Author: | Published: 5 Jan 2004
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At long last, the global private equity and venture capital industry seems to be turning a corner. For the first time in two years, the number of private equity deals completed and the total amount of funds invested are expected to increase. In the first six months of 2003, $57 billion in private equity has been invested globally, versus $102 billion for all of 2002, according to a recent survey by PricewaterhouseCoopers Consulting.

And although the numbers are still far off their boom market highs, investor confidence also seems to be rebounding. Private equity buyouts increased by more than 75% worldwide in 2002 and have continued to rise in 2003, accounting for $42 billion, or almost three-quarters of all private equity investment, in the first six months of the year.

At the venture and early-stage investment level, valuations are beginning to move higher, reflecting increased optimism among investors about the viability of reaching a positive exit event, such as an acquisition or even an initial public offering.

In the US, for example, the world's largest private equity market, investment in start-up and seed-stage companies jumped 50% from the second to the third quarter. Deal activity is also up - more than $33 billion of private equity deals were announced in the first half of 2003.

The European market is also showing fresh signs of life. Overall private equity fundraising in Europe increased by 10% in the second quarter of 2003 from the first quarter, principally due to a strong rise in funds raised by independent vehicles. Larger private equity players are investing in a regional rebound as well. Credit Suisse First Boston's $5.4 billion buyout fund, for example, recently upped its allocation for European deals from a quarter of the fund's total assets to more than a third.

In Asia, the $14.6 billion of private equity invested in 2003 has already outstripped last year's total, and is estimated to reach a record $17.5 billion by the end of the year. China, in particular, continues to attract interest, as do fast-developing markets such as India, South Korea and Malaysia.

But the market's recovery remains in its nascent stages. Corporate information technology spending, a driver of high-tech investment, has not yet recovered, dampening venture capital funding. The private equity industry also faces looming regulatory hurdles, particularly on issues such as how firms value their private equity holdings and what information they should be required to disclose to their investors.

To private equity investors, any signs of a recovery, however muted, must seem long overdue. To help keep track of developments and their impact, IFLR is publishing The 2004 Guide to Private Equity and Venture Capital.

Here, specialists worldwide provide detailed analysis of the investment and regulatory trends in their region. We hope you find the guide a useful tool and one you will refer to often.