BVCA Private Equity and Venture Capital Report on Investment Activity 2014 Autumn 2015 Percentage of UK Investee Companies by Region East of England 4% East Midlands % London 24% North East 4% North West 10% Northern Ireland 2% Scotland 8% South East 16% South West 7% Wales 6% West Midlands 8% Yorkshire & The Humber 7%
Contents Summary Data Tables 4 Appendix Methodology and Definitions 14
Summary Summary 2014 was a positive year for the UK s private equity and venture capital industry, with global investment by our members growing to just under 1.4bn globally in 2014 from 10.1bn the previous year. Moreover, 2014 saw the greatest amount divested in the industry since the BVCA began collecting data, with divestment figures reaching 21.6bn, as firms focused on returning value to their investors. Domestic investment by BVCA members was solid in 2014, with investments into the UK growing to over 4.7bn this year from 4.1bn in 201. Global investment also remained strong, with European investment reaching 6.4bn this year from 4.1bn, US investment remaining largely the same at 1.6bn and investment into the rest of the world more than doubling to 606m in 2014. The most striking trend for 2014 was the unprecedented surge in divestments, nearly doubling last year s figure of 12.9bn. This record level of divestment suggests increasing strength in the industry, as firms began to achieve liquidity on many of their pre-financial crisis investments. The most active exit routes this year were trade sales which more than doubled from 2bn in 201 to over 4.4bn this year followed closely by sales of quoted equity post flotation, which grew from just under 800m last year to over 4.2bn in 2014, reflecting the relative buoyancy of the IPO market in recent years. This continued strength in the IPO market was reflected in firms raising a record 2.7bn from flotations this year. This trend of the re-emergence of IPOs as an exit route will only help the industry over coming years. An equally noteworthy aspect of this year s report has been the greater regional balance in investment across Northern England and Scotland. While London and the South East continue to lead by amount invested, growing from 2bn in 201 to 2.7bn this year, other parts of the country have also experienced considerable increases in investment, with the West Midlands more than doubling their 201 levels to 6m and Scotland almost doubling last year s figure to 206m. Across England, both the North West and Yorkshire and The Humber saw marginal increases at 448m and 97m, respectively, while Northern Ireland also saw its investments increase from 10m in 201 to 16m. This continuing trend towards greater investment decentralisation is a positive development for the long-term future of the UK economy, and bodes well for the current political focus on creating a Northern Powerhouse. With regards to investment by industry sector, 2014 saw an increase in investment in technology, growing from 841m to 1.2bn, and was followed by the financial sector and consumer services at 1.1bn and 906m, respectively. In contrast, investment in healthcare and industrials continued to fall, to 442m and 55m respectively. Finally, fundraising largely kept pace with the strong showing from last year, with 10.8bn raised in 2014 compared to 11.2bn in 201. Pension funds once again represented the single most important source of funding, with 2.7bn raised from these investors representing 25% of total fundraising. This year was also important for Small MBOs who saw their fundraising increase from 162m in 201 to over 1.1bn. VC fundraising grew marginally from 259m last year to 288m this year and Middle MBOs saw an increase from 4.2bn to 5.2bn. Joe Steer, Director, Research BVCA Private Equity and Venture Capital Report on Investment Activity 2014
Data Tables 1 Table 1. Global Investment Activity of BVCA Members 2014 201 2012 2011 2010 2009 2008 2007 2006 2005 2004 200 2002 Number of eligible BVCA members 17 159 166 18 194 19 208 214 192 179 168 164 164 % of survey respondents 96 96 96 97 97 100 99 100 100 100 100 100 98 Total amount invested ( m) 1,6 10,127 12,288 18,610 20,447 12,629 20,025 1,64 21,85 11,676 9,679 6,57 5,466 Number of companies financed 891 857 1,009 1,048 1,07 976 1,672 1,680 1,60 1,55 1,566 1,49 1,459 Table 2a. Investment by Country Country Number of companies % of companies Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 UK 728 710 820 82 8 81 4,720 4,109 5,767 5 41 47 US 4 5 4 5 4 4 1,64 1,67 1,484 12 17 12 Europe 104 10 1 12 12 1 6,404 4,05 4,681 48 40 8 Rest of World 16 9 1 2 1 1 606 291 56 5 Total 891 857 1,009 100 100 100 1,6 10,127 12,288 100 100 100 Table 2b. 2014 Quarterly Investment by Country Country Number of companies % of companies Amount invested ( m) % of amount invested Q1 Q2 Q Q4 Total Q1 Q2 Q Q4 Total Q1 Q2 Q Q4 Total Q1 Q2 Q Q4 Total UK 21 176 157 182 728 29 24 22 25 100 1,726 665 1,20 1,099 4,720 29 24 22 25 100 US 12 10 7 14 4 28 2 16 100 286 60 598 89 1,64 28 2 16 100 Europe 22 27 29 26 104 21 26 28 25 100 1,586 1,697 2,90 71 6,404 21 26 28 25 100 Rest of World 5 5 16 19 1 1 19 100 67 70 152 16 606 19 1 1 19 100 Total 250 218 198 225 891 28 24 22 25 100,665,092 4,70 2,26 1,6 28 24 22 25 100 1. All figures in this report have been rounded to the nearest integer. For this reason individual figures may not sum to totals. 