European private equity fundraising suffers as UK bucks trend

Lower-tier private equity firms are struggling to attract the required capital to close new funds, Acanthus Advisers says.


Lower-tier private equity firms are struggling to attract the required capital to close new funds, Acanthus Advisers says.

New research from private equity advisory service Acanthus Advisers shows that, during the past two years, lowest-tier general partners (GPs) netted only 3 per cent of capital raised.

The figure represents a fall of 10 per cent from the 13 per cent raised by the same group between 2004 and 2012.

At the other end of the scale, Acanthus finds that top-tier GPs secured nearly half of all funds raised in 2011-12, up from a quarter in 2004-12.

Armando D’Amico, managing partner at Acanthus Advisers, says that fundraising in Europe is likely to remain ‘challenging’, with cash levels being returned to investors remaining low.

‘Until more of this capital is returned to investors,’ he adds, ‘many will remain over-exposed to the asset class and constrained in making new LP commitments. In the meantime, deployment remains slow, with levels of dry powder in the market still relatively high.’

For the UK, the past year has seen a recovery in its mid-market private equity fundraising volumes, Acanthus says.

Final and interim closes classified as ‘strong’ brought the amount raised in the mid-market to €2.7 billion. Furthermore, fundraising in the more than €1 billion segment pricked up, the firm says. In total, nine funds closed in 2012, including five final closes and four interim closes, raising a total of €2.7 billion – an increase on the €1.4 billion raised in 2011.

Across Europe €13.2 billion was raised in the mid-market across 48 funds. The amount raised registers a slight decline on the €14.7 billion recorded in 2011 and far below the figures posted in 2006 and 2007 (see table below).

European fund efforts – Amounts and funds raised (€bn/ number)

Rank Country 2005 2006 2007 2008 2009 2010 2011 2012
1 Emerging Europe 2.1/9 4.1/14 5.716 2.9/9 1.8/9 0.6/6 0.7/6 3.7/11
2 UK 2.0/7 5.0/14 5.7/18 5.3/14 1.8/6 3.2/12 1.4/7 2.7/9
3 France 2.6/11 5.7/17 2.3/7 2.6/6 1.5/8 1.3/7 3.9/10 2.2/9
4 Italy 1.4/4 1.3/5 2.2/12 2.1/7 2.0/5 1.1/4 0.6/6 1.4/4
5 Germany 1.5/8 1.4/7 2.8/12 1.8/8 0.5/2 0.3/2 2.0/9 1.5/5
6 Scandanavia 1.5/4 2.6/12 3.1/12 2.4/8 0.1/1 1.2/4 2.8/7 1.0/5
7 Benelux 1.4/2 1.4/5 0.7/2 1.6/3 1.2/2 1.9/4 2.3/7 0.9/4
8 Switzerland 0.1/1 0.2/1 0.0/0 1.3/4 0.0/0 0.0/0 0.5/2 0.1/1
9 Spain & Portugal 0.6/4 1.5/5 1.5/4 1.1/8 0.4/2 0.2/1 0.5/3 0.0/0
  Totals 13.2/50 23.2/80 22.9/83 21.1/67 9.4/35 9.9/40 14.7/57 13.2/48

 

Research from the survey also finds that realisations from private equity over the last decade remain ‘very low’. The firm says that until a larger proportion of the money invested is returned, capital providers will be restrained as to future allocations that can be made to the asset class.

D’Amico comments, ‘The fundraising road looks set to be very crowded in certain regions over the next couple of years, as many firms that have delayed returning to the market will need to seek fresh capital for survival.

‘The UK and France are expected to be particularly busy markets.’

Hunter Ruthven

Bernard Williamson

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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