Alchemy Partners closes its German office in response to disappointing deal flow, total value of European private equity investment increases by 12 per cent over third quarter, a cloud hangs over the future of DeutscheBank's private equity investment arm …
Venture investments in Israeli high-tech companies fall once again in Q3
The Israeli venture capital industry failed once again to break free of its downward spiral in the third quarter of 2002, according to figures released by the IVC Research Centre. Private high-tech Israeli companies raised $266m from venture capital during the period, down nine per cent from the second quarter and 29 per cent down on the same period last year. Israeli VC firms themselves invested $118m, a decrease of seven per cent on the second quarter, and accounted for around 59 per cent of the total. Foreign investors remain nervous about moving back into the market for both commercial and political reasons.
Vivendi refuses to lower asking price for publishing arm
Vivendi Universal has said that it will not lower the asking price for its publishing business, despite the likelihood that the bids will not reach E3.5bn to E4bn as expected. A consortium headed by Eurazeo is thought to be the favourite to win the bidding, although Vivendi has denied reports that the head of publishing, Agnes Touraine, is keen to strike a deal with Eurazeo.
Inveralia finalises largest Spanish buy-out this year
Spanish private equity firm Inveralia has closed what is thought to be the largest buy-out to be completed in Spain in 2002. Inveralia has finalised the E150m acquisition of Famosa, a toy manufacturer. Inveralia led a consortium consisting of two other private equity firms, Torreal and Ahorro Development Corporation. Rabobank provided debt financing for the deal.
Financial News 29.10.02
Total value of European private equity deals increases by 12 per cent in Q3 2002
New figures have delivered a rare piece of encouraging news. The value of third quarter European private equity transactions increased for the first time this year to E11.2bn, a 12 per cent increase on the second quarter, according to Initiative Europe. But there was bad news along with the good; deal volume fell by 23 per cent, down to 226 from 293 in Q2. The most active continental markets for the private equity industry were France, with 23 per cent of deal flow, and Germany, with 18 per cent. The UK and Ireland remained the most active European market, increasing its share to 43 per cent from 37 per cent in Q2 2002. Buy-out players have particular grounds for mild optimism; the value of buy-out activity increased by E1bn to E7.9bn. This is still around E1bn less than the total volume of buy-out transactions in the same period last year, though, and the number of deals is still falling.
Spanish private equity firm Aurica appoints academic adviser
Aurica, a Spanish private equity firm, has appointed an adviser in an attempt to gain greater access to companies that it may be able to buy out. Rafael Sunol is also a professor at the Spanish business Institute and a former president of the Industrial Credit Union. He has also advised Spain’s development bank. Aurica was established in 2000 and aims to focus on medium-sized companies in ‘traditional sectors’ – that is, not high technology companies.
Financial News 7.10.02
European start-ups financed during boom era failing at rate similar to those in US
European companies financed during the dotcom boom have a failure rate similar to those in the US, according to figures from VentureOne. Some 15 per cent of companies financed by venture capital between 1999 and 2002 have already gone out of business, representing losses of around E4.7bn. US venture-backed companies’ failure rate is along similar lines, although inevitably on a larger scale. Some 22 per cent of companies financed during the same period by venture capitalists have now folded, representing $15.3bn (E15.9bn) of investment. Further similarities between European and US venture-backed companies are also clear. Venture-backed healthcare companies in Europe had a far lower failure rate of six per cent than the rest of the venture market, comparable to US healthcare companies which had a failure rate of nine per cent.
Swedish private equity firm wins landmark tax case
The Swedish tax authority has dropped its E100m tax case against Bure Equity, a Swedish private equity firm. The decision turned on Bure retaining its status as an investment company rather than a trading company – trading companies pay tax at a higher rate than investment companies. This is a particular problem also in Germany, where industry experts say domestic fundraising is practically at a standstill. The Swedish tax authority argued that the turnover in Bure’s asset management portfolio was too hig for it to be regarded as an investment company: but the Supreme Administrative Court of Sweden ruled last month that Bure should be regarded as an investment company, and the tax authority has now dropped the case.
Financial News 18.10.02
Euromezzanine Conseil confirms first close for Euromezzanine Fund 4
Paris-based mezzanine fund manager Euromezzanine Conseil has had a first close for its latest fund, Euromezzanine Fund 4, at more than E300m. The fund was launched in May 2002 and has two key investors so far, BNP Paribas and Natexis Banques Populaires. Euromezzanine expects to exceed its original target of E400m. The fund will underwrite mezzanine tranches of between E5m and E80m in companies with an enterprise value ranging from E50m to E500m. PrivateEquityOnline 1.10.02
NIB announces handful of major fund investments
NIB Capital, one of Europe’s biggest institutional investors in private equity, has announced a handful of major fund investments, including a E100m commitment to Guy Hands’ Terra Firma Partners. Other investments include E100m to Lexington Partners’ worldwide secondary fund. NIB stressed the rapid growth of the secondary market from 2000 to 2002 and its own good position to take advantage of secondary opportunities in the European arena.
