The Private Equity Economic Impact Javier Echarri, EVCA Secretary General Bratislava,  20th September 2005
Agenda <ul><li>Current size and activity levels </li></ul><ul><li>Economic impact on companies </li></ul><ul><li>Economic ...
Introduction to EVCA <ul><li>Established in 1983 and based in Brussels </li></ul><ul><li>Represents the European private e...
Current size and activity levels
Evolution Activity Flows €  billion 2004 European Private Equity Survey Conducted by Thomson Venture Economics and Pricewa...
Sources of New Funds Raised 2004 2003 2004 European Private Equity Survey Conducted by Thomson Venture Economics and Price...
2004: €37 Billion Invested.  Record Level 2004 European Private Equity Survey Conducted by Thomson Venture Economics and P...
Stage Distribution of Investments Amount Invested 2004 European Private Equity Survey Conducted by Thomson Venture Economi...
Stage Distribution of Investments Number of Investments 2004 European Private Equity Survey Conducted by Thomson Venture E...
2004 Investment as % of GDP  – Investments by Country of Management 2004 European Private Equity Survey Conducted by Thoms...
Economic Impact on Companies
Without venture capital, my company… Impact of the investment on the creation, survival and growth of the company – all re...
Without venture capital, my company… seed/start-up expansion Impact of the investment on the creation, survival and growth...
In the absence of a Buyout, my company… The overall impact of the buyout on the survival and growth of the company Source:...
Venture backed: Comparison with competitors – increase in turnover and EBIT Source: NUBS/EVCA Respondent’s perceptions of ...
Post buyout increases in turnover and EBIT in comparison to competitors: respondents’ perceptions Source: CMBOR/EVCA
Percentage increase in expenditure between the time of the initial investment and the time of the survey Seed/start-up sta...
Expenditure in four areas as a percentage of sales before and after the buyout Source: CMBOR/EVCA
Impact on European Economies
The Economic weight of the European PE/VC industry <ul><li>Portfolio of 44.000 companies: </li></ul><ul><li>6.5 million pe...
The Economic weight of the European PE/VC industry <ul><li>Between 1999 and 2003:  </li></ul><ul><li>Created 1.1 million j...
Recommendations
Competitiveness of the Economies
But ICT is only a part of the story   Competitiveness Factors Macroeconomic conditions Monetary Policy Fiscal Policy Polic...
A need to boost entrepreneurship in Europe   Total Entrepreneurial activity by advanced economies 2000-2003   Source: EVCA...
Both in Europe and in the US,  finance is an obstacle in setting up a business.  Red tape is more an European obstacle Sou...
Current problems   <ul><li>Difficult to finance a project </li></ul><ul><li>Difficult to establish a company </li></ul><ul...
Policy Measures: More efforts should be targeted at entrepreneurship in education and the reduction of red tape  Share of ...
EVCA’s Recommendations <ul><li>Foster Europe’s entrepreneurial environment, culture and education: </li></ul><ul><li>Entre...
The Private Equity Ecosystem and Virtuous Cycle
The virtuous financing cycle of private equity and venture capital investment repayments + capital gains commitments dives...
The virtuous financing cycle of private equity and venture capital investment repayments + capital gains commitments dives...
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The Private Equity Economic Impact

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  • You can see that in the majority of countries, the proportion of GDP invested in private equity suffered during 2002.
  • The Private Equity Economic Impact

    1. 1. The Private Equity Economic Impact Javier Echarri, EVCA Secretary General Bratislava, 20th September 2005
    2. 2. Agenda <ul><li>Current size and activity levels </li></ul><ul><li>Economic impact on companies </li></ul><ul><li>Economic impact on European economies </li></ul><ul><li>Recommendations </li></ul>
    3. 3. Introduction to EVCA <ul><li>Established in 1983 and based in Brussels </li></ul><ul><li>Represents the European private equity and venture capital industry (PE/VC) and promotes the asset class both within Europe and throughout the World </li></ul><ul><li>Well over 900 members, mainly European </li></ul><ul><ul><li>PE/VC fund management companies </li></ul></ul><ul><ul><li>Institutional investors (banks, pension funds, insurance companies...) </li></ul></ul><ul><ul><li>Professional advisors (lawyers, placement agents, investment bankers...) </li></ul></ul><ul><ul><li>National (European) Trade Associations </li></ul></ul>
    4. 4. Current size and activity levels
    5. 5. Evolution Activity Flows € billion 2004 European Private Equity Survey Conducted by Thomson Venture Economics and PricewaterhouseCoopers on behalf of EVCA
    6. 6. Sources of New Funds Raised 2004 2003 2004 European Private Equity Survey Conducted by Thomson Venture Economics and PricewaterhouseCoopers on behalf of EVCA
    7. 7. 2004: €37 Billion Invested. Record Level 2004 European Private Equity Survey Conducted by Thomson Venture Economics and PricewaterhouseCoopers on behalf of EVCA
    8. 8. Stage Distribution of Investments Amount Invested 2004 European Private Equity Survey Conducted by Thomson Venture Economics and PricewaterhouseCoopers on behalf of EVCA 2004 2003
    9. 9. Stage Distribution of Investments Number of Investments 2004 European Private Equity Survey Conducted by Thomson Venture Economics and PricewaterhouseCoopers on behalf of EVCA 2004 2003
    10. 10. 2004 Investment as % of GDP – Investments by Country of Management 2004 European Private Equity Survey Conducted by Thomson Venture Economics and PricewaterhouseCoopers on behalf of EVCA
    11. 11. Economic Impact on Companies
    12. 12. Without venture capital, my company… Impact of the investment on the creation, survival and growth of the company – all responding companies Source: NUBS/EVCA
