Technology private equity investments in Europe rose by 19% to E6.4bn, according to PricewaterhouseCoopers “Money for Growth: the European Technology Investment Report 2005”.
In total 4,563 investments were made in the technology sectors in 2004, down by 5% from just over 4,800 in 2003. Technology represented 45% of all private equity investments in Europe by number, similar to its share in 2003. The number of investee companies (at 2,972) was down by 11%.
The total amount invested in private equity deals in 2004 reached E36.9bn in over 10,000 deals across all sectors and stages of investment. Following the relative gloom of recent years, the figures suggest the technology sector has turned the corner. A close look confirms that the recovery has been driven by a handful of sub-sectors, rather than being evenly spread across the spectrum as a whole, with nearly all of the increase in activity at the management buyout and expansion stages of investment with only a minor increase in early stage investments.
Computer software investments were up by 81% to E1.7bn, consolidating its position as the most active sub-sector, and accounting for more than a quarter of total technology investment. Software also led in terms of number of investments (29%) followed by biotechnology (17%).Communications carriers were the second largest sector for investment with an increase of 14.5% to E936m.
Over 90% of technology investments by number were made at the early and
expansion stages, representing 57% of the total amount invested in technology companies.
Investment in technology MBOs and MBIs was up by 26% to E2.6bn. And as a result, the proportion of technology private equity investment going into buyouts rose from 39% in 2003 to 41% in 2004.
Investment in technology expansion investments rose by 34% to E2.2bn, representing 34% of technology private equity investments by value. Early stage investments rose by just 1% to E1.5bn (23% share).
The UK again led the way in terms of European private equity investment in technology, with total investment rising by 32% to E2.7bn, up from E2bn in 2003. France remained in second place with E870m, down from E954m in 2003. Germany, with E626m, claimed third place ahead of the Netherlands with E531m.
Keith Arundale, European venture capital leader, global technology industry group, PricewaterhouseCoopers, said: “While the increase in European technology investment as a whole in 2004 is encouraging, the figures on new capital raising sound a note of caution, for while new venture funds marked for technology early stage and expansion investments remained almost steady in 2004, they continue to lose ground as a proportion of total venture capital fund raising. This raises the possibility that if the increase in venture capital investment (as seen in 2004) continues, there will be a gap between the funds needed and funds available for investment. However the best early stage technology propositions can and will get venture capital backing, though it remains an extremely tough climate”.