Agenda 1. What is AVCO? Equity sources of SMEs’ external finance
2. What is Private Equity/Venture Capital? 3. Austrian Private Equity Industry
EU Finance Day for SMEs
4. EU – Ranking
10th March, Vienna
5. Private Equity and Venture Capital – Impact Jürgen Marchart, Managing Director, AVCO
6. Legal Framework
What is AVCO? AVCO – Austrian Private Equity und Venture Capital Organisation is… •…Umbrella Organisation of the Austrian Private Equity Industry •…the Mission is:
AVCO's Mission & Organisation Mission • Information- & Know-how, to increase Awareness for PE and its function • Networking, to foster co-operation within the PE Industry • Lobbying • International Co-operation with EVCA, NVCAs, EC, … Organisation • AVCO is a non-profit Association • Financed by membership fee, Sponsoring, Projects
20 Ordentliche AVCO Mitglieder
34 Fördernde AVCO Mitglieder
Agenda
What is Private Equity ?
1. What is AVCO?
Private Equity provides equity capital to enterprises not quoted on a stock market.
2. What is Private Equity/Venture Capital?
Private Equity can be used to • develop new products and technologies • to expand working capital • to make acquisitions or to strengthen a company’s balance sheet. • to resolve ownership and management issues - a succession in family-owned companies • to buy out or buy in of a business by experienced managers
3. Austrian Private Equity Industry 4. EU – Ranking 5. Private Equity and Venture Capital – Impact 6. Legal Framework
What is Venture Capital?
Private Equity/Venture Capital Model PE/VC as an instrument
PE/VC as „asset class“
Venture capital is, strictly speaking, a subset of private equity and refers to equity investments made for • the launch • early development or • expansion of a business.
attract Investors
taking shares (SMEs) MANAGEMENT
Performance
Profit Investitments
INVESTORS
Fund Fund-investment
SMEs Information, Coaching, Management Know-how
mainly institutional Investors: (Definition of EVCA – European Private Equity and Venture Capital Association)
growth Innovation MBO
Agenda
3 Effects of PE/VC • Financing Function: no alternative Finance sources available for specific project
Support of:
- Pension funds - Insurances - Banks
1. What is AVCO? 2. What is Private Equity/Venture Capital?
• Selection Function: limited financial resources are allocated to projects with highest profit-potential at high risks an asymmetric function. • Added Value: („smart money“) input of active investors is not only money, but also Management Know-How, networking, consulting, …
3. Austrian Private Equity Industry 4. EU – Ranking 5. Private Equity and Venture Capital – Impact 6. Legal Framework
E X I T
Österreichische (PE/) Venture Capital Industrie
PE/VC Investments in Österreich
2007: PE Insgesamt
Investments Österreich (Mio. €) Quelle: EVCA / AVCO
Fundraising:
€ 431 Mio.
(+ 54,5%)
Investments:
€ 257 Mio.
(+ 62,6%)
Exits:
€ 210 Mio.