4 BVCA Private Equity and Venture Capital Report on Investment Activity 2014
Table. Overseas Investment by Financing Stage Financing Stage Number of companies % of companies Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 Seed 8 2 5 1 1 2 - - 7 5 11 1 Start-up 10 2 5 70-1 Early Stage 22 29 2 1 19 16 2 2 64 - - 1 Later stage VC 16 2 5 9 15 18 50 110 229 1 2 4 Total Venture Capital 49 59 79 29 40 40 85 144 65 1 2 6 Expansion/Growth Capital 27 51 16 26 86 1,081 4 17 29 19 74 6 Bridge Financing 5 5 2 - - Total Expansion 2 29 56 19 19 29 89 74 1,08 5 6 17 Replacement Capital 0 2 0 22 0 - Secondary Buyout 10 11 9 6 7 5 1,98 1,022 1,95 16 17 21 PIPE 0 0 0 0 0 0 0 0 Refinancing Bank Debt 0 0 4 0 0 2 0 0 6 0 0 1 Total Replacement Capital 1 11 1 8 7 7 1,420 1,022 1,40 16 17 22 Management buyout (MBO) 50 2 41 0 21 21 4,89,718,498 56 62 54 Management buy-in (MBI) 0 2 2 0 1 10 0 4 4 0 - Total MBO/MBI 5 2 4 1 21 22 5,149,718,50 60 62 54 Public to Private 0 2 0 878 0 10 0 2 1 448 7 Rescue/Turnaround 2 2 1 1 5 - - Other 17 16 10 11 2 718 12 15 8 5 2 Total Other Late Stage 22 18 5 1 12 1,600 760 140 19 1 2 Total 169 149 196 100 100 100 8,64 6,018 6,521 100 100 100 1. The number of companies in some financing stage categories and their subtotals add up to more than the total number of companies invested in. This is due to some companies receiving more than one investment within the year at different financing stages. Please refer to the appendix for further information. 2. indicates a value greater than 0 but less than 0.5. Some financing stages have been amalgamated where there are instances of single deals, in order to preserve confidentiality 0 Table 4. UK Investment by Financing Stage Financing Stage Number of companies % of companies Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 Seed 24 2 22 2 6 5 5 - - - Start-up 6 79 76 8 10 8 22 56 57-1 1 Early Stage 171 21 229 2 28 26 80 81 157 2 2 Later stage VC 62 60 104 8 8 12 185 156 125 4 4 2 Total Venture Capital 20 75 41 42 49 48 29 298 4 6 7 6 Expansion/Growth Capital 228 219 282 0 28 1 850 68 1,465 18 17 25 Bridge Financing 7 7 14 1 1 2 15 2 6 - - - Total Expansion 25 226 296 1 29 865 685 1,470 18 17 26 Replacement Capital 21 24 14 2 105 119 4 2 1 Secondary Buyout 14 21 11 2 1 192 927 958 4 2 17 PIPE 0 0 0 0-0 0 5 0 0 - Refinancing Bank Debt 5 5 16 1 1 2 8 18 127 - - 2 Total Replacement Capital 40 50 44 5 6 5 05 1,064 1,1 6 26 20 Management buyout (MBO) 97 75 9 1 10 10 2,86 1,679 2,568 61 41 45 Management buy-in (MBI) 9 7 7 1 1 1 117 161 110 2 4 2 Total MBO/MBI 106 82 100 14 11 11 2,980 1,840 2,677 6 45 46 Public to Private 0 0 0 0 0 0 0 0 14 2 164 Rescue/Turnaround 1 21 2 2 95 15 2 2 Other 9 25 4 5-112 128 8 2 - Total Other Late Stage 5 8 25 7 5 276 22 14 6 5 2 Total 754 771 896 100 100 100 4,720 4,109 5,767 100 100 100 1. The number of companies in some financing stage categories and their subtotals add up to more than the total number of companies invested in. This is due to some companies receiving more than one investment within the year at different financing stages. Please refer to the appendix for further information. 2. indicates a value greater than 0 but less than 0.5. Some financing stages have been amalgamated where there are instances of single deals, in order to preserve confidentiality. BVCA Private Equity and Venture Capital Report on Investment Activity 2014 5
