3i/PwC: private equity investment slows

A record total of US $177bn was invested in 2000, whilst the amount of funds raised soared by 67% to a new record of US $225bn.

But the second annual Global Private Equity report is sceptical about whether the momentum can be matched in the short-term, with 2001 likely to be only the third biggest year in private equity history.

Whilst tech investment artificially inflated the figures in 1999 and 2000, there was good general growth in global investment, according to the report which covers North America, Western Europe, Asia Pacific, Middle East and Africa, Central and South America, and Central and Eastern Europe.

Last year interest in buy-outs fell and early-stage investments showed continued growth, most markedly in Sweden, India, Israel and Switzerland.

The report added that future investments worldwide will not be constrained by a lack of capital with total funds raised exceeding all the investments made in 2000 in most of the top 20 countries. The amount of funds raised globally rose by an annual average of almost 41% over the last six years compared with the 35% increase for investments.

Other findings included:

- the tech sector claimed the lion’s share of investments with US$113bn or 64%.

- buy-outs slumped from US$79bn to US$58bn mostly in North America.

- North America led investor interest but 1H investment for 2001 slumped 6%% to $18.6bn. The report predicts an investment decline in the region for 2001 to US$30-35bn. The UK had the second largest individual world-wide share, but investment stood still at US$12bn.

- Western Europe saw a 20% investment rise to US$32bn last year. But investors are expected to be more cautious this year. There was a buy-out boost in Europe albeit with fewer, larger deals. Countries in Central and Eastern Europe should benefit from continuing integration with Western Europe, added the report.

- China’s prospects were bolstered by pending membership of the World Trade Organisation, despite a nominal 1% increase in investment in the Asia Pacific region last year. Growth in funds in 2001 is expected to slow but high growth is anticipated for Japan in the buy-out market.

- There was an upward trend in South Africa and in Central and South America. However, investment in the Middle East and Africa mirrored the downward global trend in the second half of last year, notably amongst tech investments.

By Madhu Kalia

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