"The German private equity market held its own in 2011 despite the European debt crisis and uncertain economic prospects", explained Matthias Kues, chairman of the German Private Equity and Venture Capital Association (BVK), at the press conference on the statistics for the German private equity market in 2011 published today by the organisation. Investments in Germany increased by 22 % year on year to €5.92 billion. Approximately 1,200 mostly small and medium-sized companies were financed with private equity during the course of the year, underpinning the importance of investment companies in financing these enterprises. Only 6 % of the companies financed during the course of the year employed more than 500 people.
The €5.92 billion invested last year comes on the heels of the €4.86 billion in private equity put into companies during the course of 2010. More than three-quarters of this amount was invested in the succession of shareholders. The amount invested here rose by almost 50 % to €4.6 billion. The number of transactions recorded remained almost unchanged (2011: 108, 2010: 109), demonstrating a rise in the number of large transactions. At €0.69 billion, venture capital investments just barely missed the figure for the previous year, which stood at €0.72 billion. The number of companies financed was also down on the previous year, at 879 (previous year: 965). SME-oriented minority interests (growth, replacement and turnaround financing) totalled €0.63 million, thus falling short of the figure for the previous year at €1.11 billion. However, this was influenced by one very large individual minority interest in a family-owned company.
Fundraising by German investment companies amounted to €2.83 billion, more than twice that raised in 2010 (€1.2 billion). This significant increase was due to some governmental financed funds as well as funds of private firms, which in some cases raised amounts in the three-digit million range. Fundraising is therefore again approaching normal levels following very difficult times in 2009 and 2010. "Nevertheless, the number of new funds, particularly those of private investment companies, remains low and there are no signs of an fundamental improvement in the fundraising situation at German investment companies. The ongoing threat to the capital markets from the lingering euro debt crisis inspires caution on the part of institutional investors, to the detriment of their private equity activities", said BVK Board chairman Matthias Kues.
Outlook is cautiously optimistic
Despite yet another good year, prospects are only optimistic to a degree. "The extent to which the market upturn will continue in 2012 will largely depend on how successful politicians can be in stemming the debt crisis. Experience shows that the capital markets are highly sensitive to disruption", said Dr. Hanns Ostmeier, BVK’s president. However, private equity firms are generally facing 2012 with confidence. This is confirmed by "Private Equity-Prognose 2012", a survey of all BVK members on their expectations regarding fundraising, investments and divestment activities for this year. More than half the firms participating in the survey expect a slight or significant increase in investments in their market segment, with a further 30 % expecting investments to remain on a par with 2011. Growth/buyout firms are more optimistic than representatives of venture capital firms.
Expectations on the possibility of successfully exiting investments are also optimistic. Almost half of all those surveyed believe divestments will increase, with a further 44 % expecting the level to remain at least steady. The greatest confidence is being shown with regard to trade sales and secondary buyouts. The companies surveyed were much less optimistic in relation to their exit opportunities through an IPO. Nevertheless, one in five private equity firms stated they have at least one company that is ready to go public; a total of 34 portfolio companies were classed as ready to go public.
Private equity firms have also placed fundraising at the top of their agenda for 2012. 30 companies said they have already commenced fundraising or will be starting in the next two years. They aim to raise a total of €3.67 billion in new fund capital.