Table 5a. MBOs by Investment Size (UK) Size Number of companies % of companies Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 Small (< 10m) 47 5 45 48 47 48 184 154 171 6 9 7 Mid-sized ( 10m 100m) 40 7 41 41 49 44 1,219 1,007 1,016 4 60 40 Large (> 100m) 10 7 10 4 8 1,461 517 1,80 51 1 54 Total 97 75 9 100 100 100 2,86 1,679 2,568 100 100 100 1. The number of companies in some financing stage categories and their subtotals add up to more than the total number of companies invested in. This is due to some companies receiving more than one investment within the year at different financing stages. Please refer to the appendix for further information. 2. Size bandings are based on amount of equity invested by BVCA private equity members, not the total transaction size. Table 5b. MBIs by Investment Size (UK) Size Number of companies % of companies Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 Small (< 10m) 5 2 56 29 11 7 9 6 7 100 161 100 Mid-sized ( 10m - 100m) 4 5 44 71 107 10 91 94 Large (> 100m) 0 0 0 0 0 0 0 0 0 0 0 0 Total 9 7 7 100 100 100 117 161 110 100 100 100 1. The number of companies in some financing stage categories and their subtotals add up to more than the total number of companies invested in. This is due to some companies receiving more than one investment within the year at different financing stages. Please refer to the appendix for further information. 2. Size bandings are based on amount of equity invested by BVCA private equity members, not the total transaction size.. Some financing stages have been amalgamated where there are instances of single deals, in order to preserve confidentiality. Table 6. Average Amount Invested by Stage (UK) Financing Stage Average Amount Invested, 000s 2014 201 2012 Seed 260 217 206 Start-up 52 711 744 Early Stage 466 80 686 Later stage VC 2,977 2,601 1,20 Total Early Stage 914 795 796 Expansion/Growth Capital,70,119 5,194 Bridge financing 2,151 251 422 Total Expansion,68,00 4,968 Replacement Capital 5,007 4,965,059 Secondary Buyout 1,704 44,12 87,11 PIPE 0 0 1,584 Refinancing Bank Debt 1,667,555 7,929 Total Replacement Capital 7,6 21,270 25,747 Management buyout(mbo) 29,516 22,8 27,610 Management buy-in(mbi) 1,016 22,97 15,664 Total MBO/MBI 28,115 22,4 26,774 Public to Private 0 0 11,741 Rescue/Turnaround 7,1 6,426 Other 2,871 5,125 1,899 Total Other Late Stage 5,214 5,874 5,702 Total 6,260 5,0 6,46 1. Some financing stages have been amalgamated where there are instances of single deals, in order to preserve confidentiality. 6 BVCA Private Equity and Venture Capital Report on Investment Activity 2014
Table 7. Investment by Industry Sector (UK) Industry Sector Number of companies % of companies Amount invested % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 Basic Materials - Chemicals 7 8 18 1 1 2 5 11 5 - - - Basic Materials - Forestry & Paper 0 0 0 0 0 0 0 0 0 0 0 0 Basic Materials - Industrial Metals & Mining 0 0-0 2 0 - - 1 - Basic Materials - Mining 0 0 0 0 0 0 0 0 Total Basic Materials 7 11 21 1 2 5 12 8 - - - Consumer Goods - Beverages 5 2 2 1 - - 81 26 24 2 1 - Consumer Goods - Food Producers 7 11 12 1 2 1 17 107 45-1 Consumer Goods - Household Goods & Home Construction 16 11 12 2 2 1 74 50 51 2 1 1 Consumer Goods - Automobiles & Parts 1 8 6 2 1 1 91 77 47 2 2 1 Consumer Goods - Leisure Goods 15 8 12 2 1 1 96 202 2 1 4 Consumer Goods - Personal Goods 22 21 1 2 281 167 42 6 4 1 Consumer Goods - Tobacco 0 0 0 0 0 0 0 0 0 0 0 0 Total Consumer Goods 78 61 57 11 9 7 640 460 411 14 11 7 Consumer Services - Food & Drug Retailers 7 7 8 1 1 1 19 74 65-2 1 Consumer Services - General Retailers 2 18 42 5 20 55 06 4 1 5 Consumer Services - Media 12 29 1 2 4 4 27 245 140 7 6 2 Consumer Services - Travel & Leisure 29 1 5 4 4 4 57 77 410 8 9 7 Total Consumer Services 71 85 116 10 12 14 906 751 921 19 18 16 Financials - Financial Services 26 25 18 4 4 2 966 244 228 20 6 4 Financials - Banks 0 0 0 0 0 0 0 0 0 0 0 0 Financials - Life Insurance 0 0 0 0 0 0 0 0 Financials - Non-Life Insurance 9 1 57 1 9 8 1 1 69 185 1 Financials - Equity Investment Instruments 0 0 0 0 Financials - Non-equity Investment Instruments 0 0 0 0 0 0 0 0 Financials - Real Estate Investment Trusts 0 0 0 0 0 0 0 0 0 0 0 0 Financials - Real Estate Investment & Services 11 11 10 2 2 1 6 8 457 1 1 8 Total Financials 46 45 6 6 6 4 1,070 8 870 2 8 15 Health Care - Equipment & Services 76 77 98 10 11 12 70 441 742 8 11 1 Health Care - Pharmaceuticals & Biotechnology 58 58 6 8 8 8 72 219 457 2 5 8 Total Health Care 14 15 161 18 19 20 442 660 1,199 9 16 21 Industrials - Aerospace & Defense 6 8 9 1 1 1 8 116 6-1 Industrials - Construction & Materials 7 1 14 1 2 2 45 84 121 1 2 2 Industrials - Electronic & Electrical Equipment 25 20 0 4 27 9 29 1 1 1 Industrials - Engineering 11 11 14 2 2 2 66 58 44 1 1 1 Industrials - General Industrials 19 19 16 2 81 245 9 2 6 2 Industrials - Support Services 4 57 71 6 8 9 271 01 1,107 6 7 19 Industrials - Transportation 7 6 1-1 7 15 17 1 - - Total Industrials 118 11 160 16 18 20 55 858 1,448 11 21 25 Oil & Gas - Alternative Energy 7 14 19 1 2 2 8 48 22-1 - Oil & Gas - Oil & Gas Producers 2 2 5 - - 1 11 6 11 - - - Oil & Gas - Oil Equipment, Services & Distribution 20 15 18 2 2 172 95 128 4 2 2 Total Oil & Gas 29 1 42 4 4 5 190 149 160 4 4 Technology - Hardware & Equipment 24 25 29 