Uncertainty over future of Deutsche Bank’s private equity arm
A decision will be made about the future of Deutsche Bank’s private equity division during the next few weeks, following a strategic decision by Deutsche to reduce its allocation of assets to the high-risk world of private equity. The exact outcome, however, of the ongoing review remains unclear, despite mounting speculation about the likelihood of the various options. Deutsche’s investment bankers are understood to be considering three broad options for the private equity division: selling the whole direct investment portfolio, liquidating it or selling it to the management team. Liquidation, however, is considered to be the least likely of the three.
Germany’s Global Life Science Ventures closes second fund on E140m
Munich-based Global Life Science Ventures has announced the final closing of its second fund with E143m of commitments. The close indicates that there is still significant appetite for life science venture investing among German venture investors. Global Life Science Ventures was set up in 1996 and closed its first fund at DM130m.
Knorr Capital finally files for bankruptcy
After widespread reports over the past few months that Knorr Capital, the Munich-based venture firm, had run into trouble, the firm recently filed for bankruptcy. The firm announced that it was downsizing its business and reducing its staff from 80 to 20 in June 2002. The firm also left SMAX in the hope of reducing its accounting costs. Knorr joins a number of casualties of the tech slump, including Brandts Ventures, a Danish quoted venture capital firm, which filed for bankruptcy earlier in the year.
European venture firms remain upbeat despite difficult conditions
European venture capital firms are putting a brave face on the enduring difficulties afflicting their sector, according to a new AltAssets research report. Despite the dismal exit environment and more generalised economic downturn, firms expect to generate net returns of around 17 per cent per annum over the next five years, says After the Goldrush: A Survey of European Venture Capital Firms. This optimism, however, was not always consistently expressed by venture firms. Some 78 per cent of the survey’s 125 respondents said they thought consolidation was very likely over the next two or three years. The report predicts that some 30 per cent of existing European venture firms will disappear over that period.
Swiss venture industry set to equal last year’s total
The Swiss venture industry looks set to do better than most other European countries if, as seems likely, the total amount of investment in 2002 comes close to that in 2001. So far the signs look good: Swiss venture capital firms raised E212m in the firs nine months of 2002, and forecasts for the fourth quarter imply that the year-end total will be about the same as the E278m recorded for 2001. More than half of the total venture capital investment so far this year – just under E110m – has gone into the biotech sector.
SG moves into German leveraged finance
In a move that suggests that Société Générale is expecting further activity in the mezzanine and buy-out sectors, SG, the corporate and investment banking division has hired a former Merrill Lynch managing director Claus Peter to help establish a leveraged finance operation in Germany. Peter previously headed up Merrill’s German leveraged finance operations in Frankfurt and has been involved with German leveraged finance since the early 1990s.
Deutsche Telekom receives four bids for cable business of up to $2.3bn
Deutsche Telekom is reported to have received four bids from financial buyers for its cable TV business ranging from $2bn to $2.3bn – well down on the $5.5bn proposed by US cable group Liberty Media last year. Deutsche had hoped to raise as much as $2.8bn by the sale of the cable TV arm. But the debt-burdened company is likely to accept one of the deals, in order to keep on track with its programme to reduce its E64bn debt burden. The firm will hold further talks with the bidding consortia this week before drawing up a shortlist.
Financial Times 2.10.02
Clayton, Dubilier & Rice to further strengthen European team
US buy-out firm Clayton, Dubilier & Rice is to intensify its focus on the European market by hiring Bruno Deschamps, previously president and chief operating officer of Ecolab. Deschamps brings extensive management experience and has successfully implemented growth strategies in a various ‘challenging’ industrial and consumer businesses. He will be joining the firm’s European office in London. The appointment will further strengthen CD&R’s European presence following its appointment of Oliver Cognet in August.
European IPO market remains in the doldrums and may not recover until Q2 2003
The European IPO market slowdown has worsened markedly over the last few months and may not manage much of a comeback before the second quarter of next year, according to figures released by PricewaterhouseCoopers. There were just 34 IPOs in the third quarter of 2002, down 53 per cent from the same period last year, and a handful of high-profile postponements such as Yell in London. Valuations dropped even more dramatically. The total offering value of IPOs in the third quarter of 2002 was E1bn, down 80 per cent from E5.1bn in the same period last year.
Israeli Veritas Ventures closes third venture capital fund at $40m
Israeli venture capital firm Veritas Venture Partners has closed its third venture fund, Veritas Venture Partners II, with just over $40m. The firm has also decided to cease investing from its evergreen funds, Millennium and Anglo-American Veritas. Fund II will make seed investments in software, medical devices, network security and communications. Most investments are likely to be sourced in Israel, although the fund will also invest in the south-east of the US. Three investments have already been made.
