EUROPE - Smaller private equity funds face being pushed out of the market as European institutional investors chase the relative security of bigger offerings, new evidence suggests.
Recently, investors have been spooked by collapsing public markets and economic downturns, resulting in substantial falls in European private equity activity levels in 2002, according to private equity research firm, Initiative Europe.
Some e24bn was raised in Europe, a fall of 37%on 2001 figures and a 42% fall on 2000.
The research predicts that the shift is likely to leave limited weaker offerings, with some fundraisings falling well short of targets or being postponed or cancelled over the next 12 months.
Nicholas Gordon, head of research at Initiative Europe, said: “Those investors that have continued to commit to private equity have, in the main, opted for the relative safety and security of the buyout market.
“This ‘flight to brand’ is likely to remain a feature fo the market throughout 2003.”
Across segments, buyout and generalist funds fared best, raising e20.4bn, or 85% of all funds raised. Mega-funds - those targeting e1bn+ - also continue to dominate fundraising, accounting for over 60% of total European fundraising last year.
Cinven saw the biggest close, with its e4.4bn Third Cinven Fund.However, more and more investors are turning to mid-market players which are increasingly raising e1bn+ funds, with 2002 seeing the likes of Monagu Private Equity, Bridgepoint and Barclays Private Equity all raising e1bn+ vehicles.
Gordon added that this trend is likely to continue: “With the likes of 3i, Permira, Terra Firma Capital Partners, Doughty Hanson, Industri Kapital and Charterhouse all currently in the market with multi-billion offerings, this segment of the market is likely to account for a significant proportion of the capital to be raised in 2003.”
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