Private Equity in Germany - Positive Movements in All Market Fields

A positive fundraising and continuing high investment amounts show the continuous good mood in the German private equity market. New funds raised in the third quarter made up €1,102m but could not meet the 2nd quarter’s result of €1,527m but could outdo the results of the four quarters of 2006.

Investments made by private equity firms active in Germany in the third quarter totalled €1,674m. Increasing buy-out investments mainly contributed to this result. Buy-out activities in Germany showed unimpressed by the turmoil in international credit markets. These are some of the key facts of the statistics on the private equity market in the third quarter 2007 presented today by the German Private Equity and Venture Capital Association e.V. (BVK).

New funds raised from Jan to Sept 2007 totalled €3,146m and surpassed the result of the entire year 2006 when €2,820m were raised. The main reason for this increase is not a more successful fundraising on a wide spectrum but a few new large buy-out funds and an increasing fundraising by captive and evergreen funds. Almost half of the funds in the third quarter were raised by captive and evergreen funds, i.e. dependant firms who do not raise funds from external investors. About three quarters of the new funds raised from Jan to Sep 2007 are to be invested in buy-outs, another 28 per cent are to be invested in venture capital.

The €1,674m invested by German private equity firms in the third quarter surpass the investments made in quarters one and two and investments in venture capital and the buy-out increased. The number of financed companies increased to now 341. €1,451m were invested in buy-outs, about the sum of quarters one and two. Three large buy-outs mainly contributed to this result. Venture capital investments accounted for €223m invested in 315 companies and surpassed the results achieved in quarters one and two. Within the venture capital field the number of financed seed and start-up companies came to 169 marking the highest figure since 2002. Apart from publicly supported venture capital companies an increasing number of private companies continuous to invest in the early stage. Throughout this year buy-out investments accounted for €2,952m and surpassed the amount of €843m invested from Jan to Sep 2006. Venture capital investments slightly fell from €606m to €566m. Nevertheless, the number of financed companies increased from 619 to 719 and in the buy-out segment from 67 to 83. Another upswing can be seen in the early stage. So far, €270m were invested in 362 seed and start-up companies. In the same period 2006 €202m were invested in 267 companies.

In spite of these positive figures Germany still has a lot to catch up if compared to other European private equity markets. The German fundraising in particular lacks behind its possibilities if compared to other countries and with regard to Germany’s economic strength because of the disadvantageous effects of non-competitive environmental conditions for German private equity companies.