Venture investing in Europe dropped significantly in the fourth quarter as M&A activity continued at a slow pace in the continent’s soft economy. Capital deployed during the final three months of the year decreased 26% from a year earlier and deal volume slumped 22%, according to Dow Jones VentureSource.
For all of 2012, 145 venture-backed companies were acquired, a drop of 30% from 2011 and the low water market for the region since VentureSource began keeping figures in 2000.
European Venture Investment Continues To Fall In Fourth Quarter
Dow Jones VentureSource: Fourth quarter weak for deal activity and investment; lowest M&A count for Europe since records began
LONDON, Jan. 28, 2013 /PRNewswire/ – Investment into European companies continued its year-over-year decline during a weak fourth quarter of 2012, as Europe-based companies raised €967 million from 233 venture capital deals, according to Dow Jones VentureSource. The drop represents a 26% decrease in capital and a 22% decrease in deals from the same period in 2011.
During 2012, venture capitalists put €4.4 billion into a total of 1074 deals, a slight drop of 9% in capital invested and 11% in the number of deals completed in 2011.
“With M&A at its lowest since VentureSource started tracking data in Europe, investors appear trapped in their current investments, needing to wait longer to recoup their financial returns while at the same time lacking funds to fuel new ventures,” said Anne Malterre, European research manager, Dow Jones VentureSource. “However, the renewed trust in early-stage companies and the consumer services industry are positive signs. Due to the growing interest in social media, online shopping and entertainment, the industry should remain attractive in 2013 provided it can transform that appetite into revenues.”
The median size of a European venture capital deal in 2012 was €1.9 million, an increase on the €1.6 million median of 2011.
M&A at lowest point since records began
A total of 33 European venture-backed companies were acquired during the fourth quarter of 2012, compared with 45 during the same period in 2011. Over the whole of 2012, 145 companies exited via M&A, a drop of 30% from the 2011 figure and the lowest count for Europe since VentureSource began tracking the region in 2000. M&As garnered €4.7 billion over the course of the year, a fall of 45% from the €8.6 billion amassed during 2011.
• In 2012, 16 venture-backed companies went public compared with 15 in 2011 and €379 million was raised during the year, down 46% on the €699 million raised during 2011.
• Two-thirds (67%) of deals in the fourth quarter went to early-stage companies, up from 55% in the same period last year. Early-stage companies also accounted for 35% of capital invested, up from 31% in the same period last year.
• Second-round deals accounted for 19% of deal flow and 24% of capital invested, down from 20% and 27%, respectively, in the year-ago period.
• Later-stage deals accounted for 14% of deals, down from 24% a year earlier, and 41% of capital invested, matching that of the year-ago period.
Consumer Services industry has biggest investment year on record, favouring social media, entertainment and online shopping
In 2012, the Consumer Services industry registered its largest allocation of investment in a year since 2000.
• The industry surpassed Healthcare in receiving the most investment capital over the course of the year, with €1.3 billion for 283 deals during 2012, an increase of 13% and 8% respectively from 2011.
• The industry collected €319 million in 63 deals during the fourth quarter of 2012, an increase of 55% in investment despite a 6% drop in deal flow.
• More than half of the capital collected by the Consumer Services industry went to social media, entertainment and online shopping companies in the Consumer Information Services sector. Those companies raised €779 million for 186 deals, a rise of 4% in investment and 9% in deals completed from 2011.
Healthcare dips to all-time investment low
Although Healthcare registered its lowest allocation of investment for the industry on record, it still managed to pip the Information Technology (IT) industry to second position in terms of capital invested.
• The industry collected €983 million for 186 deals, a decline of 29% and 30% from 2011 respectively.
• Biopharmaceuticals took the lion’s share of industry investment as 113 deals raised €772 million, a 20% decline in deals and a 19% decrease in investment.
Communications and Networking sector gives boost to IT
The uptick in IT industry investment during 2012 was largely down to increased capital directed into companies operating in the Communications and Networking sector. The sector pulled in €156 million across 30 deals during the year, a 40% increase in investment.
• The industry drew €965 million during 2012, an uptick of 5% year-over-year. Deal flow, however, dropped by 9% to 305.
• IT posted shallower declines in deal flow and investment for the fourth quarter compared to other industries, collecting €169 million for 75 deals, a respective 24% and 7% drop from the year-ago period.
Financial Services registers gains, but fails to ignite industry growth
The Business and Financial services industry failed to post growth over the past year, despite a boost from financial services companies.
• These companies attracted €132 million for 30 deals during 2012, up 43% in both investment and deal activity from 2011. However, a 22% drop to €379 million for the Business Support Services sector offset any industry gains.
• Overall, the Business and Financial Services industry collected €590 million in 158 deals during 2012, a respective 8% and 3% decline compared with figures for 2011.
Energy & Utilities hits lowest investment level for seven years
The Energy and Utilities industry suffered sizeable drops in deals completed and capital invested for the year.
• The industry garnered €172 million across 38 deals, representing a drop of 52% and 37% from 2011 respectively.
• Investment in renewable energy companies tailed off significantly in the fourth quarter, collecting €23 million for six deals compared to €37 million for 11 deals during the same period a year ago. Investment and deal flow fell by 40% from 2011 figures to €144 million and 32 respectively, mirroring the industry trend for the entire year.
U.K. still favourite destination for VC investment in Europe; Germany shows strong growth to buck market trends
The U.K. retained its standing as the favoured destination for venture capital investment in Europe during 2012. Companies in the U.K. raised €1.4 billion for 295 deals, a 5% decline in investment and a 10% drop in deals from 2011.
• Germany took second spot and bucked general market trends as companies managed to draw €822 million for 189 deals, a 48% rise in investment and a 16% increase in deal flow.
• France dropped to third position as companies raised €721 million for 202 deals, a 7% decline in investment and a 17% drop in deals completed.
• The Netherlands secured fourth spot, with companies there raising €207 million for 25 deals, a 9% increase in investment despite a 22% decline in deals.
For information on Dow Jones VentureSource’s research methodology, visit http://bit.ly/VSFAQs. For general information about Dow Jones VentureSource, visit http://www.dowjones.com/pr/privatemarkets.