4 4 101 47 24 2 1 - Technology - Software & Computer Services 155 160 170 21 2 21 470 692 86 10 17 7 Total Technology 179 185 199 25 26 24 572 79 410 12 18 7 Telecommunications - Fixed Line 5 2 5 1-1 18-1 - - - Telecommunications - Mobile 7 9 8 1 1 1 11 8 27 - - 5 Total Telecommunications 12 11 1 2 2 2 29 8 286 1-5 Utilities - Electricity 5-1 - 2-1 - Utilities - Gas, Water & Multiutilities 4 5 1-1 4 6 28 1 - - Total Utilities 7 8 8 1 1 1 7 28 1 1 1 1 Other 47 7 7 6 1 1 292 104 24 6 - Total 728 710 820 100 100 100 4,720 4,109 5,767 100 100 100 1. indicates a value greater than 0 but less than 0.5 2. The Industry Classification Benchmark (ICB) has been used to classify individual company investments by industry and subsector.. Some sectors have been amalgamated where there are instances of single deals, in order to preserve confidentiality BVCA Private Equity and Venture Capital Report on Investment Activity 2014 7
Table 8. Technology Investment (UK) Industry Sector Number of companies % of companies Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 Mobile Telecommunications 5 1-6 8 2 2 4 7-1 Fixed Line Telecommunications 4 1 - Computer: Computer Hardware 2 2 4 1 1 1 1 - - - - Internet 29 1 22 8 9 5 42 1 54 9 8 Semiconductors 9 11 10 2 2 4 7 - - 1 Software 88 80 111 24 2 27 12 61 144 26 7 21 Other Electronics 19 15 20 5 4 5 16 6 10 1 1 2 Biotechnology 1 4 9 9 8 2 20 25 2 2 4 Medical: Medical Equipment 24 18 29 7 5 7 12 7 10 1 1 1 Pharmaceuticals 16 15 14 4 4 8 61 1 7 2 Health Care 17 17 19 5 5 5 44 17 45 4 2 7 Other 12 114 18 4 4 712 26 66 59 9 54 Total 66 42 410 100 100 100 1,207 841 681 100 100 100 1. indicates a value greater than 0 but less than 0.5 2. Technology classification is included in the appendix (p 14) Table 9. 2014 Technology Investment by Stage (UK) Industry sector Number of companies Amount invested ( m) Early Stage Expansion Replacement Capital MBO/MBI Other Total Early Stage Expansion Replacement Capital MBO/MBI Other Total Mobile Telecommunications 0 0 0 4 0 0 0 6 1 Fixed Line Telecommunications 0 0 0 0 0 0 0 0 4 Computer: Computer Hardware 2 0 0 0 0 2 1 0 0 0 0 1 Internet 2 6 0 0 10 11 0 0 Semiconductors 9 2 0 0 2 1 0 0 8 267 Software 61 20 0 184 0 29 0 96 14 Other Electronics 14 6 2 1 Biotechnology 28 5 0 0 21 2 0 0 Medical: Medical Equipment 2 0 0 0 10 0 0 0 6 Pharmaceuticals 15 0 0 9 0 0 2 184 52 Health Care 1 2 0 9 7 0 11 17 Other 60 2 20 70 15 578 806 Total 251 76 6 0 1 76 129 14 29 897 18 1,207 1. The number of companies in some financing stage categories and their subtotals add up to more than the total number of companies invested in. This is due to some companies receiving more than one investment within the year at different financing stages. Please refer to the appendix for further information. 2. indicates a value greater than 0 but less than 0.5. Technology classification is included in the appendix (p 14) 8 BVCA Private Equity and Venture Capital Report on Investment Activity 2014
Table 10. Investment in Cleantech Companies by Stage (UK) Financing Stage Number of companies % of companies Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 Venture 60 65 102 54 65 6 1 6 67 5 2 29 Expansion 25 26 46 22 26 29 25 50 71 4 2 1 Replacement Capital 2 4 2 2 6 2 22 1 21 9 MBO/MBI 17 2 7 15 2 4 556 1 72 89 20 1 Other 8 4 2 7 4 1 5 7-1 4 - Total 112 100 161 100 100 100 624 156 22 100 100 100 1. The number of companies in some financing stage categories and their subtotals add up to more than the total number of companies invested in. This is due to some companies receiving more than one investment within the year at different financing stages. Please refer to the appendix for further information. 2. Some financing stages have been amalgamated where there are instances of single deals, in order to preserve confidentiality.. Cleantech is defined in the appendix (p 14) Table 11. Investment by Region (UK) Region Number of companies % of companies Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 London 17 169 191 24 24 2 2,145 1,580 2,062 45 8 6 South East 114 8 115 16 12 14 578 452 1,281 12 11 22 South East & London 287 252 06 9 5 7 2,72 2,02,4 58 49 58 South West 50 46 49 7 6 6 2 71 172 5 9 East of England 29 5 9 4 5 5 48 176 424 1 4 7 West Midlands 57 6 77 8 9 9 6 1 2 7 6 East Midlands 2 40 2 6 4 249 44 16 5 11 Yorkshire & The Humber 5 9 9 7 5 5 97 61 11 8 9 2 North West 75 8 66 10 12 8 448 19 55 10 8 9 North East 0 61 82 4 9 10 12 97 410-2 7 Scotland 61 44 67 8 6 8 206 116 159 4 Wales 47 29 7 6 4 5 51 51 87 1 1 2 Northern Ireland 16 18 26 2 16 10 9 - - - Total 728 710 820 100 100 100 4,720 4,109 5,767 100 100 100 1. indicates a value greater than 0 but less than 0.5 Table 12. Investment activity by region compared to total number of VAT registered local units Number of VAT registered local units Number of private equity backed companies Companies invested in per 1,000 of total VAT registered local units Region 2014 201 2012 2014 201 2012 2014 201 2012 London 461,025 42,095 419,75 17 169 191 0.8 0.9 0.46 South East 41,525 400,665 99,755 114 8 115 0.28 0.21 0.29 South East & London 874,550 82,760 819,490 287 252 06 0. 