“2020 was no ordinary year and also posed numerous challenges for the German private equity market,” Frank Hüther, board spokesman of the German Private Equity and Venture Capital Association (Bundesverband Deutscher Kapitalbeteiligungsgesellschaften, BVK), summarises the preliminary statistics for the German private equity and venture capital market published in mid-March. “Nevertheless, private equity companies invested a total of €12.6 billion in Germany. Thus, the German private equity market not only underlined its strength, but also helped many companies through the pandemic and is now supporting them in overcoming the further pandemic consequences.” Although this means that the market missed the previous year’s result by almost a quarter, it clearly exceeded the investments made in 2017 and 2018.
Small setback for venture capital
After the last few years were characterised by a clear upward trend in investments by venture capital companies, a slight decline was recorded in 2020. Investments fell to €1.9 billion – after a historic high of €2.3 billion in 2019. However, with around 650, virtually the same number of start-ups and young companies were financed as in the previous year. 62 per cent of all companies financed with equity capital during the year thus received venture capital. “In view of the adverse general conditions, the relatively small decline in investment can be seen as a success for investors, founders and the public sector,” emphasises Ulrike Hinrichs, managing board member of the BVK. “The fears that Corona would prove to be a serious existential threat to the German start-up and VC ecosystem have fortunately not materialised. This speaks for the development the industry has taken.”
Buy-outs – Decline after record
After buy-out investments reached a double-digit billion level for the first time in history in 2019 with €11.5 billion, 2020 brought a noticeable decline of around a quarter to €9.4 billion. Nevertheless, the previous years’ high investment levels (2018: €8.3 billion, 2017: €8.4 billion) were exceeded. “A decline had already been announced after the first six months,” adds Hinrichs. “Even though the number of acquisitions and especially very large buy-outs was below the previous year’s figure, there were some transactions worth highlighting.” In particular, the takeover of ThyssenKrupp Elevator, the largest buy-out in German history, is worth mentioning. Other examples are the transactions at Wella, neuraxpharm, Flender, Hermes or Schülke & Mayr. “The pandemic had been weighing on the business since the first lockdown. Nevertheless, unlike during the financial crisis, investments did not come to a standstill,” Hinrichs continues. “On the seller side, as in the previous year, there are still often families and companies. Equity capital remains an important financing pillar and an anchor of stability for medium-sized entrepreneurs, especially in difficult times.”
Fundraising with losses
After German private equity companies were able to raise more new funds from investors in 2019 than ever before, fundraising in 2020 was down by a third to €3.9 billion – although the number of new funds (30) remained almost unchanged – compared to the record previous year (€6.0 billion). Both buy-out and venture capital funds suffered losses. Venture capital funds accounted for €1.6 billion of the new funds raised and buy-out/growth funds for €2.2 billion. “We saw many new and exciting funds again in 2020. The fundraising environment continues to be favourable despite the economic turmoil, as institutional investors look for return opportunities in alternative investments in the face of low interest rates and volatile equity markets,” explains Hüther.
Outlook for 2021
“In 2021, much will depend on how quickly social life and the economy return to a new normal. The demand for equity capital is very positive in all market segments, but the economic uncertainties are nevertheless also weighing on the investment business,” Hinrichs looks cautiously at the current year. “At the moment, forecasts are almost impossible. However, we are sure that equity capital will help many companies to overcome the current crisis.”
The detailed, preliminary statistics on the private equity market 2020 (data as of March 2021) of the German Private Equity and Venture Capital Association (BVK) including methodological explanations can be downloaded here. The statistical data is subject to continuous updating and may deviate from earlier and later evaluations.