The European private equity industry saw fund raising plummet by 20% according to preliminary data from EVCA’s Investors’ Forum 2009 in Geneva.
In 2008, private equity fund raising fell from €81.4bn in 2007 to €65.3bn. Average fund sizes also fell from €496.9m in 2007 to €425.7m. Last year also saw the number of funds holding final closing drop from 144 in 2007 to 128.
Times were particularly gloomy for the buyout market. The number and value of buyout funds fell from 62 that raised €56.5bn in 2007 to 53 raising €44.4bn in 2008.
The silver lining came from venture capital and growth capital funds. In venture capital, final closes actually increased in 2008, from 37 in 2007 to 47, with average fund size reaching €84.7m. Final closes on early stage venture funds increased from 15 in 2007 to 21 in 2008.
Growth capital funds also had a successful year. Ten funds raised nearly €3bn in 2008, compared with nine funds raising €2bn in 2007.
Investment allocation in private equity was altogether a different story. While pension funds actually increased their allocation from 17% (€13.9bn) in 2007 to 23% (€15.2bn), making up the largest contribution and accounting for 23% of all funds raised, banking commitments plummeted by more than 50% from over €9bn to €3.8bn, relating to the debt freeze that has paralysed the large buyout market.
The sale of equity stakes also slumped by half during 2008, from €26.6bn in 2007 to €13.1bn. The majority of exits were made up of trade sales and secondary buyouts.
In terms of regions, the UK and Southern Europe were worst hit by drop-offs in funding contributions. Although the number UK deals that were completed were relatively stable, UK contributions fell from 17.5% to 11.3% and Southern Europe nose-dived from 13% to 1.6%.
By sector, energy and environment and computer and consumer electronic sectors attracted more capital than the year previous.
Secretary General of EVCA, Javier Echarri, said: “With capital markets all but closed and so much uncertainty in the wider economy, it is no surprise that there was a significant slump in both investment and divestment activity towards the end of the year. As holding periods increase, private equity will demonstrate its capacity to support portfolio companies through the downturn.”