Forecasts have already suggested it: 2019 was a very good year for the equity capital market in Germany. A forecast that is now backed up by the latest figures from the Bundesverband Deutscher Kapitalbeteiligungsgesellschaften (BVK). “2019 was a record year for the German equity capital market,” says Ulrike Hinrichs, managing BVK board member. “Both investments and fundraising reached new record levels.”
Last year, investment companies in Germany invested a total of 14.3 billion euros, almost a fifth more than in 2018, and the years 2017 and 2018 have already reached interim highs of 11.7 and 12.0 billion euros respectively. In the course of the year almost 1,000 companies were financed with equity capital.
Upward trend in venture capital continues
After a clear upward trend in investments by venture capital companies had already been apparent in previous years, with a total of 1.5 billion euros invested in 2018, this trend was continued in 2019. Venture capital investments rose to 1.7 billion euros. Around 570 start-ups and young companies were financed, accounting for around 60 percent of all companies financed during the year. “This is good news for the German start-up ecosystem,” says Dr Regina Hodits, spokeswoman of the BVK board. “The German venture capital scene has matured in recent years and the figures speak for the attractiveness of German start-ups.” However, Hodits continued, the gap to the USA or Asia was still immense. Moreover, foreign venture capital companies continue to provide the bulk of the funds in Germany. “Foreign capital is welcome, but it must be our aim to establish our own powerful venture capital scene, for which purpose more capital must be mobilised for venture capital, especially from German institutional investors.”
Buy-outs exceed the 10 billion euro mark in 2019
At 10.6 billion euros, buy-out investments reached a double-digit figure for the first time in history. At the same time, they exceeded the already high investment levels of previous years (2017: 8.4 billion euros, 2018: 8.3 billion euros) by around a quarter. This record result also became apparent in the course of the year, mainly due to large-volume transactions such as the takeovers of Ifco Systems, Röhm, Robert Bosch Packaging, Adco, AutoScout24 and Axel Springer. “On the seller side, unlike in previous years, we saw primarily strategists as well as families and entrepreneurs,” explains BVK board member Hinrichs. “This speaks for the attractiveness of private equity”. Despite the fact that the SME business remains very active, the number of transactions fell from 176 to 146.
There was also a slight decline in the minority investments (growth, replacement and turnaround financing), which are generally geared towards SMEs. After 2.2 billion euros was invested in 2018, the figure last year was 1.9 billion euros.
Fundraising with a leap
In 2019, German investment companies were able to collect more new fund resources from investors than ever before. Fundraising reached 5.2 billion euros, almost a quarter more than in the already successful previous year (4.2 billion euros). “The fundraising environment is currently more advantageous than ever,” says Hinrichs. “Not only internationally, but also in Germany, this is leading to a strong inflow of mainly institutional capital into alternative asset classes such as private equity and venture capital, which is looking for profitable investments in the low-interest phase”. Both buy-out funds and venture capital funds were able to raise more capital. Venture capital funds accounted for 2.9 billion euros of the new funds and buy-out funds for 2.1 billion euros. “Domestic funds are increasingly able to attract investor interest to Germany. The fund sizes are increasing,” Hinrichs continues.
Outlook for 2020
Following the very good result in 2019, the BVK is also optimistic about the current year. Despite economic concerns and economic conflicts, the economic environment is proving robust, while demand for equity capital remains stable.
You can download the detailed, preliminary investment market statistics for 2019 (data status February 2020) here.