BVK: Private equity activities are stabilising

In the third quarter of 2010, private equity investments in Germany reached €1.02 billion in 388 businesses, which represents an increase of more than one third in comparison to the previous quarter (€0.74 billion). The results from the same quarter of last year (€0.78 billion) were also exceeded by some distance. This figure emerges from the statistics for the German private equity market in the third quarter of 2010 released today by the German Private Equity and Venture Capital Association (Bundesverband Deutscher Kapitalbeteiligungsgesellschaften BVK). The German private equity market has therefore confirmed that it is continuing its stable growth of recent quarters. After the market had almost collapsed in the first six months of 2009 as a result of the financial and economic crisis, the level of investment once again has been increasing significantly over the last five quarters.

"We are experiencing a sustained stabilisation after the interruptions caused by the financial and economic crisis", comments the managing director of the BVK, Dörte Höppner. In the current year to date, investments in Germany have totaled €3.31 billion in 938 companies and have therefore exceeded not only the equivalent results from the previous year (€1.48 billion), but also the investments for the whole of 2009 of €2.74. Private equity activities were, however, interrupted significantly last year by the economic turbulence, which puts the significant increase in investments into a slightly different perspective.

Of the total investments in the third quarter, €0.60 billion was allocated to buy-out transactions, which is almost 60%. They were half the amount of the results from the previous quarter (€0.40 billion) and also exceeded the amount for the same quarter last year (€0.49 billion). The number of recorded transactions, at 23, remained unchanged in comparison to the previous quarter. Following a strong rise in venture capital investments in the second quarter (€153 million), this positive trend could not be sustained in the quarter that has just expired. At €126 million, venture capital investments fell back to the level of the first quarter (€122 million).

In this year to date, the total venture capital investment in Germany has been €0.40 billion, which is almost the same as last year’s level (€0.43 billion). At the same time, both buy-out investments, which almost trebled from €0.69 billion to €1.8 billion, and minority investments (growth, turnaround, replacement), which rose from €0.35 billion to €1.12 billion, have recorded significant increases.

"Private equity has proved itself as a form of finance during the financial and economic crisis", says Dörte Höppner. "German companies want to grow. They need capital to do so. The private equity industry can provide that capital. We therefore continue to anticipate a lively demand." The economic recovery and companies’ increasing demand for capital have played a significant part in allowing private equity investments to surpass the results of 2009 by some distance. If the current trend continues, an investment volume of €4 to 4.5 billion may be achieved by the end of the year. Dörte Höppner has one reservation: "This also depends on whether there are any more sizable transactions before the end of the year". Despite the encouraging recovery, this still means that the figure for 2008, when €9.28 billion was invested in Germany, has been halved.