Mid-market underpins quiet year for private equity markets

Mid-market underpins quiet year for private equity markets

The 2012 New Zealand Private Equity and Venture Capital Monitor, released today, recorded a total investment value of $111.4m spread across 62 deals 2011. The total was down $442m compared with the high of 2011 and slightly below average activity levels. Mid-market volumes remained steady and venture and early-stage activity declined from 2012 levels.

“Mid-market investment of $84.6m continued to underpin the New Zealand domiciled fund activity and investors reinforced commitment to private equity markets with new capital raised,” says Andrew Taylor, partner Ernst & Young.

“Large buy-out activity fluctuates with the timing of a few deals each year. The absence of large transactions completed in 2012 is offset by significant deals completed late in 2011 and early in 2013 – it is the nature of a small economy.”

“The number of mid-market deals was the same as the previous year but the average deal value decreased from NZ$18.6m to NZ$7.0m,” says Taylor. The full year Ernst & Young and NZVCA Monitor results 2012 show:

· Total investment value in 2012 was $111.4m spread across 62 deals. The decrease in activity from the prior 2011 year reflects a return to typical mid-market private equity activity levels. There was an absence of large buy-out private equity activity in contrast to the previous year.

· Mid-market investment reduced from the $223.0m high of 2011 to $84.6m across twelve deals averaging $7.0m

· Venture & early stage investment activity fell from $36.6m in 2011 to $26.8m as New Zealand followed international trends of lower deal size and market consolidation

· There were no buy-out investments recorded in 2012

· A total of 62 investments occurred in 2012, down from the 84 in 2011, with average deal value reducing from $6.6m to $1.8m, reflecting the swing from two large buy-out transactions in 2011 and no buy-out deals disclosed in 2012.

· Total divestment value decreased from $907.9m in 2011 to $76.7m in 2012 with only mid-market recording any divestment activity.

· Mid-market divestment activity was back to average levels with $76.7m compared with $116.3 in 2011 and an historic average of $63.8m

· Mid-market funds were active capital-raising with investors demonstrating support for managers with track record.

“2012 was a year of lingering uncertainty impacting M&A activity globally”, said NZVCA chairman Matthew Houtman. “New Zealand mid-market continues to underpin private equity investment with levels of deal activity near historic averages.

“Aside from the ebb and flow of buy-out deals, the activity of New Zealand domiciled managers has been consistent. The declining activity for venture and early stage reflects the dual challenges of fund-raising for venture managers and the consequent shallow pools of new capital available for companies seeking to raise capital in the $2 - 10m range to fuel growth.

“While PE managers have been successful with capital-raising recently, we would welcome more positive news from venture managers in 2013” says Houtman.

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