A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

INDUSTRY OVERVIEW

The growth in the overall Canadian private equity market occured more recently than that of the United States. To date in 2009, in terms of investments, firms in the United States continue to receive three times the level of venture capital support than their Canadian counterparts 23 .

The Western European private equity market

1.3.2

The Western European private equity market is concentrated in a small number of coun- tries and dominated by the United Kingdom – the largest and most developed private equity industry in Europe and second only in size to the United States -, followed by France and Germany: • The United Kingdom ’s predominance in the European private equity market can be ex- plained by several factors: the availability of funds to invest, opportunities to make invest- ments, people with the necessary skills to source, negotiate, structure and manage invest- ments, as well as the availability of exit opportunities such as the large equity market. The private equity industry has been an important contributor to domestic investments for dec- ades; Between 1984 and 2008, the amount invested by the British private equity industry into local businesses totaled over £70 billion in around 25,000 companies 24 . Firms located in the United Kingdom have also attracted the largest proportion of European private equity investments in recent years, although investments in UK–based companies suffered the steepest decline in 2008 compared to the other European regions. • France is traditionally the third-largest private equity business worldwide, behind the United States and the United Kingdom. Amounts invested in private equity in the country doubled over the past 5 years, from c 5.2 billion in 2004 to c 10.0 billion in 2008. Nearly 1,600 companies in the venture, expansion, buyout or turnaround stages, 80% of which were small- and medium-sized businesses with fewer than 250 employees and sales under c 50 million, received private equity investments in 2008. Thanks to the FCPI in- novation funds, which have been providing fiscal advantages to investors since 1997, France is one of the few European countries having benefited from regular investments in innovation, even after the internet bubble burst in 2001 25 . Today these investments fo- cus mainly on information technologies, telecommunication, medical and biotechnology. In addition, the French TEPA Act of 2007, under which individual investors in small- and medium-sized businesses benefit from a wealth tax (ISF) reduction, seems to have been a catalyst in the increase of private investment in the FIP regional investment funds and the FCPI innovation fund’s 2008 vintage 26 . • Germany , the third largest private equity market in Europe, has still further growth poten- tial as a target for private equity investments, compared to other European countries, with a 0.28% rate of private equity investment based on GDP (see figure 16). In 2008, 1,140 Ger- man companies ranging from start-ups to large caps were funded with private equity. In total, private equity firms invested c 8.4 billion in these companies, mainly in the chemicals and materials industry, business and industrial products, as well as construction sectors.

23 Source: CVCA, “Venture capital investment level is the lowest in 14 years”, 10 November 2009 24 Source: BVCA, “The economic impact of private equity in the United Kingdom”, February 2008 25 Source: L’Agefi Hebdo, “Le capital-risque réserve sa cagnotte aux seconds tours” by Edwige Murguet, 2-8 April 2009 26 Source: Unquote France, Issue 100, “FCPI and FIP funds receive increased backing”, April 2009

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