As the German Private Equity and Venture Capital Association (BVK) shows in its annual statistics, 2019 was a record year for the German private equity market. Buyout investments reached €10.6 billion, fundraising €5.2 billion, and venture capital investments €1.7 billion, some of which were significantly higher than in the previous year.
Investments in acquisitions of companies and parts of groups reached a double-digit billion value of €10.6 billion in 2019, the first time in German startup history. The previous year, the figure was €8.3 billion. This record figure had already been reached by major transactions completed during the year, such as the acquisitions of Ifco Systems, Röhm, Robert Bosch Packaging, Adco, AutoScout24 or Axel Springer announced. However, the number of transactions fell from 176 to 146. In the minority investments (growth, replacement, and turnaround financing), which are generally oriented towards small and medium-sized enterprises, investments declined slightly. While 2.2 billion were invested in 2018, the figure fell to just 1.9 billion last year. Ulrike Hinrichs, Managing Board Member of BVK, says:
"On the seller side, unlike in previous years, we primarily saw strategists, families, and entrepreneurs. This speaks to the attractiveness of private equity. However, the environment for buyouts remains positive. The economic situation, financing environment, available capital, and the high acceptance of private equity all speak in favor of private equity companies, even if the valuation level remains challenging."
Venture Capital: There is a lack of money from Germany
In the venture capital segment, private equity firms invested €1.7 billion (2018: €1.5 billion). 570 companies were financed with venture capital. Growth financing and other minority investments (replacement, turnaround) totaled €1.9 billion, a decrease from the previous year (€2.2 billion). Regina Hodits, spokesperson for the BVK board, explains:
"This is good news for the German startup ecosystem. The German venture capital scene has matured in recent years, and the numbers speak for the attractiveness of German startups. However, the gap to the US or Asia remains immense. Moreover, foreign venture capital firms continue to provide the majority of funding in Germany. Foreign capital is welcome, but our goal must be to establish our own powerful venture capital scene, which requires mobilizing more capital for venture capital, especially from German institutional investors."
Fundraising: More advantageous than ever
German private equity firms raised more new funds from investors in 2019 than ever before, according to the study. Fundraising reached €5.2 billion, almost a quarter more than in the previous year (€4.2 billion). Both buyout funds and venture capital funds raised more capital. Venture capital funds accounted for €2.9 billion of the new funds, while buyout funds received €2.1 billion. Funds focusing on growth and minority investments, mezzanine investments, and generalists raised €0.2 billion, compared to €0.8 billion the previous year. Hinrichs explains:
"The fundraising environment is currently more favorable than ever. This is leading not only internationally, but also in Germany, to a strong inflow of capital, especially institutional capital, into alternative asset classes such as private equity and venture capital, which is seeking profitable investments in the low-interest rate environment."
Distribution across regions and sectors
In a regional comparison, Bavaria leads the way: 27 percent of all investments flowed into the Free State, followed by Berlin (22 percent), and Hesse (16 percent). When looking at the number of companies financed, however, Berlin leads the way: 219 startups received funding there, compared to a few fewer in Bavaria (194). Baden-Württemberg takes third place with 101.
A look at the sectors reveals that in 2019, the largest share of investments (34 percent) went to startups in the ICT segment. This was followed by the corporate products and services and consumer goods and services sectors, each accounting for 18 percent.
