1

Rory Earley

Director Investment and SME Finance

Small Business Service

2

Global Private Equity

Trends in Investment and Fund Raising

PricewaterhouseCoopers and 3i

3

The Global ViewKey Points• At least $155 billion of private equity and venture capital invested globally in

2003 – increase of 43% on 2002 level of $109 billion• Equivalent to 0.48% of worlds GDP (based on 2002 GDP from World Bank Development

Indicators - $32,300 billion)

• Almost $82 billion of funds were raised globally in 2003 – down 12% from $93 billion in 2002

4

Key Points• Technology investments totalled at least

$42 billion in 2003 – 27% of total investment – down 11% on 2002

• Around $19 billion was invested in expansion stages in 2003 – down 27% on 2002 levels

• Approx $118 billion invested globally in buyouts in 2003 – increase of 83% on 2002

5

Investment and Fund Raising Trends

93

165214

110 109155

133154

262

177

93 82

050

100150200

250300

1998 1999 2000 2001 2002 2003

Year

US$

bInvestments Funds Raised

6

• Investment – compound average growth rate 10.81%

• Funds Raised – compound average growth rate –9.20%

Source – The PricewaterhouseCoopers/Venture Economics/National Venture Capital Association Money Tree Survey/Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review/EVCA Yearbook/ AVCJ Guide to Venture Capital in Asia/ Venture Equity Latin America/ SAVCA Private Equity Survey/ IVC Online

7

High Technology Investment Trends

93

165

214

110 109

155

3264

121

5940 42

0

50

100

150

200

250

1998 1999 2000 2001 2002 2003

Year

US$

bInvestments High Technology

8

• Investments: Compound average growth rate 10.81%

• High Technology: Compound average growth rate 5.93%

Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Association Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review/ EVCA Yearbook/ AVCJ Guide to Venture Capital in Asia

9

Expansion Investment Trends

93

165

214

110 109

155

2146

87

39 26 190

50

100

150

200

250

1998 1999 2000 2001 2002 2003

Year

US$

b

Investments Expansion

10

• Investments: Compound average growth rate 10.81%

• Expansion: compound average growth rate –1.54%

Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Association Money Tree Survey/ Private Equity Analyst/ CVCA Annual Statistical Review/ EVCA Yearbook/ AVCJ Guide to Venture Capital in Asia

11

Buyout Investment Trends

93

165

214

110 109

155

5583

6240

65

118

0

50

100

150

200

250

1998 1999 2000 2001 2002 2003

Year

US$

b

Investments Buyouts

12

• Investments: Compound average growth rate 10.81%

• Buyouts: Compound average growth rate 16.00%

Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Associate Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review/ EVCA Yearbook/ AVCJ Guide to Venture Capital in Asia

13

North AmericaKey Points• $108.2 billion of private equity and venture capital

was invested in North America in 2003 – an increase of 67% on 2002 which had seen a decrease of 3% on 2001

• This is equivalent to 0.97% of North American GDP (based on 2002 GDP for USA and Canada from World Bank Development Indicators - £11,116bn)

• £45.3 billion funds were raised in North America in 2003 – down by 21% on 2002 levels

14

Key Points• At least $27.5 billion was invested in technology

investments in North America in 2003 – up 6% on 2002 levels which were down 33% on 2001 levels

• Approx $10.4 billion was invested in expansion stages in 2003 – a decrease of 24% on 2002 which saw a decrease of 41% on 2001

• At least $89.0 billion was invested in buyouts in 2003 – up 114% from $41.6 billion in 2002 which was up 78% in 2001

15

Investment and Fund Raising Trends

63.5

120.1152

66.4 64.6

108.295.9 103.6

180.5

117.9

57.1 45.322.7

50.4

93.5

40.326.1 27.5

0

50

100

150

200

1998 1999 2000 2001 2002 2003

Year

US$

b

Investments Funds Raised High Technology

16

• Investments: Compound average growth rate 11.25%

• High Technology: Compound average growth rate 3.96%

• Funds Raised: Compound average growth rate –13.94%

Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Associate Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review

17

Investment Trends by Stage

63.5

120.1

152

66.4 64.6

108.2

11.331.7

62.7

2413.6 10.4

4163.5

41.523.3

41.6

89

020406080

100120140160

1998 1999 2000 2001 2002 2003

Year

US$

b

Investments Expansion Buyout

18

• Investments: Compound average growth rate 11.25%

• Expansion: Compound average growth rate –1.80%

• Buyout: Compound average growth rate 16.75%

Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Associate Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review

19

% Stage of Investments

27 3565

8211

12

6

4

4136

221019 16 7 42 1 1

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003

Tota

l Inv

este

d (B

illio

ns) %

Buy out Other Late Stage ExpansionEarly Stage Seed/Start-up

20

• Data for North America has been created by adding Money Tree/Buyout Newsletter and CVCA data

Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Associate Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review

21

EuropeKey Points• An estimated $27.1 billion of private equity and venture

capital was invested in Europe in 2003 – a 16% decrease on 2002

• This is equivalent to 0.28% of European GDP (based on 2002 GDP for Europe as calculated using the World Bank Development Indicators - $9,568 billion)

• Approx $32.5 billion funs were raised in Europe in 2003 – up 1% on 2002 levels

22

Key Points• Approx $5.7 billion was invested in expansion

stages in 2003 – decrease of 29% on 2002 which saw a decrease of 9% in 2001

• The buy-out market totalled £18.1 billion in 2003 – down 9% on 2002 which had seen an increase of 65% on 2001

• Technology investments totalled $7billion in 2003 – double 2002 levels ?

