"The German private equity market achieved a new record volume: Investments of more than €7 billion in about 1.300 companies mark the highest investment volume since 2008”, commented Wilken von Hodenberg, Spokesman of the Board of the German Private Equity and Venture Capital Association (BVK) at the press conference on the Statistics for the German Private Equity Market in 2014. "This reinforces the continued importance of venture capital and private equity firms in the financing of German companies”.
In 2014, the decrease in investments of the previous year was more than compensated. At €7.06 billion investments increased by 40% compared with 2013 (€5,06 billion) and were as high as they were in 2008. Particularly small and medium-size companies (SME) received equity investments. 93% of all of the companies that received capital over the course of 2014 had less than 500 employees and generated annual turnover of less than €100 million. “The German private equity market 2014 was again dominated by investments into small and medium-size companies”, von Hodenberg continued.
But it were big transactions in particular that contributed to the rise in investments, for example Scout24, HX Holding, Minimax, Mauser or Median Kliniken. More than three quarters of all the investments were accounted for majority investments (buyouts). Their investment volume was 43% above previous year’s figures and the number of registered transactions saw a considerable increase (2014: 127; 2013:98). Strong company results, optimistic business prospects and favourable financing conditions because of the continued phase of low interest rates offered an excellent environment for buyouts. Minority investments (growth, replacements, turnaround) accounted for €0.82 billion and doubled their last year result due to some bigger transactions.
Venture capital investments proved to be stable accounting for €0.65 billion which is only slightly beyond last year’s result (€0.72 billion), but exceeded the results of 2012. The 712 venture capital backed companies made up more than half of all the companies financed in 2014. Over the past few years the venture capital sector lacked a certain dynamic. Better environmental conditions are badly needed in order to finance young companies and thus giving impetus to the market. “The venture capital bill announced by the great coalition should at last be tackled. In January, the BVK submitted a draft for discussion. The measures we suggest would mobilize more capital, attract foreign investors and thus considerably strengthen the situation of the German venture capital market”, comments BVK Spokesman Dr. Peter Güllmann.
The fundraising accounted for €1.67 billion and exceeded the results of the previous year (€1.33 billion) by 25%. This increase is the result of a considerable increase of new capital from buyout funds. Despite this and the increase in number of new funds the raising of capital in the venture capital sector faces some difficulties. BVK Spokesperson Dr. Peter Güllmann: “2012 and 2013 were very difficult years for raising funds. The result of the past year gives reason to hope that institutional investors will have great interest in German private equity as an asset alternative because of the low interest environment.
Private Equity Forecast: Industry is optimistic for 2015
Private equity firms report of a sustained demand for equity financing by start-ups and SMEs. The continued low interest environment and the present favourable financing conditions will boost buyouts. “If the environment remains stable the investments should be at the level of 2014”, von Hodenberg looks ahead. The industry is looking at 2015 optimistically, as confirmed by Private Equity Forecast, a survey of the BVK’s members on their expectations. 119 firms took part in the survey.
More than half of private equity firms forecast a slight or considerable increase in their investments. Another 40% expect their own investments to remain at the same level. Firms with a focus on growth financing/buyouts are as optimistic as representatives of venture capital. Throughout all market segments half of all respondents expect increases in company evaluation because low interest rates are important drivers for evaluation multiples. With regard to venture capital firms their share has more than doubled if compared with the previous year.
The firms are also hopeful with regard to their chances of successfully selling their investments. The development of multiples as basis for company evaluation supports exit opportunities.. Almost every second firm expects an increase in exits or at least exits at a constant level.
After 2014 saw an increase in the number of new funds raised many private equity firms will look for new investors in the current year. 24 German firms responded that they had already started raising new funds or will start in 2016. They aim to raise a total of €2.4 billion of new capital.