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European PE investment drops a third in 2001

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EUROPE – The total invested in European private equity last year fell a third to €24.3bn while funds raised across Europe last year fell 18.3% to €38.2bn, according to the latest annual survey published by the European Private Equity and Venture Capital Association (EVCA).

The EVCA points out that 2001 still represented the second highest year to date and it blames the fall on the downturn in the equity markets, particularly the technology and high-tech sectors, which saw investments fall 37% to €6.8bn. Consumer goods sectors again attracted the most investment, accounting for €3.8bn.

The number of divestments, measured at cost, also increased from €9.1bn to €12.5bn. Write-offs accounted for €2.8bn of divestments in 2001, which is a massive increase over the €0.7bn recorded in 2000. “This is where you see the true extent of the impact of the economic downturn on the private equity industry,” says as EVCA spokeswoman.

The research finds that pension funds continue to be the highest investors in private equity, accounting for 27% (€9.8bn) of funds raised last year, as opposed to 24% the previous year. Banks and insurance companies are next, with 24% (€8.7bn) and 13% (€4.6bn) respectively.

Geographically speaking, UK-based private equity companies, again invested the most, with €7bn, followed by Germany with €4.4bn and France with €3.3bn. However, Germany now has the highest concentration of companies that attracted investment, with 1,969 companies, followed by France with 1,546.

Says Edoardo Bugnone, chairman of the EVCA until the end of the year: “2001 was a year of reorganisation of private equity portfolios in which valuations decreased from the excessive levels of prior years to more reasonable ones.”

Max Burger, chairman of the EVCA Investor Relations Committee and EVCA chairman-elect adds: “The sustained significance of pension funds in financing the European private equity industry in 2001 is noteworthy progress. Private equity is a long-term investment and should be seen as a permanent fixture in any long-term investor’s balanced portfolio. To assure sustained positive developments, care should be taken that regulatory changes do not inadvertently harm future pension fund allocations.”

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