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Bumper growth in VC and PE Industry

7 September 2006

Bumper growth in VC and PE Industry

Strong interest from both New Zealand and Australian funds reflects growing maturity of industry and high quality of opportunities available

Huge increase in number and value of deals
New Zealand’s Venture Capital and Private Equity industry continues its growth trajectory in the six months to 30 June, with a record 54 deals completed worth an adjusted investment value of $434 million. This compares to $27 million across 25 deals in the same period last year, although last year’s figures did not incorporate the activity of offshore funds in New Zealand.

Significantly, total investment for the half included four large Private Equity deals not reported - Metropolitan Glass, Hirepool, Tegel, and Griffins Foods, worth an estimated $287m - adding to the reported investment amount of $147m which compares more directly with the $27m reported in the first half of 2005.

Ernst & Young Director Jon Hooper noted, “This level of investments represents a spectacular start to the year, and reflects a new level of maturity for the New Zealand Industry. The strong interest shown by both New Zealand and International investors is an endorsement of the quality of deals available.”

The median deal size was $1 million for the period, while the average deal size was $8 million. “The average deal size has historically sat around $2 million,” explains Jon “but the five large Private Equity deals have skewed the average for this period.”

Private Equity dominates
The split between Private Equity and Venture Capital is more pronounced than previous survey results; with 94% of funds invested in Private Equity deals for the current half year versus 70% for the 2005 full year. Similarly, later stage deals (i.e. investments in established companies) dominated, representing 87% of total funds invested.

South Island more active
An increased number of deals are being completed in the South Island; accounting for 20% of the number of deals and 12% by investment value.

Committed capital at $2 billion: $674 million notionally available for investment
Committed capital remains steady at approximately $2 billion, reflecting modest levels of new capital raised during the period. Capital notionally available for investment finished at $674 million for the half year, with approximately $582 million being available for Private Equity and $92 million for Venture Capital. This amount does not include the offshore funds notionally available for investment in New Zealand.

IT still attracting Venture Capital
Venture Capital investing continues to be focused in the technology space with Information Technology, Technology and Communications accounting for half the deals done for the half year.

Divestments
Five divestments during the half to a value of $20m, excluding Hirepool, demonstrate the continuing development of the private equity market in New Zealand.

To view or download a copy of the Half Year Venture Capital Monitor visit www.ey.com/nz

ENDS

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