French private equity investment grew strongly in H1 2002
The French private equity market is comfortably on course for robust growth despite gloomy forecasts the world over, according to figures released by the Association Française des Investisseurs en Capital. Private equity transactions in France totalled E1.4bn in the first half of 2002, an increase of 20 per cent on the same period last year. There was an 87 per cent increase in the volume of LBO transactions compared to the same period last year. Interest in new investments also increased, and investment in new portfolio companies amounted to 76 per cent of the total compared to 57 per cent of the total in H1 2001. There was, however, a fall of roughly 25 per cent in the value of early-stage and development-stage investments.
Natexis to launch new buy-out fund
France-based Natexis Banques Populaires is to launch a new buy-out fund managed by Finatem, the bank’s German subsidiary. The fund target is between E120m and E150m. Fundraising is reportedly to start within the next six months. Natexis is likely to make a cornerstone investment to the fund, despite heavy write-downs to its private equity portfolio that have dragged down its profits in the first half of 2002.
Financial News 11.10.02
Swedish investors team up to finance high-tech start-up fund
A group of major Swedish investors is banding together to finance a new, high-tech seed capital fund that will target entrepreneurs looking to spin out of the Swedish Royal Institute of Technology. The Swedish Industrial Development Fund, W Capital Management, SEB Företagsinvest and KTH Holding will together invest a total of E14m in KTH Seed Capital. Seed investment in high-tech companies has taken a big hit of late. The establishment of this new fund will do little to rectify this disillusionment but it does clearly demonstrate the appetite among Swedish investors for technology investing.
CVC fears blockage on Iberdrola bid
CVC Capital Partners’ acquisition of the electricity-grid assets of Spain’s Iberdrola has run into problems. The Spanish National Energy Commission, the electricity sector regulator, has issued an unfavourable report on the bid, although a final ruling will not be until 8 November. CVC planned to pay E577m for the electricity lines and 500 substations presently owned by Iberdrola.
Financial Times 25.10.02
Austrian venture capital investment fell 18 per cent in 2001
Austrian venture capital investment was the lowest of all the countries in the European Union in 2001, according to figures released by WIFO, the Austrian Institute for Economic Research. The total invested fell by 18 per cent to just E157m in 2001. WIFO blamed the decline on increasing caution on the part of investors as well as the uncertainty of the public markets. There was, however, a small grain of hope in the fact that despite a fall in the value of venture investment, the number of transactions rose to 173 from 118.
German buy-out fund to invest in under-performing Mittelstand companies
Private equity fund manager Barlage, Knoth & Cie has launched a E175m mid-cap buy-out fund using a German stock corporation structure (AG). The innovative structure is designed to protect investors from uncertainty over potential changes to German tax law. A recent ruling in Germany’s highest tax court said that fees for management services provided by a GmbH to a limited partnership in which it is at the same time a shareholder will fall under VAT.
Alchemy closes German office in response to disappointing deal flow
UK-based private equity firm Alchemy Partners, headed by Jon Moulton, has closed its office in Germany and dispensed with the services of its local investment professionals. The firm said the opportunities in the German market place no longer ‘warranted a physical presence there going forward’. The news further reinforces the view that the German market is still some way from producing the sort of sustainable deal flow that excites private equity firms. The country is well populated with prospective investors but activity remains low and disappointment levels high. The prospects for the German market remain grisly. The abolition of capital gains tax on the sale of non-core corporate assets was expected to accelerate deal flow but appears to have had negligible impact. Meanwhile, new proposals for the tax treatment of private equity firms continue to concern practitioners, some of whom have warned they may have to relocate.
Candover moves into Iberian private equity market with new appointment
European buy-out giant Candover is to build its presence in Spain and Portugal with the appointment of Alejandro von der Pahlen. He will be based in Madrid, but will work alongside Gerard Conway, who will remain in Candover’s London office. Von der Pahlen will be focusing on deal origination in the media, IT, financial services, healthcare and leisure sectors in the peninsula. He most recently worked for Andersen Corporate Finance, developing the company’s Spanish and Portuguese presence. Candover’s managing director Colin Buffin said that the appointment would strengthen the firm’s ability to target and transact buy-outs in the area.
German TFG writes down value of portfolio
TFG Venture Capital, a German-listed company, has written down the value of its venture portfolio by almost E32m. In the last nine months, TFG has lowered its portfolio valuation by E42.5m. TFG also plans to delist before the end of 2002, allowing the firm to make savings on the costs of index listing and meeting the reporting requirements under IAS. TFG currently invests in some 60 companies in the IT, industry and life sciences sectors.
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