NZ private equity showing recovery signs

Media Release

Embargoed until 1am, 3 November 2010

NZ private equity showing recovery signs

Private equity investment in New Zealand is on the increase with $170 million of investment in the first half of 2010 – the highest activity level since the global financial crisis.

The Ernst & Young and NZVCA Monitor results for the first six months of 2010 show:

• Strong total investment of $170 million, the highest investment level since the first half of 2007.

• Significant rise in mid-market investment, particularly New Zealand domiciled fund activity.

• In the venture capital segment, Angel investor activity supported similar investment levels in 2009.

• Top-end private equity activity occurred in the form of a significant follow-on investment.

Ernst & Young Partner Andrew Taylor said optimism is returning to the private equity sector.

“The NZVCA Monitor results from the first half of 2010 suggest a slow but encouraging recovery in the New Zealand mid-market private equity and venture capital.

“While the top-end of the market is still quiet, reflecting market challenges and the small number of M&A transaction in the segment, there was heartening levels of activity in other market segments.

“It is pleasing to see mid market activity returning to long term average trends from the low levels experienced in the second half of 2009. Survey participants reported $68M invested in the first half of 2010. This is returning towards the average across all half year periods since 2003 of $61.1M invested. The value of deals is on the increase with the average investment size rising from NZ$7.4m in the first half of 2009 to NZ$8.5m this year.

“At the venture capital level, activity was most notable for the growth in angel investment. We are seeing angels moving into transactions previously executed by formal VC funds due to the current VIF-backed funds being largely fully committed.”

NZVCA chairman Kerry McIntosh said he expects to see improving levels of investment activity as the majority of New Zealand and Australian-domiciled mid market private equity managers active in New Zealand have substantial committed but undrawn capital.

“New fundraising has been relatively subdued but we have seen New Zealand growth funds successfully raising new funds, demonstrating a willingness from local investors to consider quality alternate asset opportunities.

“We expect to see renewed fundraising activity at the venture capital level following the Government’s decision to provide a $40 million underwrite which is enabling the New Zealand Venture Investment Fund to commit to new funds.”

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About the New Zealand Private Equity & Venture Capital Association
The NZVCA is a not-for-profit industry body committed to developing the Venture Capital and Private Equity industry in New Zealand. Its core objectives include the promotion of the industry and the asset class on both a domestic and international basis and working to create a world-class Venture Capital and Private Equity environment. Members include Venture Capital and Private Equity investors, financial organisations, professional advisors, academic organisations and government and quasi-government agencies.

About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organisation of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organisation, please visit www.ey.com

Disclaimer
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New_Zealand_Private_Equity__Venture_Capital_Monitor_2010_First_Half.pdf

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