BVK Statistics 2006: Half year with positive results in spite of dull investments in the second quarter

Inspite of a weaker second quarter 2006 the private equity industry looks back to a positive first half announced the Bundesverband Deutscher Kapitalbeteiligungsgesellschaften - German Private Equity and Venture Capital Association e.V. (BVK) at its press conference in Berlin.

Compared to the first six months of the year 2005,  more funds were raised now totalling 846.3 million Euro (684.8 million Euro in the first half 2005) and invested.  Half the amount were independent funds raised from institutional and private investors.  Investments increased by almost one quarter to 939.3 million Euro (760.9 million Euro),  the number of financed companies rose to 473 (457) while divestments totalling 813.3 million Euro slightly exceeded last year’s figure (764.0 million Euro).

Slacking fund raising, increasing direct investments

This year’s second quarter presented itself in a slacking mood for raising funds.  The raised 293.2 million Euros lack behind the first quarter’s result of 553.1 million Euro and mark the lowest figure since the first quarter 2005.  “At present, only a few smaller funds are in the closing process,  but we are confident that this number will have increased by the end of the year.  The planned tax reform already showed effects.”, said Dr Holger Frommann, Managing Director of the BVK e.V.

Investments showed a clearly better result although the amount of 428.5 million Euro invested in 276 companies is less than the amount  invested in the first quarter (510.8 million Euro invested in 251 companies) but exceeds the result of the second quarter 2005 (353.7 million Euro invested in 279 companies).  From April to June 2006,  the total portfolio rose to 21.6 billion Euro invested in 5.843 companies.

Revival of the seed stage

A look at the sectoral distribution of investments shows that buy-outs tool the lead in the first half.  Although big buy-outs were missing investments totalled 574.9 million Euro (61.2 per cent of all investments) thanks to a high number of smaller buy-outs which means a plus of almost 50 per cent compared to the first half 2005 (366.4 million Euro).  The second quarter 2006 showed positive signs with regard to seed and expansion investments:  The number of financed seed companies doubled to 28 compared to this year’s first quarter.  Expansion investments jumped to 100.4 million Euro in 121 companies (79.7 million Euro in 103 companies). „I am sure that the growing activities of the Hightech Gruenderfonds and its co-investors have to be seen as one reason for the revival of the seed stage.“, Frommann continues.

IPOs strong

Other than in the previous three record quarters the second quarter saw no bigger sales through the M&A market.  Exits totalled 316.5 million Euro which is one third less than the amount of the previous quarter (496.9 million Euro) but more than last year’s second quarter (197.3 million Euro).  Trade sales and buy-backs made up more than half the exit amount.  Between the first and the second quarter the number of trade sales sank from 24 to 20.  Nine private equity financed companies went to the stock exchange, four in Germany and five abroad.  Total losses kept almost constant (21.6 million Euro. 37 companies) and accounted for only 6.8 per cent of all exits.

All in all,  divestments in the first half 2006 totalled 813.3 million Euro thus slightly exceeding last year’s amount of 764.0 million Euro.  The dominant exit channel were trade sales (28.6%) followed by IPOs and sale of shares (25.1%).

Outlook

Till the end of the year the BVK expects clear signals from the political decision makers concerning the development of the German private equity and venture capital market.  “In its agreement of 11 Nov 2005,  the coalition government recognised the economic impact of private equity and announced an improvement of the environmental conditions for the private equity industry.  The government’s new plans on a taxation of interests in the context of the corporate tax reform will have equity traded investments go up in price.  Such plans will have negative effects on all companies, they will hit our industry badly and hamper the development of the market.”, says Klaus-Michael Hoeltershinken,  member of the BVK Board.  “We do not hope that the improved environmental conditions announced in the SME initiative will sustain a bitter setback.  Private equity has a high impact on the German economy.  The government must stand to what it laid down in the coalition agreement and make environmental conditions more attractive.”, Hoeltershinken continued.

Private equity means investments to companies not quoted on the stock exchange in all stages i.e. venture capital and buy-outs.  Venture capital means early stage (including seed and start-up) and later stage (expansion) investments.

Contact us:

Bundesverband Deutscher  
Kapitalbeteiligungsgesellschaften e.V. (BVK) 
Dr. Holger Frommann, Managing Director  
Reinhardtstrasse 27c 
10117 Berlin
Germany 
Phone: +49.(0)30.30 69 82-0 
Fax:     +49.(0)30.30 69 82-20 
bvk@bvk-ev.de
www.bvk-ev.de

VOCATO public relations
Birgit Brabeck / Jessica Amthor
Bahnstrasse 19
50858 Köln
Germany
Phone: +49.(0)22 34.6 01 98-18/-17
bbrabeck@vocato.com
jamthor@vocato.com