    13. 13. Without venture capital, my company… seed/start-up expansion Impact of the investment on the creation, survival and growth of the company – all responding companies Source: NUBS/EVCA
    14. 14. In the absence of a Buyout, my company… The overall impact of the buyout on the survival and growth of the company Source: CMBOR/EVCA
    15. 15. Venture backed: Comparison with competitors – increase in turnover and EBIT Source: NUBS/EVCA Respondent’s perceptions of post-investment increases in turnover and EBIT in comparison to competitors – all responding companies
    16. 16. Post buyout increases in turnover and EBIT in comparison to competitors: respondents’ perceptions Source: CMBOR/EVCA
    17. 17. Percentage increase in expenditure between the time of the initial investment and the time of the survey Seed/start-up stage companies Expansion stage companies Source: NUBS/EVCA
    18. 18. Expenditure in four areas as a percentage of sales before and after the buyout Source: CMBOR/EVCA
    19. 19. Impact on European Economies
    20. 20. The Economic weight of the European PE/VC industry <ul><li>Portfolio of 44.000 companies: </li></ul><ul><li>6.5 million people employed </li></ul><ul><li>3.2% of the EU’s active population </li></ul><ul><li>€ 156bn of EQUITY invested </li></ul>
    21. 21. The Economic weight of the European PE/VC industry <ul><li>Between 1999 and 2003: </li></ul><ul><li>Created 1.1 million jobs </li></ul><ul><li>585.000 in Early stage companies </li></ul><ul><li>450.000 in Later stage companies </li></ul>
    22. 22. Recommendations
    23. 23. Competitiveness of the Economies
    24. 24. But ICT is only a part of the story Competitiveness Factors Macroeconomic conditions Monetary Policy Fiscal Policy Policy initiatives Factor endowments (infrastructure et al.) ICT Access to finance Entre- preneurship Productivity & innovation Administrative & regulatory environment Structural conditions Access to human capital Innovation & knowledge diffusion Open & well- functioning markets
    25. 25. A need to boost entrepreneurship in Europe Total Entrepreneurial activity by advanced economies 2000-2003 Source: EVCA based on Global Entrepreneurship Monitor - 2003 Executive Report and International Monetary Fund 26 Hong Kong 13 Finland 25 Japan 12 Denmark 24 Belgium 11 Portugal 23 Taiwan 10 Switzerland 22 France 9 Italy 21 The Netherlands 8 Norway 20 Sweden 7 Ireland 19 Singapore 6 Canada 18 Germany 5 Iceland 17 Spain 4 United States 16 United Kingdom 3 Australia 15 Israël 2 New Zealand 14 Greece 1 Korea Ranking Country Ranking Country
    26. 26. Both in Europe and in the US, finance is an obstacle in setting up a business. Red tape is more an European obstacle Source: Flash Eurobarometer – Entrepreneurship 2004 Do you … with the following opinions? % Agree (Strongly + Agree)
    27. 27. Current problems <ul><li>Difficult to finance a project </li></ul><ul><li>Difficult to establish a company </li></ul><ul><li>  </li></ul><ul><li>Difficult to run a new company </li></ul>
    28. 28. Policy Measures: More efforts should be targeted at entrepreneurship in education and the reduction of red tape Share of the respective objectives of policy measures % of total number of policie measures targeting innovation in the EU-15 Source: TrendChart/European Commission / note: information as of 2004 29.9 Fostering and Innovation Culture 100.0 Total 0.3 Other Objectives 14.4 <ul><ul><li>Including: Co-operation Research/Universities/Companies </li></ul></ul>11.5 <ul><ul><li>Including: Start-up of technology-based companies </li></ul></ul>49.2 Gearing Research to Innovation 14.2 <ul><ul><li>Including: Financing </li></ul></ul>0.6 <ul><ul><li>Including: Legal and Regulatory Environment </li></ul></ul>0.9 <ul><ul><li>Including: Administrative Simplification </li></ul></ul>20.7 Establishing a Framework conducive to Innovation 5.8 <ul><ul><li>Including: Education & Training </li></ul></ul>Share in percentage Typology of objectives
    29. 29. EVCA’s Recommendations <ul><li>Foster Europe’s entrepreneurial environment, culture and education: </li></ul><ul><li>Entrepreneurship through an adequate regulatory framework </li></ul><ul><li>Requirements for company formation, lighten the burden of regulation, improve access to finance and adjust insolvency and bankruptcy rules to allow for an orderly end or restructuring of a failed business </li></ul><ul><li>Entrepreneurship through education and support programmes </li></ul><ul><li>Integrate entrepreneurship into education at all levels; enhance awareness of the positive relationship between entrepreneurs and private equity and venture capital firms </li></ul>
    30. 30. The Private Equity Ecosystem and Virtuous Cycle
    31. 31. The virtuous financing cycle of private equity and venture capital investment repayments + capital gains commitments divestments pensions savings savings and pensions investments Private Equity Funds High-potential companies Institutional investors (Insurance companies, pension funds, banks…) Private Equity Funds Institutional investors (Insurance companies, pension funds, banks…) Saving accounts, Pension plans, Insurance contracts…
    32. 32. The virtuous financing cycle of private equity and venture capital investment repayments + capital gains commitments divestments pensions savings savings and pensions investments Private Equity Funds High-growth companies Institutional investors (Insurance companies, pension funds, banks…) Private Equity Funds Institutional investors (Insurance companies, pension funds, banks…) Saving accounts, Pension plans, Insurance contracts… Legal vehicle Young innovative companies, family companies, development potential, … High Growth Markets, trade sales,… who is buying? Long term investment plans: Pension Funds (Prudent Man Rule), Banks, Insurance companies, … Double Taxation Permanent establishment
    33. 33. Thank You
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