.

Funds raised by UK private equity firms increased by 14 per cent last year, reaching £8.9bn compared to £7.8bn in 2002. International investors accounted for 69 per cent of total commitments, up from 55 per cent in 2002. North America was the largest contributor at 38 per cent, while Asia was the next most significant supplier of funds outside the UK, accounting for seven per cent of funds raised, a 37 per cent increase on its 2002 allocation.

The number of divestments completed by UK private equity firms increased by 17 per cent in 2003 to 1,285 and the total amount divested increased by 11 per cent to £2.9bn. Trade sales represented the most common path to exit, accounting for 22 per cent of all divestments. Flotations were the second most popular route to liquidity at 17 per cent, followed by write-offs at 16 per cent. Secondary buy-outs accounted for 14 per cent of the total amount divested at £410m.

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