0.0 0.7 South West 247,965 241,550 241,265 50 46 49 0.20 0.19 0.20 East of England 266,275 256,10 255,125 29 5 9 0.11 0.14 0.15 West Midlands 215,680 209,800 208,975 57 6 77 0.26 0.0 0.7 East Midlands 181,115 175,025 174,650 2 40 2 0.1 0.2 0.18 Yorkshire & The Humber 192,605 187,50 187,260 5 9 9 0.28 0.21 0.21 North West 265,975 256,180 255,820 75 8 66 0.28 0.2 0.26 North East 78,205 75,70 75,60 0 61 82 0.8 0.81 1.08 Scotland 20,755 198,280 197,760 61 44 67 0.0 0.22 0.4 Wales 11,215 110,500 111,680 47 29 7 0.42 0.26 0. Northern Ireland 81,900 82,65 82,880 16 18 26 0.20 0.22 0.1 Total 2,721,240 2,625,490 2,610,55 728 710 820 0.27 0.27 0.1 Source for 2012/1/14: UK Business: Activity, Size and Location - [2012/1/14] (http://www.ons.gov.uk) BVCA Private Equity and Venture Capital Report on Investment Activity 2014 9
Table 1. Investment Stage Analysis by Region (UK) Number of Companies Region Venture capital Expansion Replacement capital MBO/MBI Other stage Number % Number % Number % Number % Number % 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 London 64 80 80 20 21 19 56 57 65 24 25 22 10 17 14 25 4 2 6 20 5 4 24 5 11 9 9 21 24 6 South East 42 41 58 1 11 1 50 1 54 21 14 18 8 7 20 6 16 18 9 8 17 11 8 5 7 4 9 18 16 South East & London 106 121 18 2 2 106 88 119 45 9 40 18 20 21 45 40 48 54 29 4 51 5 4 16 16 1 0 42 52 South West 11 11 12 27 22 11 10 11 5 4 8 10 9 6 7 6 6 9 6 5 East of England 22 22 20 7 6 5 7 1 14 6 5 4 9 4 5 5 5 2 2 4 5 8 10 7 7 West Midlands 27 41 4 8 11 8 20 18 8 9 8 1 7 4 10 5 10 4 8 East Midlands 9 1 21 5 6 11 10 5 2 5 0 5 10 0 5 10 6 5 12 6 2 5 0 4 1 0 Yorkshire & The Humber 25 20 17 8 5 4 12 16 11 5 7 4 5 2 1 6 5 9 4 8 8 5 8 5 2 9 5 12 North West 28 44 29 9 12 7 26 18 20 11 8 7 6 15 15 18 8 4 2 15 11 8 9 5 18 11 8 14 8 14 North East 24 7 80 8 10 19 5 16 10 2 7 0 0 7 9 0 0 0 0 0 0 Scotland 24 0 2 8 8 7 19 15 2 8 7 11 6 7 10 0 9 0 6 Wales 1 22 24 10 6 6 5 6 2 2 0 2 8 0 5 5 5 5 9 7 7 2 5 7 2 5 Northern Ireland 1 14 24 4 4 6 4 2 1 0 0 0 0 0 0 Total 20 75 41 100 100 100 25 226 296 100 100 100 40 50 44 100 100 100 106 82 100 100 100 100 5 8 25 100 100 100 1. The number of companies in some financing stage categories and their subtotals add up to more than the total number of companies invested in. This is due to some companies receiving more than one investment within the year at different financing stages. Please refer to the appendix for further information. 2. indicates a value greater than 0 but less than 0.5. Some regions have been amalgamated where there are instances of single deals, in order to preserve confidentiality. 11 9 8 8 8 1 20 Table 14. Investment Stage Analysis by Region Amount invested (UK) Venture capital Expansion Replacement capital MBO/MBI Other stage Region Amount ( m) % Amount ( m) % Amount ( m) % Amount ( m) % Amount ( m) % 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 2014 201 2012 London 71 100 126 24 4 7 08 254 94 6 7 27 44 400 85 14 8 8 1,670 768 1,66 56 42 51 5 88 90 19 40 6 South East 22 14 55 8 5 16 219 124 60 25 18 24 4 94 81 11 9 72 288 16 4 10 9 2 15 16 9 5 7 6 South East & London 9 114 182 2 8 5 527 77 754 61 55 51 78 494 898 25 46 79 1,958 91 1,409 66 51 5 68 104 99 25 47 70 South West 2 4 8 8 1 11 50 4 84 6 6 6 7 1 15 2 1 1 14 268 5 4 15 1 19 7 1 East of England 14 25 2 5 8 7 10 22 11 1 1 - - 29 29 10 9 126 288 7 11 7 9 242 8 6 West Midlands 5 16 16 2 5 5 58 41 71 7 6 5 75 7 44 171 2 6 18 6 East Midlands 4 10 7 2 2 10 21 17 1 1 10 229 0 22 0 22 180 19 7 10 5 2 15 0 1 7 0 Yorkshire & The Humber 70 4 15 24 1 4 27 1 21 5 1 58 174 6 19 16-97 89 8 5 144 64 7 52 29 5 North West 9 94 1 1 4 105 61 51 12 9 116 8 84 0 8 210 110 6 9 22-10 - 477 7 18 North East 7 7 16 2 2 5 5 7 57 1 1 24 0 0 71 4 0 0 0 0 0 0 Scotland 5 15 2 18 5 7 57 55 94 7 8 6 41 2 4-85 0 40 0 1 4 2 Wales 12 7 9 4 2 24 9 4 1 7 0 5 2 0-6 8 6 2 4 25 16 2 1 19 6 1 1 1 Northern Ireland 2 4 2 1 1 1 1 - - 0 0 0 0 0 0 Total 29 298 4 100 100 100 865 685 1,470 100 100 100 05 1,064 1,1 100 100 100 2,980 1,840 2,677 100 100 100 276 22 14 100 100 100 1. indicates a value greater than 0 but less than 0.5 10 BVCA Private Equity and Venture Capital Report on Investment Activity 2014