(+ 15,2%)
163
147
257*
146
141
158
143
113 89 51 19 1
1
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 * 2007 Methodenwechsel bei Erheb ung (online), eingeschränk te Vergleichbarkei zu VJ
PE/VC Investments in Österreich
PE/VC Investments in Österreich Investments Österreich nach den wichtigsten Branchen Quelle: EVCA / AVCO
Investments Österreich Anteil VC (Mio. €) Quelle: EVCA Yearbooks
300
800 257*
250 Total Venture Capital
200
Chemicals and Materials
700
Financial Services
600 163
150
147
146
141
143
400
Energy and environment
113 300
89
100
149
51 50 0
1 1
1 1
19 8
36
1995
1996
1997
1998
127
116
101
122
Computer and consumer electronics
200 105
55
89 48*
Consumer goods and retail
100 0
1999
2000
2001
2002
2003
2004
2005
2006
22,8% 16,6%
Bus. and industrial products
500
158
42,9% 2,3% 0,0%
Life sciences
39,4%
4,5% 0,0%
2007*
4,2%
0,8%
3,5% 20,9%
2007
Venture Capital: Seed / Start-up / Expansion * 2007 Methodenwechsel bei Erhebung (online), eingeschränk te Vergleichb arkei zu VJ
Communications
2006
29,7%
4,2%
0,6% 1,2%
* 2007 Methodenwechsel b ei Erheb ung (online), eingeschränkte Vergleichbarkei zu VJ
PE/VC Investments in Österreich
PE/VC Fundraising in Österreich
Investments Österreich nach Unternehmensphasen Quelle: EVCA / AVCO
2,7%
2,8%
2,9%
3,2% 12,5% 0,2% 20,9%
50,8%
Quelle: EVCA / AVCO
Start-up 279
Expansion 235
Rescue/turnaraound 3,2%
60,3%
40,4%
217
183
Replacement capital 124
Buyout
177 137
164 122
61 1
2006 (€ 158 Mio.)
431*
Fundraising Österreich (Mio . €)
Seed
2007* (€ 257 Mio.) 2007 Methodenwechsel b ei Erheb ung (online), eingeschränkte Vergleichbarkei zu VJ
24
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 * 2007 Methodenwechsel b ei Erheb ung (online ), eingeschränkte Vergleichb ark ei zu VJ
PE/VC Fundraising in Österreich
PE/VC Fundraising - Investorengruppen
kommittiertes Kapital nach Phasen – Plan bei Fundraising (muss daher nicht mit tatsächlich getätigten Investitionen übereinstimmen)
Fundraising Österreich nach Quellen Quelle: EVCA / AVCO
Fundraising Österreich (Mio. €) 431*
Quelle: EVCA / AVCO Early Stage HT Expansion HT Buyout 235 Total 8 183 37 124 12 52
11
1998
66
137
32
12 41
1999
52
40
53 13 23
62 11 3 27
2001
2002
2003
2004
Pension Funds Insurance Companies
57 29 5
2005
Fund of Funds
1,5% 66
40 2 26
49 5 1 10
64,5%
Academic Institutions Capital Markets Endowments and Foundations
1,0% 1,8%
9
2006
25,6%
8,8%
54
Family offices
9,2%
Other asset managers
17,8%
3,3%
2007
Unknown
* 2007 Methodenwechsel bei Erhebung (online), eingeschränkte Vergleichbarkei zu VJ
* 2007 Methodenwechsel bei Erhebung (online), eingeschränk te Vergleichbark ei zu VJ
