Recovery signs for private equity

Private equity investment in New Zealand is on the increase with $170 million invested in the first half of 2010 – the highest activity level since the global financial crisis.The latest Ernst & Young and New Zealand Venture Capital Association Monitor for the first six months of 2010 also reveals a ignificant rise in mid-market investment, particularly New Zealand domiciled fund activity.Ernst & Young partner Andrew Taylor said results suggested a slow but encouraging recovery in the New Zealand mid-market private equity and venture capital.

Private equity investment in New Zealand is on the increase with $170 million invested in the first half of 2010 – the highest activity level since the global financial crisis.

The latest Ernst & Young and New Zealand Venture Capital Association Monitor for the first six months of 2010 also reveals a ignificant rise in mid-market investment, particularly New Zealand domiciled fund activity.

Ernst & Young partner Andrew Taylor said results suggested a slow but encouraging recovery in the New Zealand mid-market private equity and venture capital.

Top-end private equity activity occurred in the form of a significant follow-on investment.
In the venture capital segment, angel investor activity supported similar investment levels in 2009

“While the top-end of the market is still quiet, reflecting market challenges and the small number of M&A transaction in the segment, there were heartening levels of activity in other market segments,” he said.

“It is pleasing to see mid market activity returning to long term average trends from the low levels experienced in the second half of 2009.”

Survey participants reported $68 million invested in the first half of 2010 – a return towards the $61.1M average across all half-year periods since 2003, with the average investment size rising from NZ$7.4m in the first half of 2009 to NZ$8.5m this year.

“At the venture capital level, activity was most notable for the growth in angel investment. We are seeing angels moving into transactions previously executed by formal VC funds due to the current VIF-backed funds being largely fully committed.”

NZVCA chairman Kerry McIntosh said he expected to see investment improve as the majority of New Zealand and Australian-domiciled mid market private equity managers active in New Zealand have substantial committed but undrawn capital.

“New fundraising has been relatively subdued but we have seen New Zealand growth funds successfully raising new funds, demonstrating a willingness from local investors to consider quality alternate asset opportunities,” said Mr McIntosh.

“We expect to see renewed fundraising activity at the venture capital level following the Government’s decision to provide a $40 million underwrite which is enabling the New Zealand Venture Investment Fund to commit to new funds.”