With a difficult exit environment and downward pressure on valuations overall horizons in private equity fell 24.9% in 2008, according to data compiled by Thomson Reuters’ in association with EVCA.
The latest benchmark analysis shows that short-term horizons for venture fell 17.9% and fell 26.4% for all buyouts. Buyouts were hit across the board. Mega-buyouts plummeted 27.1%, compared with the 20.1% growth spurt in 2007, small buyouts fell from +39.5% in 2007 to -23.8% in 2008. The mid-market was also affected with a drop from 25.2% in 2007 to -17.9% in 2008.
But despite the buyout market’s gloomy tidings, mid-to-long-term performance of buyouts remained strong on the back of several high returns. Overall private equity for net IRR since inception to December remained strong with a 10.3% increase. The three year IRR to December 2008 reached 8.5% and the five year figure reached 14.1%. European venture just broke even over the three year IRR period but increased by 2.1% for the five year net IRR.
Top quarter performance for buyouts and venture remained buoyant with a 30.9% pooled average top quarter IRR for buyouts and a 13.3% increase for venture. There was a 22.7% increase for all private equity funds.
Secretary General of EVCA, Javier Echarri, said: “Macro-economic conditions have precipitated a sharp slump in distributions, particularly since 2008, with exit markets particularly difficult. A strong depreciation of values in the near-term have hit one-year return horizons, but European private equity finds have demonstrated a consistently strong performance across a number of years.”
The performance benchmarks are based on private equity fund performance over the past 29 years and the sample includes 1,320 funds.