BVK: Upswing in Private Equity Investments in Germany

"The German market has made a sustained recovery since the low point in the first half of 2009. We have now recorded an increase in investments for four half-year terms in a row," says Ulrike Hinrichs, Director of the German Private Equity and Venture Capital Association (BVK), presenting the statistics on the German private equity market for the second quarter of 2011.

The increase in investments first and foremost reflects the high demand for equity capital in start-ups and medium sized companies thanks to the positive developments in the economy. "The need to finance company growth during the economic upswing leads many companies to reach out for private equity," says Dr. Sonnfried Weber, Managing Director at BayBG Bayerische Beteiligungsgesellschaft, the host for the today’s presentation of BVK's market figures.

Overall, private equity firms invested €3,131 million in German companies in the first half of the year. Both investments in the same period of the previous year (€2,321 million) and in the previous half year (€2,325 million) were therefore exceeded by a good third. In addition to the consistently high demand for private equity, the livelier buy-out business made a key contribution to this development. The upwards trend in investments is also confirmed by the second quarter investments, which totalled €1,840 million and clearly exceeded those of the previous quarter (€1,291 million).

None of the three market sectors (venture capital, minority investments, buy-outs) saw a decrease in investments in the second quarter. Of all investments in the second quarter in Germany (€1,840 million in 339 companies), €1,497 million, or 81%, were attributed to buy-out transactions. Buy-out investments were therefore nearly double those of the previous quarter (€999 million). Several larger transactions significantly contributed to this development. Venture capital investments remained unchanged compared to the previous quarter (€163 million), so the venture capital sector continues to stabilise at a low level. Other investments, particularly in minority shares of medium sized companies (growth, turnaround, replacement), totalled €181 million, up from €128 million in the previous quarter.

Venture capital investments in Germany totalled €326 million in the first half of the year. This figure is slightly ahead of the previous year's results (€320 million), but failed to match that of the previous half year (€389 million). A clear increase can be seen in buy-out investments. They increased by nearly 50%, from €1,703 million in the second half of the previous year to €2,496 million. Minority investments (growth, turnaround, replacement) also saw an increase in investments from €233 million to €309 million. The result from the first half of 2010 of €871 million, however, was not matched, as there were no very large minority investments made by buy-out firms as seen in the first six months of the previous year.

The extent to which the upward investment trend from the past two years will continue remains to be seen. "Now that the private equity market has recovered from the cutbacks following the financial and economic crisis, we will see what challenges the latest developments in the international capital markets will produce," says Hinrichs. The BVK expects to see an overall successful annual result despite the gloomy outlook for the economy and financial markets. "We expect to clearly exceed last year's investments," Hinrich predicts. Private equity investments in Germany totalled €4,646 million last year.

Detailed statistics on the German private equity market for the second quarter 2011 can be downloaded at www.bvkap.de.