European PE & VC investment activity Q1 2001

Thomson Financial’s Venture Economics unit has published investment activity levels for the European private equity market for the first time. The Venture Economics unit was formed as part of Thomson Financial’s reorganisation along market-focused lines in May 2000 and comprises the ECVJ magazine, and a European research team.

This new report is based on disclosed equity investments made into European-based or headquartered companies. Venture Economics’ analysis shows a dramatic fall off in the level of investment into companies at all stages of their lifecycle.

Whilst reported buyout and acquisition funding rounds was low, the drop from $2.53 billion to $0.55 billion represented a 78% decline, although only a 33% fall by number of investments, the data based on total funding value ie including senior debt and mezzanine showed a buoyant first quarter result. The total number of buyouts recorded for Q1 2001 to date, was 148 with a total funding value of $12.8 billion compared to 177 deals and $11.2 billion in Q4 2000. These numbers include all buyouts regardless of whether a private equity firm was disclosed and regardless of whether the funding values were disclosed. The Venture Economic’s numbers include only rounds with a disclosed amount and a named private equity financier. Healthy buyout activity is expected to continue through the economic slowdown since more attractive buying opportunities present themselves to the private equity firms as trade buyers can feel less inclined to acquire.

Early stage, which encompasses seed and early stage round investments, was hit badly in both measures, falling 68% by value and 44% by activity level. “This is likely to be a temporary stall but fund managers can not sit on the money for long, there are going to be some interesting developments” commented Gillian Middleton, private equity research manager.

Investment Stage/ 2001 Q1 No of rounds/ 2001 Q1 Total disclosed investment amount $000/ 2000 Q4 No of rounds/ 2000 Q4 Total disclosed investment amount $000

Buyout/Acquisition*/ 35/ 553,739/ 48/ 2,533,762

Expansion/ 162/ 1,362,649/ 212/ 2,116,177

Early Stage/ 64/ 290,408/ 114/ 898,842

Later Stage/ 4/ 128,611/ 24/ 245,087

Other/ 5/ 48,028/ 8/ 112,192

Total/ 270/ 2,380,508/ 406/ 5,905,769

* these numbers refer to only the equity component of the buyout funding

The breakout by the nationality of the investee company makes the UK once again the largest destination of private equity funding in Europe and whilst the numbers have dropped they are not the slump that many observers expected.

Investee Company Nation/ 2001 Q1 No of rounds/ 2001 Q1 Total disclosed investment amount $000/ 2000 Q4 No of rounds/ 2000 Q4 Total disclosed investment amount $000

United Kingdom/ 121/ 1,095,711/ 190/ 2,387,973

France/ 72/ 475,370/ 52/ 1,292,088

Italy/ 1/ 325,395/ 14/ 994,507

Germany/ 22/ 158,783/ 57/ 513,017

Netherlands/ 15/ 109,784/ 20/ 148,693

Denmark/ 3/ 63,902/ 7/ 72,245

Sweden/ 14/ 57,768/ 31/ 230,815

Spain/ 5/ 31,535/ 6/ 39,765

Finland/ 10/ 31,542/ 18/ 156,687

Switzerland/ 7/ 30,718/ 9/ 77,479

Norway/ -/ -/ 2/ 19,500

Total/ 270/ 2,380,508/ 406/ 5,905,769

The first quarter sector analysis shows a fall off in the investment activity in most sectors, the most notable exception being the medical, health and life sciences sector which reported 9 investment rounds valued at $713 million compared to 26 deals valued at $113 million in the previous quarter. Non high technology companies remained the largest sector for investment which reflects the continuing trend for the largest investments to go into the buyout and acquisition rounds.

Sector/ 2001 Q1 No of rounds/ 2001 Q1 Total disclosed investment amount $000/ 2000 Q4 No of rounds/ 2000 Q4 Total disclosed investment amount $000

Non High Technology/ 68/ 813,497/ 98/ 2,538,106

Medical/Health/Life Science/ 9/ 713,011/ 26/ 112,754

Semiconductors/Other Electronics/ 9/ 503,755/ 29/ 335,210

Computer Related/ 107/ 164,867/ 160/ 1,033,547

Communications and Media/ 64/ 98,789/ 71/ 1,709,800

Biotechnology/ 13/ 86,859/ 29/ 335,210

Total/ 270/ 2,380,508/ 406/ 5,905,769

Fund raising has held up well and the preliminary volume for first quarter 2001 is $5.1 billion compared to $7.5 billion in the last quarter of 2000. “These early numbers indicate that whilst the industry remains confident, 2001 is unlikely to break records” commented Lisa Bushrod, editor of EVCJ. Confidence was apparent in continental Europe where two large buyout funds were announced. EQT of Sweden announced the final close of its Euros 2 billion ($1.8 billion) EQT Northern Europe private equity fund which will focus on the acquisition of companies.