Returns up by almost a quarter in 2004

The money returned to investors from private equity commitments rose by 23% in Europe last year compared to 2003, according to a report by Strategic Capital Management (SCM.)

SCM found that distributions totalled around US$57bn in the US and Europe, with US$49bn in the US, a 50% increase from the previous year.

In terms of number of exits, the US again leads, with 2004 experiencing a 27% increase with the value of realised proceeds leaping by 290%. There was a more modest 13% rise in the number of realisations in Europe, with a 74% increase in value.

US buyout realisations increased in amount by 365%, far surpassing Europe’s 75% climb. For venture, 2004 saw a 142% increase, with Europe recording 73%.

Of exits in the US, 30% came by way of a trade sale, making up 55% by value, making it a more important divestment route for US managers than for their European counterparts, where trade sales accounted for 27% by number and 26% by value.

Perhaps unsurprisingly, it was the secondary buyout which proved the most popular exit in Europe, with a 41% increase in 2004 on 2003. No other exit type in Europe has generated more distributions to investors than secondary buyouts according to the report. In the US the picture is reversed, with secondary buyouts decreasing by 25%.

Recapitalisations too saw an increase, in Europe up 28% from the previous year and making up 29% of all exits, but they only account for 16% of proceeds generated. There was a 7% increase in the US, with 10% of all exits being recaps, representing 13% by value.

The opening up of the IPO market bore fruit for private equity last year, with 27% by value generated by flotations and the sale of quoted equity once the lock-up periods had expired. In the US, the value was slightly lower at 21%. Looking just at venture, the US is still comfortably ahead in achieving value from IPO exits, with 42% of all exits by value represented by floating or selling of public stock compared to 29% in Europe.

In another sign of the industry’s buoyancy, write offs were down by 16% overall, 23% in Europe by number and 3% by value. The US saw a 14% decrease by number, translating to 4% in terms of value.