Private equity fundraising in Europe hits 8-year high 

Private equity fundraising

Private equity fundraising across Europe hit its highest level last year since 2008 at €74.5bn, a 37 per cent year-on-year increase, as investors hunted for value in a low interest rate environment, a new report shows.

Invest Europe’s 2016 report on private equity in the continent revealed the sector’s investments totalled €53.7bn last year, the second highest amount in almost a decade.

Nearly 6,000 companies across Europe benefited from investment, 83 per cent of which were small and medium-sized enterprises, says the report, which covers activity on over 1,200 companies.

“This data demonstrates high investor confidence in European private equity, in an otherwise low-yield global investment environment,” said Michael Collins, Invest Europe’s chief executive. “All European economies are now growing and investors value the proven ability of European fund managers to find attractive investment opportunities across sectors and geographies.”

In the past four years, European private equity funds have raised over €240bn — more than twice the amount raised in the four years following the financial crisis, 2009 to 2012.

Pension funds accounted for over a third of capital raised in 2016.

The report offered a breakdown of the fundraising by sector. Consumer goods and services in Europe received the largest amount, at 28 per cent of the total — representing a 23 per cent year-on-year increase for the sector.

The technology sector took a fifth of the investment, as did business-to-business products and services, according to Invest Europe, which represents European private equity and venture capital firms and their investors.

By geography, France- and Benelux-based companies received more than a third of private equity investments in 2016. Investments in southern Europe were 19 per cent of the total, mainly driven by increases in Italy and Spain.

Companies in the UK and Ireland and in Germany, Austria and Switzerland each had about 17 per cent share of the total investment, followed by the Nordics at 9 per cent.

“Over 40 per cent of capital raised by European private equity last year came from investors outside of Europe, while a third of investments made into companies were cross-border,” Mr Collins said.

It has become easier to raise funds both in the US and Europe as investors look for profits in a record-low interest rate environment and as hedge funds lose their appeal. In New York, Apollo is set to raise $20bn from investors this year. In Europe, CVC expects to raise the largest European fundraising ever, at €15bn.

As demand from institutional investors grows, private equity managers have been able to dictate terms, including lowering hurdle rates and scrapping early-bird discounts.

Source: FT

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