23

Investment and Fund Raising Trends

16.9

29.4

41

28.532.3

27.123.829.8

56.346.9

32.4 32.5

4.5 8.313.3

8.3 7.3 70

10

20

30

40

50

60

1998 1999 2000 2001 2002 2003

Year

US$

bInvestments Funds Raised High Technology

24

• Investments: Compound average growth rate 9.82%

• Funds Raised: Compound average growth rate 6.37%

(Source: EVCA Yearbook/ EVCA Preliminary Data

25

Investment Trends by Stage

16.9

29.4

41

28.532.3

27.1

5.18.7

15.29.4 8 5.78.7

15.5 16.912.8

19.8 18.1

0

10

20

30

40

50

1998 1999 2000 2001 2002 2003

Year

US$

b

Investments Expansion Buy out

26

• Investments: Compound average growth rate 9.82%

• Expansion: Compound average growth rate 2.27%

• Buy out: Compound average growth rate 15.87%

Source: EVCA Yearbook/EVCA Preliminary Data

27

% stage of InvestmentsSource: EVCA Preliminary Data

42 4562 67

3 5

35

37 3325

2117 15 10 62 2 1 1

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003

Tota

l Inv

este

d (B

illio

ns) % Buy Out Replacement Capital Expansion Start-up Seed

28

Asia PacificKey Points• A predicted $17.5 billion of private equity and

venture capital was invested in the Asia Pacific region in 2003 – a 91% increase on 2002

• Equivalent to 0.23% of Asian GDP (based on 2002 GDP calculated using the World Bank Development Database - $7,479 billion)

• Only $3.3 billion of funds raised are predicted for 2003 – up 11% on 2002 levels

29

Key Points• Technology investments in Asia Pacific

totalled an estimated $7.3 billion in 2003 – up 100% on 2002 levels

• Approx $2.6 billion invested in expansion stages in 2003 – decrease of 28% on 2002

• The buy-out market totalled a record $8.9 billion in 2003 – up 454% on 2002

30

Investment and Fund Raising Trends

4.9

9.112.3 11.2

9.1

17.5

7.4

16.617.9

9.9

3 3.31.8

45.6 5.2

3.7

7.3

0

5

10

15

20

1998 1999 2000 2001 2002 2003

Year

US$

b

Investments Funds Raised High Technology

31

• Investments: Compound average growth rate 28.91%

• High Technology: compound average growth rate 33.17%

• Funds Raised: Compound average growth rate –14.87%

Source: AVCJ Guide to Venture Capital in Asia/ AVCJ estimates

32

Investment Trends by Stage

4.9

9.112.3 11.2

9.1

17.5

2.44.1

64.6 3.7 2.6

0.4 0.8 1 2 1.6

8.9

0

5

10

15

20

1998 1999 2000 2001 2002 2003

Year

US$

b

Investments Expansion Buy out

33

• Investments: Compound average growth rate 28.91%

• Expansion: Compound average growth rate 1.73%

• Buy out: Compound average growth rate 86.72%

Source: AVCJ Guide to Venture Capital in Asia/ AVCJ estimates

34

% Stage of Investments Source: AVCJ Guide to Venture Capital in Asia/ AVCJ estimates

51

626

152

0%

20%

40%

60%

80%

100%

2003tota

l Inv

este

d (b

illio

ns) %

Buy out OtherTurnarond/restructuring ExpansionStart-up/early stage

35

Data SourcesNorth America• The PricewaterhouseCoopers/ Venture Economics/

National Venture Capital Association MoneyTree Survey www.pwcmoneytree.com

• Buyouts, a Venture Economics publication www.ventureeconomics.com

• The Private Equity Analyst, Asset Alternatives inc, Wellesley Massachusetts 781-304-1400 www.assetnews.com

36

• Canadian Venture Capital Association (CVCA) Annual Statistical Review, Macdonald and associates Ltd www.cvca.ca

Europe• European Private Equity and Venture Capital Association

(EVC) Survey, PricewaterhouseCoopers and Thomson Venture Economics www.evca.com

Asia Pacific• Asian Venture Capital Journal (AVCJ) Guide to Venture

Capital in Asia and estimates from the AVCJ for 2002 www.asiafn.com

37

Central/South America• Venture Equity Latin America 2003 Year-End Report

www.ve-la.comMiddle East and Africa• The Kesselman and Kesselman PricewaterhouseCoopers

MoneyTree Survey, Israel www.pwcmoneytree.com• Israel Venture Capital Research Centre Annual Survey

www.ivc-online.com• KMPG and South African Venture Capital Association

(AVCA) Private Equity Survey www.savca.co.za

38

Summary

• Maturing but still very dynamic industry• Cyclicality will continue to be a problem for

funders of private equity• Technology investing has unique attributes• Future looking bright but challenging ?