"As early as the fourth quarter of 2011, it was clear that the upward trend in private equity investments would be reversed. This is has now been confirmed by the market figures for the first quarter of 2012," explains Matthias Kues, Chairman of the German Private Equity and Venture Capital Association (BVK), about the current statistics for the German private equity market. At €669 million, almost a third less than the previous quarter (€1.058 million) was invested in the first three months.
The most recent decline in investments is not unique to Germany, it is a phenomenon throughout Europe. It reflects a return to insecurity in the market about how the European debt crisis will impact upon the financial market and financing conditions as well as the state of the economy. Particularly in the area of large majority acquisitions, investment activities decreased considerably in the past few months, as these have always responded sensitively to mood changes in the capital market. "At first glance, the figures look worrying. But we are still far from a situation like the beginning of 2009," according to Kues. "Especially in the area of the financing of small and medium-sized companies, the market is continues to show stability."
At €471 million - the lowest result since the second quarter of 2010 - buyout investments remain at around a third below the result for the previous quarter (€698 million). Especially the transactions of foreign private equity firms that influence the market result considerably are still completely failing to materialise. This is partly due to the limited availability of debt to finance buyouts and partly due to the limited number of potential investment targets. At €131 million, venture capital investments almost achieved the result for the previous quarter (€133 million), but fell short of the result for the first quarter of 2011 (€170 million). At present, the venture capital sector is showing no signs of recovery or a change to an upward trend.
Given that the development in the capital market is difficult to forecast, an outlook for the remainder of the year is difficult. Once the capital markets have regained confidence, the private equity market will also be able to achieve the investment level of the previous two years.