Table 15. 2014 Industry Sector Analysis by Region (UK) Number of Companies Region Oil & gas, basic materials & industrials Consumer goods Health care & consumer services Telecoms, utilities & financials Technology Number % Number % Number % Number % Number % Number % London 22 14 16 21 54 26 24 7 50 28 7 15 South East 28 18 10 1 4 21 8 12 17 9 8 17 South East & London 50 2 26 97 47 2 49 67 7 15 2 South West 12 8 5 6 10 5 4 6 1 7 6 1 East of England 5 2 9 4 2 8 4 6 West Midlands 16 10 11 14 12 6 5 12 7 6 East Midlands 5 2 9 4 2 2 2 4 Yorkshire and The Humber 11 7 10 1 15 7 5 8 7 4 5 11 North West 17 11 1 17 22 11 1 7 7 15 4 6 North East 2 5 6 4 2 14 8 6 Scotland 2 15 Wales 9 6 4 5 17 8 6 9 1 7 0 0 Other 7 7 11 20 11 6 Northern Ireland 2 1 0 0 9 5 0 0 Total 154 100 78 100 205 100 65 100 179 100 47 100 1. Some regions have been amalgamated where there are instances of single deals, in order to preserve confidentiality. Table 16. 2014 Industry Sector Analysis by Region (UK) Amount Invested Region Oil & gas, basic materials & industrials Consumer goods Health care & consumer services Telecoms, utilities & financials Technology Amount Amount Amount Amount Amount Amount ( m) % ( m) % ( m) % ( m) % ( m) % ( m) % London 184 25 20 6 556 41 811 71 285 50 80 27 South East 157 21 77 12 101 8 71 6 146 26 26 9 South East & London 40 47 07 48 657 49 882 78 41 75 106 6 South West 0 4 4 1 27 2 2 2 47 8 102 5 East of England 2-1 - 15 1 2-4 1 24 8 West Midlands 81 11 19 75 6 14 12 10 2 16 6 East Midlands 7 1 162 25 54 4 18 2-6 2 Yorkshire and The Humber 51 7 97 15 207 15 18 2 2-21 7 North West 55 7 41 6 268 20 42 7 16 5 27 2 North East 1-2 - 6-2 - 1 - Scotland 156 21 Wales 7 1 7 1 18 1 14 1 6 1 0 0 Other 22 2 18 2 10 2 1 - Northern Ireland 1 - - - 0 0 15 0 0 Total 71 100 640 100 1,49 100 1,16 100 572 100 292 100 1. indicates a value greater than 0 but less than 0.5 BVCA Private Equity and Venture Capital Report on Investment Activity 2014 11
Table 17. UK Investment by type of PE organisation Type of private equity organisation Amount invested ( m) % of amount invested 2014 201 2012 2014 201 2012 Organisations which manage third-party funds (Independents) 2,70 2,024,289 58 49 57 Organisations which invest own or parent company money (Captives) 506 459 447 11 11 8 Organisations which do both (Semi-captives) 1,484 1,627 2,01 1 40 5 Total 4,720 4,109 5,767 100 100 100 Table 18. Funds Raised by Source Type of source Amount raised ( m) % of amount raised 2014 201 2012 2014 201 2012 Pension Funds UK 05 17 665 1 11 Overseas 2,7 2,805 419 22 25 7 Total 2,677 2,94 1,084 25 26 18 Insurance Companies UK 54 56 509 - - 9 Overseas 464 1,092 154 4 10 Total 518 1,148 66 5 10 11 Corporate Investors UK 84 252 71 1 2 12 Overseas 69 240 7 1 2 - Total 154 492 720 1 4 12 Banks UK 0 0 5 0 0 - Overseas 106 101 2 1 1 1 Total 106 101 7 1 1 1 Family Offices UK 147 94 42 1 1 1 Overseas 79 68 4 7 1 Total 886 462 85 8 4 1 Funds of Funds UK 280 00 84 1 Overseas 1,288 1,157 680 12 10 11 Total 1,568 1,458 764 14 1 1 Government Agencies UK 8 25 424 - - 7 Overseas 14 25 18 1 - - Total 151 50 441 1-7 Academic Institutions UK 77 0 7 1 0 - Overseas 685 65 70 6 1 1 Total 761 65 77 7 1 1 Private Individuals UK 270 18 26 2 2 5 Overseas 444 09 22 4 - Total 714 492 48 7 4 6 Capital Markets UK 1 12 42-1 1 Overseas 0 27 0 0-0 Total 1 150 42-1 1 Sovereign Wealth Funds UK 0 0 1,18 0 0 19 Overseas 1,000 1,890 170 9 17 Total 1,000 1,890 1,08 9 17 22 Others UK 48 1,02 87-9 6 Overseas 2,28 917 17 21 8 - Total 2,286 1,949 404 21 17 7 Total UK 1,27 2,201 4,42 12 20 7 Total Overseas 9,549 8,997 1,61 88 80 27 Grand Total 10,822 11,198 5,97 100 100 100 1. indicates a value greater than 0 but less than 0.5 2. UK includes Bermuda, Cayman Islands, Channel Islands and British Virgin Islands 12 BVCA Private Equity and Venture Capital Report on Investment Activity 2014
Table 19. Funds Raised by Country Country Amount raised ( m) % of amount raised 2014 201 2012 2014 201 2012 UK 1,27 2,201 4,42 12 20 7 France 116 80 14 1 1 2 Germany 266 522 85 2 5 1 Ireland 0 44 16 0 - - Netherlands 616 427 50 6 4 1 Sweden 110 171 52 1 2 1 Switzerland 510 445 152 5 4 Rest of Europe 510 422 227 5 4 4 United States 5,420 4,14 54 50 8 9 Canada 49 541 192 5 Australia 97 265 0 1 2 0 China 61 467 1 1 4 - Japan 125 114 0 1 1 0 Middle East 698 86 184 6 Africa 59 48 4 1 - - Other 612 764 0 6 7 0 Total 10,822 11,211 5,97 100 100 100 1. UK includes Bermuda, Cayman Islands, Channel Islands and British Virgin Islands 2. indicates a value greater than 0 but less than 0.5 Table 20. Funds Raised by Investment Focus Focus Amount raised ( m) % of amount raised 2014 201 2012 2014 201 2012 Large MBO 4,181 6,555,64 9 58 61 Middle MBO 5,204 4,25 1,170 48 8 20 Small MBO 1,149 162 722 11 1 12 VC 288 259 428 2 7 Generalist 0 0 19 0 0 - Total 10,822 11,211 5,97 100 100 100 1. indicates a value greater than 0 but less than 0.5 Table 21. 