Highest value of mid-market deals boosts markets
Wednesday 13th May
Highest value of mid-market deals
boosts private equity and venture capital markets
The New Zealand Private Equity and Venture Capital Monitor, released today, recorded the highest value of mid-market deals (investment and divestment) in the twelve years of the Monitor and the highest number of deals since 2008. The level of deals with disclosed values increased to NZ$243.5m from NZ$191.5m in 2013.
Total activity across all private equity and venture capital was NZ$919.5m, down from $1.1b in 2013, mainly due to there being no large buy-outs. Total investment value was NZ$299.3m spread across 81 deals, while total divestment was still high, but decreased slightly to NZ$620.3m in 2014, down from NZ$665.4m in 2013.
Venture and early-stage investment value
increased marginally to NZ$55.8m across 62
deals.
‘While the high level of mid-market activity was
expected given economic conditions, it was great to see this
playing out in practice, with private capital aligning and
finding a home with ambitious and entrepreneurial New
Zealand founders, owners and management wanting to see those
businesses taken to their next stage. The number of
mid-market deals was significantly up on the previous year
and the average deal value remained steady at NZ$12.8m’,
says Brad Wheeler, partner EY.
Mid-market divestment
value in 2014 increased significantly driven by the initial
public offering of Metroglass and Scales Corp by Crescent
Capital and Direct Capital respectively.
The volume of
mid-market deals increased during 2014 with the average deal
value of NZ$12.8m being in-line with 2013. Venture and
early-stage investment average deal value was NZ$0.9m across
62 deals.
Venture and early-stage investment in IT and
software continued to grow and be the dominant sector for VC
activity with a marked drop in the health/biosciences
sector.
The outlook for the New Zealand PE and VC market
continues to be optimistic as a result of continued strong
business confidence and economic growth.
‘The consistent level of mid-market activity reflects the deep pool of target companies in this space,’ says Matt Riley, chair of NZVCA.
‘Private businesses don’t just need capital; they also need skills to complement those of their founders and management executives. A strong alignment of interests between investors, owners and management goes to the heart of private equity success and delivers a powerful model for achieving the shared aspirations of all stakeholders.’
‘The strength of the mid-market
was evident in 2014, says NZVCA executive director Colin
McKinnon. ‘New Zealand privately owned businesses and
innovative entrepreneurs are continuing to find effective
capital accompanied by skills that help deliver excellent
results. New Zealand capital markets – public and private
– are evolving with innovative products across the
spectrum. Crowd-funding is being established for young
companies while the NXT exchange will add options for larger
companies. Private markets and privately-owned companies
continue to dominate the New Zealand business landscape.
‘Behind the numbers are stories of Kiwi founders and
owners who have built strong businesses with innovation and
determination. When we have a year of strong investment
activity we know that more businesses are growing and that
makes a difference to New Zealand’s economic
prospects.’
Wheeler adds: ‘For the year ahead, the PE
and VC fund managers outlook remains optimistic, with the
market and capital fundamentals continuing to encourage
transaction activity. EY’s latest Capital Confidence
Barometer also hints at a strengthening view of the global
economy, while the local NZ economy is seen to be plateauing
into a positive and stable position ahead.’
The
full year EY and NZVCA Monitor results 2014 show:
·
Total investment value in 2014 was $299.3m spread across 81
deals. The mid-market was the driving force with highest
value of mid-market deals (investment and divestment) in the
last twelve years and the highest number of deals since
2008
· Mid-market investment increased from the $191.5m in 2013 to $243.5m across nineteen deals averaging $12.8m
· Venture & early stage investment
activity increased from $54.8m in 2013 to $55.8m as investor
confidence in the New Zealand technology sector continued to
grow, with software and services being dominant while
health/bioscience receded
· There was no buy-out
investment recorded in 2014 and two divestments
·
A total of 81 investments occurred in 2014, on par with the
82 in 2013, with average deal value decreasing from $5.6m to
$3.7m, reflecting the lack of large LBO activity compared to
2013
· Total divestment value declined from $665m
in 2013 to $620m in 2014 with mid-market providing a
significant NZ$148.3m of the divestment activity
·
Venture and early-stage investment activity maintained
momentum with 62 deals of NZ$55.8m total investment value of
compared with 66 deals of total value of NZ$54.8m in
2013
· There were no new funds raised in 2014 as
managers were actively building portfolios following recent
capital raising and other managers were returning capital
from successful divestments.
Ends