A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

INDUSTRY OVERVIEW

Other active private equity markets in Europe, although far behind the top 3, are Italy, Spain, the Netherlands, Sweden, Norway and Switzerland. The latter acts as a European entry point for foreign investors, attracting heavy flows of foreign capital, notably through its strong fund of funds industry which enable investors to diversify their investments while enjoying an indirect exposure. Moreover, banking tradition fuels the pool of talented private equity managers in the country. Although the general tax exemption for capital gains is not specific to the private equity industry, it is an important factor for investors in Switzer- land. In 2008, fund raising in the country doubled compared to the previous year, reaching E 3.1 billion 27 . The level of maturity of the private equity market is still heterogeneous across Europe, as shown by the rate of private equity investments as percentage of GDP per country in Eu- rope. In 2008, this rate ranged from 1.24% for the United Kingdom to 0.03% for Hungary, as displayed by figure 16.

1.3

Figure 16: Private equity investments as a percentage of GDP per country in Europe, 2008

1.241% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0% as a percentage of GDP 1.022%

0.450%

0.418%

0.394%

0.301%

0.284%

0.258%

0.239%

0.238%

0.207%

0.194%

0.193%

0.189%

0.168%

0.142%

0.082%

0.073%

0.043%

0.032%

0.030%

Italy

Spain

France

Poland

Europe

Ireland Czech Republic

Greece

Finland

Austria

Norway

Sweden

Belgium

Portugal

Hungary

Romania

Germany

Denmark

Switzerland

Netherlands

United Kingdom

Source: EVCA & PEREP analytics, 2009

At the same time, the structure of the different national markets has become increasingly similar and the buyout segment now predominates in all countries despite difficulties in obtaining leverage in 2008. With regard to the sources of capital for private equity in Europe in 2008, as displayed in figure 17, pension funds continued to be overall the main source, accounting for 25.1% of all funds raised in 2008, compared with 17.5% in 2007. Fund of funds were overall the second most important source of capital, committing up to 14.4% of the total capital raised, while bank commitments continued overall to decrease their contribution, dropping from 11.5% in 2007 to 6.7% in 2008. However, it should be noted that this breakdown can vary significantly from one country to another, with pension funds playing a major role in the United Kingdom for example, while banks remains the main subscribers in Italy and Spain. Meanwhile, private individuals and family offices now dominate the French private equity market in terms of funds raised by source, due to high tax incentives for investors.

A thorough understanding of PE | page 31

27 Source: EVCA yearbook 2009