2014 Divestments Type of divestment Amount divested Number of divestments Number of companies m % Number % Number % Divestment on Flotation (IPO) 2,668 12 6 4 29 5 Repayment of Preference Shares/Loans,68 17 4 144 24 Sale of quoted equity post flotation 4,20 19 82 8 51 9 Sale to another Private Equity firm 2,702 1 77 8 61 10 Sale to Financial Institution 691 67 7 2 5 Sale to Management (Buy-back) 1,420 7 71 7 45 8 Trade Sale 4,415 20 197 20 145 24 Write Offs 72 55 6 9 7 Others 1,077 5 80 8 46 8 Total 21,592 100 999 100 592 100 BVCA Private Equity and Venture Capital Report on Investment Activity 2014 1
Appendix: Methodology and Definitions Appendix Methodology and Definitions In early 2015, BVCA s Benchmark data collection system collected data on investments made by BVCA private equity and venture capital members during the calendar year 2014. A 96% response rate was achieved, which included virtually every major private equity and venture capital firm in the UK. In order to ensure only qualifying investments were included in the analysis certain criteria were applied to the data received and are outlined below: Overseas Investments The BVCA survey includes all investments made or advised by the BVCA full member firm, regardless of whether the investing fund is UK or overseas-based. This means that the figures relate to investments undertaken by BVCA full member firms based in the UK, and also to those undertaken through an overseas office where the UK office was the lead adviser, regardless of where the investment fund was domiciled. As a result, more cross-border investments have been included in the BVCA data which therefore reflect more accurately the activity of BVCA full members, particularly those that invest through pan-european or global funds. Industry Sectors The Industry Classification Benchmark (ICB) is used throughout this report to classify individual company investments by industry and subsector. Financing Stages The number of companies in some financing stage categories and their subtotals add up to more than the total number of companies invested in. This is due to some companies receiving more than one investment within the year at different financing stages. For example, if a company receives a round of start-up finance and then further rounds of expansion finance later in the same year, that company will be counted once in each of the start-up and expansion categories (therefore appearing to be counted twice), but only counted as one investment in the overall total. This only affects number of companies not amounts invested. Technology Classification There is as yet no universally accepted definition of a technology company. For the purposes of this report, investments defined by BVCA member firms as high-tech are included in tables 8 and 9. Cleantech Classification Cleantech represents a diverse range of products, services and processes which are intended to provide superior performance at lower costs, while greatly reducing or eliminating negative ecological impact, at the same time as improving the productive and responsible use of natural resources. For the purposes of this report, investments defined by BVCA member firms as cleantech are included in table 10. Foreign Currency Conversion Where BVCA collected investment information in foreign currencies, the amounts were converted into Sterling using the annual average exchange rates for 2012, calculated from figures supplied by the Bank of England. Private Equity Definitions The term private equity is generally used in Europe to cover the industry as a whole, including both buyouts and venture capital. Venture capital is a subcategory covering the start-up to expansion stages of investment. Private equity describes equity investments in unquoted companies, often accompanied by the provision of loans and other capital bearing an equity-type risk. 14 BVCA Private Equity and Venture Capital Report on Investment Activity 2014
