European private equity to “pick up in 2004”

EUROPE – The European private equity market is expected to pick up from the end of this year and going into 2004, says law firm S J Berwin.

“The period from the end of 2003 through the year 2004 is expected to be very positive for fund raising and, with prices being low and debt being cheap, we believe that once some stability returns to the market place there will be a major increase in private equity activity,” says Jonathan Blake, head of private equity at S J Berwin.

Writing in the European Private Equity and Venture Capital Association’s 2003 yearbook, Blake adds: “One of the key factors that differentiates this downturn from the last one is the availability of private equity and financial buyers, and perhaps one of the main reasons why this downturn has not turned into a major recession is because relatively few businesses have been wound up.”

Meanwhile, a report from KPMG has found that private equity houses are becoming more proactive in the way they manage portfolios. “They are devoting greater time and resources to monitoring their investment portfolios and employing wider industry knowledge and operational expertise in the process,” it says.

KPMG’s Insight into Portfolio Management report also discerned a trend towards investment executives’ giving up responsibility for portfolio companies after the has been struck. It said this reflects a greater acceptance that deal-making and portfolio management are distinct skills.

Earlier this month, the EVCA said that pension funds significantly decreased their investments in the European private equity industry in 2002. In 2002 just 4.3 billion euros in capital was raised from pension funds – around 16.3% of the total – compared to 10.2 billion euros in 2001 – 26.8% of the total.