Agenda
Entwicklung der Exits Divestments Österreich
1. What is AVCO?
Quelle: EVCA / AVCO
2. What is Private Equity/Venture Capital?
210 Mio. €
182 Mio. €
Banks
31,4%
206
71
56
Government Agencies
1,5%
7,3%
77
122
62
32
44
2000
164
Private Individuals
8,6%
5,6% 302
177
92
63
279 217
73 15 22
31 11 17
2,6%
9,5%
Not Available
Corporate Investors
2007*
2006
Early S. Non HT Expansion Non HT
Trade Sale
3. Austrian Private Equity Industry
Public Offering (IPO)
41,6%
Secondaries Write-Off 88,8%
4. EU – Ranking
Sale to Management (MBO) Repayment of Pricipal Loans
38,3%
Sale to Financial Institutions
5. Private Equity and Venture Capital – Impact
Other
8,5% 3,5% 5,1%
3,4% 5,2%
2006
2007*
6. Legal Framework
* 2007 Methodenwechsel bei Erhebung (online), eingeschränkte Vergleichbarkei zu VJ
PE/VC Investments im EU Vergleich
PE/VC Investments im EU Vergleich PE/VC Investments Anteil in % am BIP 2007 Quelle: EVCA Yearbook 2008
Investments Europa vs. Österreich (Mio. €)
0,041 Hungary
0,095 Italy
0,094 Austria
0,097 Portugal
0,284
0,291
0,292
0,154
2007 Methodenwechsel bei Erhebung (online), eingeschränkte Vergleichbarkei z u VJ
0,101
2007
Ireland
2006
Czech Republic
2005
0,199
2004
0,186
2003
Poland
2002
Greece
2001
0,245
2000
Romania
1999
0,0
Belgium
1998
Spain
1997
Switzerland
0 1996
0,584
0,5
100
0 1995
1,0
200
0,338
158
0,307
143
Norway
141
Germany
51
113
Denmark
19
146
300
Europe
5.546 6.752 1 1
147
89
257*
0,557
163
14.461 9.655
1,5
400
27.648 29.096
Finland
20.000
24.331
0,702
25.117
0,532
36.920
34.986
30.000
2,0
France
40.000
500
0,658
600 47.057
The Netherlands
50.000
1,692
700
Europa Österreich
1,255
60.000
(Industriy statistics: by country of private equity firm)
2,5
Sweden
70.000
10.000
71.165 73.788*
Quelle: EVCA Yearbooks
800
United Kingdom
80.000
VC Investments im EU Vergleich
Agenda
VC Investments Anteil in % am BIP 2007
1. What is AVCO?
Quelle: EVCA Yearbook 2008 (Industriy statistics: by country of private equity firm)
0,5
2. What is Private Equity/Venture Capital?
0,011
0,008
0,017
0,011
0,024
0,019
0,059
0,044
0,068
0,063
0,073
0,094
0,095
0,093
0,1
0,099
0,134
3. Austrian Private Equity Industry 0,105
0,207
0,2
0,144
0,235
0,3
0,222
0,4
Venture Capital: Seed / Start-up / Expansion
Private Equity and Venture Capital – Impact Research Project:
Greece
Czech Republic
Austria
Hungary
Italy
Poland
Ireland
Germany
Romania
France
Portugal
Spain
Denmark
Europe
Belgium
Norway
The Netherlands
Finland
Switzerland
Sweden
United Kingdom
0
4. EU – Ranking 5. Private Equity and Venture Capital – Impact 6. Legal Framework
Results I: No PE/VC – Reasons d ies e F r ag e ha t s ic h n ie g es te llt
„The Impact of Private Equity (PE) und Venture Capital (VC) on growth and performance of Austrian Companies“
S e lbs tf ina n zie ru ng a us re ich en d
a us re ic he nd e F i na nz ie run g: K re dit e
.. .. b is he ri ge G es ell sc ha ft er
.... F ö r de run g en
performed together with WIFO
. ... B u si ne ss A ng el s, et c.
N = 138 . ... M ez za ni nfi na nz ie run g
Empiric Research Economic/political Consequences
g run ds ä tzl ich e A ble hn u ng
ke ine A b ga be v o n M it sp rac h ere c hte n
ke in e F in a nz ier un gs be re its c ha ft du rc h P E / V C - G eb er
0
Results: Effects of PE/VC on Company development? Anteile in % 5.6
20
30 40 Anteile in %
50
60
70
Resluts III: Initial occasion for PE/V investment? Seed Finanzierung
2.8
8.5
(weitere) Existenz ohne PE/VC nicht m öglich
36.6
Start-up Finanzierung
bessere Entwicklung
Wachstumsfinanzierung
gleiche Entwicklung
Umstrukturierungsmaßnahmen
schlechtere Entwicklung durch PE/VC anderes
46.5
10
N = 71
N = 72
Vorbereitung Börsegang Eigentümerwechsel (MBO, etc.) 0
10
20
30
40
Anteile in %
50
60
Results: PE/VC-induced Changes in Company?
