Global investment increases

Global private equity investment in the first half of this year indicates 2003 could see the first full year increase in two years. According to the Global Private Equity research report, produced by 3i and PricewaterhouseCoopers, $57bn was invested in the first six months of the year. This compares favourably to last year’s total investment figure of $102bn. Brian Larcombe, chief executive of 3i, says he expects higher levels of activity next year. Conversely, funds raised in the first six months stand at just $24bn, down considerably compared to the full year totals of $88bn in 2002 and $164bn in 2001.

Tracy Lefteroff, PwC global managing partner, private equity and venture capital, said: “It may well be that 2003 is the watershed year, marking the return to relative stability in global private equity investing. Over the past two years, the sharp decline in the venture capital component has been mitigated by a shift towards buy-outs and other private equity financing. Now that erosion appears to be subsiding and venture capital, especially in the U.S., is settling down to a natural level that is both substantial and sustainable, there is cause for optimism which in turn creates opportunity.”

Buyouts worldwide increased by some 76% in 2002 and have continued to rise this year, accounting for $42bn, or 74% of global investment, in the first six months. Seed and early stage totalled $3bn and expansion stages $7bn. Technology investments were down 31% to $39bn. Rod Perry, executive director 3i technology, says: “In Europe, early-stage investment continued to fall in the first half of 2003, and may have bottomed out at the end of the second quarter. And, as in the US, September saw an upsurge in new opportunities across the UK, France, Germany and the Nordic countries?Overall we are not expecting a rapid rise in investment, but the mood among VCs is now one of cautious optimism.”

Keith Arundale, European venture capital leader, global technology industry group, PricewaterhouseCoopers, said: “For investment in early stage technology to stabilise and even recover, what we really need is an upsurge in corporate IT spending and a reopening of the IPO exit route – and there is precious little sign at the moment of either of these happening.”

Western Europe saw a 21% increase in investments last year to $26bn, while funds raised fell 24% to $25.8bn. Buyouts $16bn, technology $7.3bn and expansion stages $6.4bn. The first half of 2003 shows a 10% fall in European investments, compared to the previous six months and fund raised were down 20% on the figure for the first half of 2002.

Total investment in North America ($64.3bn) remained almost static throughout 2002, however it remains the largest territory both for funds raised ($57bn) and funds invested.

In Asia a 20% decrease in investment was seen last year. Contrary to other regions, expansion stage investment, rather than buyouts, led the field. This year has so far seen an upturn in the buyout market, estimated at $2.8bn, and other late stage financing are estimated at $2.4bn. Japan led by total value of deals ($2.3bn).