Rödl & Partner GbR
Study: Private equity sector growth with medium-sized companies / financial resources available for investments increase again
Rödl & Partner GbR / Key word(s): Study/Private Equity – Focus on medium-sized companies: investments up to 50 million euros increase Munich, 4th July, 2013: Private equity companies focussed on medium-sized companies are enjoying an upswing. Greater financial resources are available again for 2013. The competition for attractive companies will, however, continue to intensify and the prices for acquisitions are increasing. Inflated purchase prices are consequently deal killer no. 1. The health sector attracts the most investors, followed by the mechanical and plant engineering industries and the clean-tech industry. Regionally Bavaria comes in front of North Rhine-Westphalia and Baden-Württemberg as the most attractive German state for private equity investments. These are the main findings of the Rödl & Partner study ‘The German private equity sector in 2013‘. In the spring of 2013 more than 300 private equity companies in Germany were exclusively consulted for the survey. ‘Due to the lack of mega deals the private equity companies are successfully concentrating on German medium-sized companies. The coffers of the private equity companies are well filled. Given the positive economic environment an increasing number of exits can again be reckoned with’, explains managing partner Wolfgang Kraus. Private equity companies increasingly invest in medium-sized companies The greater part of the investments for new private equity holdings is made below the limit of 50 million euros and the share is increasing significantly. The focus of the private equity companies on medium-sized companies is also reflected in longer holding periods with investments running on average for 6 or 7 years. The most important reason for the entry of PE investors is the organisation of the company succession before the financing of operating growth and spin-offs. On the other hand the credit squeeze and independence from banks for financing now only play a minor role. ‘Private equity companies are today a mainstay for the financing of medium-sized companies. They bring in new capital and important know-how and support companies with their strategic realignment. An exit from a holding can generate returns of between 10% and 20%’, explains Björn Stübiger, corporate finance manager at Rödl & Partner. ‘ German medium-sized companies are attracting investors from all over the world. PE companies, family offices, and strategic investors from Germany and abroad are all wooing attractive target companies. However, this is driving prices upwards. The chances of a successful private equity investment are rare.’ The increasing competition has already had a strong impact. Inflated purchase prices for entry are reducing profits and in the meantime yields of over 20% have become rare. At the same time the number of portfolios with a negative development have gone up. The most important reasons for this are management errors, development of the market and distribution problems. In particular the fall in demand in the euro zone crisis countries has made things difficult for many companies. Partly due to the limitation of subsidies in the boom countries of Italy and Spain, extensive investments in recent years in the area of renewable energy have also frequently not paid off. Health sector and mechanical and plant engineering in front of the clean-tech industry Against the background of declining business in the field of renewable energy, the health sector including the field of medical engineering is top of the list of the most important areas for private equity investors. The mechanical and plant engineering industries are in second place. The clean-tech field as a former leader is now in third place, closely followed by the information and communications technology. However, if one examines the market for growth capital, the ranking is led by the fields of life science, ICT and software. Bavaria in front of North Rhine-Westphalia as top target for PE investments The most attractive German state for the private investment sector remains Bavaria (27%), closely followed by North Rhine-Westphalia (23%). Baden-Württemberg is in third place (16%) but continues to lose ground to the leaders. The most attractive location for start-up companies is Berlin (8%) in fourth place and for investments under 5 million euros the capital is behind Bavaria in second place. ‘Bavaria’s top position is the result of the excellent investment environment for young companies and strong medium-sized companies’, emphasises Stübiger. ‘Over many years the right decisions have been taken to promote high-growth companies.’ Only in the area of investments above 50 million euros is North Rhine-Westphalia just in front of Bavaria and Baden-Württemberg is in first place. Berlin on the other hand benefits from the development of the start-up culture particularly for IT, communications technology and the media industry. Weak environment up to now for venture capital in Germany Investors which make growth capital available to young companies were also integrated in the study for the first time. The result shows that the financial resources available for start-ups in Germany are insufficient and available for too short a time. 60% of the financial resources were only made available for a maximum of 18 months and 80% of the funds were under 3 million euros with 60% even below 1.5 million euros. ‘The financing situation remains critical for company founders. After the early stage hardly any investment funds are available’, explains Gerhard Wacker, manager of the venture capital practice at Rödl & Partner. ‘A large part of the financing comes from business angels, family offices and friends and family of the founder. Then there are the high tech start-up funds, without which the start-up scene would be dismal. This opens up an attractive market niche for the PE companies.’ Click here to order the study ‘The German private equity sector in 2013’ (in German): www.roedl.de/PE-Studie-2013 Printed version of the study A printed version of the study (in German) is available from Rödl & Partner in Munich.
Wolfgang Kraus, Certified Public Accountant, Certified Tax Consultant, Managing Partner Björn Stübiger, Partner, Head of Corporate Finance Gerhard Wacker, Attorney at Law (Germany), Partner
Rödl & Partner is active at 91 wholly-owned locations in 40 countries. The integrated firm for audit, legal, management and tax consulting owes its dynamic success to 3.500 entrepreneurial minded partners and colleagues. In close collaboration with our clients we develop information for well-founded economic, tax, legal and IT decisions that we implement together – both nationally and internationally. The corporate finance division of Rödl & Partner advises companies on raising capital via the capital market, strategic partnerships, M&A transactions and the strengthening of equity via private equity and venture capital. The lawyers, tax consultants, accountants and corporate finance experts of Rödl & Partner have extensive experience in the field of financing strategies, IPO consulting, capital increases, with legal, tax and financial due diligence audits and with company acquisitions and disposals in Germany and other countries. More information on Rödl & Partner is available at www.roedl.com. 2013-07-04 Dissemination of a Corporate News, transmitted by DGAP – a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de |
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