Figures presented by the German Venture Capital Association (BVK) paint a bleak picture of the German market, with little prospect of an imminent improvement. The BVK believes that, despite positive decisions taken at a recent conference of the Lnders’ finance ministers, the uncertain legal status of German private equity funds is still aggravating fund raising difficulties as institutional investors are deterred by the insecurity of funds’ tax situations.
At EURO490 million investments made in the third quarter of 2002 were lower than figures for the second quarter (EURO727.7 million) and only slightly higher than the first three months of the year (EURO482.2 million). Dr Holger Frommann, managing director of the BVK, said: “The market does not seem to recover in the near future, it even seems to be realistic not to expect considerable tendencies for recovery in 2003.”
Of the total investments made by BVK members in the third quarter EURO382.8 million went to German companies. Investments in the rest of Europe dropped drastically from EURO302.2 million last quarter to EURO44.5 million, below the volume of investment outside of Europe (EURO62.9 million).
Buyouts returned to a more normal level (EURO155.6 million) after a peak in the second quarter (EURO372.6 million). In the year to date LBOs (defined as takeovers of companies spun out of larger enterprises or taken off the stock exchange) have accounted for 79.7 per cent of the total buyout market.
Exit volume for the quarter totalled EURO476.5 million, with the wave of portfolio clearance seen earlier in the year continuing. Although there was an increase in sales to financial investors, losses represent 31.2 per cent of this figure.