Results: Effects on Growth of Company VC (N • 78)
NVC (N • 138) N • 70
Kostenvorteile technologische Innovationen
2.5
Kosteneffizienz 3.0 Absatzgebiet (geographische M ärkte)
Finanzierungsmanagement
3.0
Kooperationen 2.5
2.0
innovative Dienstleistungen
geographische Ausweitung
1.0
Qualitätsverbesserung 0 .... not relevant 1 .... low 2 .... medium 3 .... high
Organisation und Personalentwicklung
1.5
Verbreiterung der Produktpalette Marketing und Werbung
Results VI: PE/VC- Effects on Growth and Employment? PE/VC financed Companies show:
Produktpalette 2.0
M arktpräsenz und Kundenservice 0...stark verschlechtert 1...verschlechtert 2...gleich geblieben 3...verbessert 4...stark verbessert
Innovationstätigk eiten
Produk tqualität
Schutzmaßnahme n für geistiges Eigentum
Positive effects of company development
• PE enables implementation of ambitious growth targets of innovative enterprises; not possible without PE/VC (Financing Function)
• 70 % higher Turnover • 50 % higher Employment
than Companies of control group
• PE focuses especially to growth potent SMEs, high success rate (Selection Function) • PE contributes active support for SMEs (Added Value)
Agenda
PE as policy factor
1. What is AVCO? 2. What is Private Equity/Venture Capital? 3. Austrian Private Equity Industry 4. EU – Ranking 5. Private Equity and Venture Capital – Impact 6. Legal Framework
•
Since 1990ies dynamic market development
•
More dynamic development in Europe since 2003
•
Austrian Market remains small (EU Ranking)
•
To use positive Impulses for high potential SMEs there should be implemented ….
•
… a specific Set of Measures under respect of some basic principles according to the PE/VC Model
PE as policy factor • In many countries including EU Strategies & Measures were developed to benefit from PE/VC-effects
• Risk capital AP, RTD AP, EIF-Programme, CIP – „Dachfondsinitiative“, D – SICAR, Lux / Private Pricaf, Be – SITRA / FII, Fin • Austria: Initiatives started 1995
– FGG Guaranties, MiFiG • As a consequence PE/VC had a dynamic development in Austria, but there is still need for more activity
Currant Status Quo of legal framework for PE/VC in Austria • current legal framework (MiFiGG 2007) for PE/VC has precisely the opposite effect. • As a result, existing finance corporations are fleeing into foreign structures (Luxembourg, Liechtenstein, Switzerland), where the framework conditions for PE/VC conform to international standards and are much more attractive than is currently the case in Austria. • This situation affects approximately 50 finance corporations for medium-sized businesses and 500 holding companies with more than 30,000 employees and a turnover in excess of EUR 4 billion.
Currant Status Quo of legal framework for PE/VC in Austria • long-term nature of the PE/VC business • capital is currently available (funds raised in 2007: 257 million euro) for investments in Austrian SME’s. • Private equity is not the cause of the current financial crisis! Private equity is part of the solution! • However only if lawmakers allow it to be and create attractive framework conditions.
Currant Status Quo of legal framework for PE/VC in Austria • Kapitalmarktstärkungs- und Innovationsgesetzes 2008 (KMStIG 2008; IGG) • in terms of its content the current draft bill has still much needs to be optimised • The draft IGG contains provisions regarding permissible investments as well as excessive information and disclosure obligations that in practical terms make it impossible to use the structure. • In the present “light version of the IGG”, the problem areas have been eliminated so that a practicable, internationally competitive draft is now available that only needs to be implemented.
…in a nutshell If reasonable Measures are implemented which address market failure directly and do not replace private capital, the market will be self regulated • • • •
Internationalisation Investors from Abroad Early stage Projects ….
The Competitiveness of Austria as a business location and a financial community will be strengthened.
Contact Dr. Jürgen Marchart Managing Director
[email protected] P +43 1 526 38 05-0 F +43 1 526 38 05-10 AVCO – Austrian Private Equity and Venture Capital Organisation www.avco.at