Appendix: Methodology and Definitions Types of Private Equity Firms The definitions below need to be interpreted with caution. In recent years, several larger private equity firms that historically invested funds from a single in-house source have begun to raise and manage external sources. Independents: These can either be firms, funds or investment trusts, either publicly listed or private, which raise their capital from external sources. Captives: These organisations invest their own money, and/or manage or invest funds on behalf of a parent organisation. In the latter case, the private equity firm would be a wholly owned subsidiary or division of the parent, usually a financial institution. Semi-captives: These organisations invest funds on behalf of a parent company, or their own funds, in addition to investing funds raised within the last five years from external sources. Stages of Investment Seed: Financing that allows a business concept to be developed, perhaps involving the production of a business plan, prototypes and additional research, prior to bringing a product to market and commencing large-scale manufacturing. Start-up: Financing provided to companies for use in product development and initial marketing. Companies may be in the process of being setup or may have been in business for a short time, but have not yet sold their product commercially. Other early stage: Financing provided to companies that have completed the product development stage and require further funds to initiate commercial manufacturing and sales. They may not yet be generating profits. Late stage venture: Financing provided to companies that have reached a fairly stable growth rate; that is, not growing as fast as the rates attained in the early stage. These companies may or may not be profitable, but are more likely to be than in previous stages of development. Expansion: Sometimes known as development or growth capital, provided for the growth and expansion of an operating company which is trading profitably. Capital may be used to finance increased production capacity, market or product development, and/ or to provide additional working capital. Bridge financing: Financing made available to a company in the period of transition from being privately owned to being publicly quoted. Replacement capital: Minority stake purchase from another private equity investment organisation or from another shareholder or shareholders. Refinancing bank debt: Funds provided to enable a company to repay existing bank debt. PIPE: Private investment in public companies (minority stake only). Rescue/Turnaround: Financing made available to existing businesses which have experienced trading difficulties, with a view to re-establishing prosperity. Management buyout (MBO): Funds provided to enable current operating management and investors to acquire an existing product line or business. Institutional buyouts (IBOs), leveraged buyouts (LBOs) and other types of similar financing are included under MBOs for the purposes of this report. Management buy-in (MBI): Funds provided to enable an external manager or group of managers to buy into a company. Public to private: Purchase of quoted shares with the purpose of de-listing the company. Secondary buyout: Purchase of a company from another private equity investment organisation. BVCA Private Equity and Venture Capital Report on Investment Activity 2014 15
Appendix: Methodology and Definitions Fundraising The following apply to the fundraising section: 1. Funds managed by UK private equity firms for both UK and overseas investment are included. 2. Funds managed by the overseas headquarters of international private equity firms (which have UK-based offices that are BVCA members) are excluded. UK Regions The standard Government Office Region (GORs) classification is used throughout this report to classify the location of individual company investments. The composition of GORs is listed below. North East Cleveland Durham Northumberland Tyne and Wear East Midlands Derbyshire Leicestershire Lincolnshire Northamptonshire Nottinghamshire South East Berkshire Buckinghamshire East Sussex Hampshire Isle of Wight Kent Oxfordshire Surrey West Sussex North West Cumbria Cheshire Greater Manchester Lancashire Merseyside West Midlands Hereford and Worcester Shropshire Staffordshire Warwickshire West Midlands London Yorkshire and The Humber Humberside North Yorkshire South Yorkshire West Yorkshire East of England Cambridgeshire Norfolk Suffolk Bedfordshire Essex Hertfordshire South West Avon Cornwall Devon Dorset Gloucestershire Somerset Wiltshire 16 BVCA Private Equity and Venture Capital Report on Investment Activity 2014
Appendix: Methodology and Definitions Industry classifications Economic Group Sectors Subsectors Oil and Gas Oil and gas, Oil and gas producers Oil equipment, services and distribution Alternative energy Exploration and production, integrated oil and gas. Oil equipment, and services pipelines. Renewable energy equipment, alternative fuels. Basic Materials Chemicals Forestry and paper Industrial metals and mining Mining Commodity and speciality chemicals. Forestry, paper. Aluminium, non-ferrous metals, iron and steel. Coal, diamonds and gemstones, general mining, gold mining, platinum and precious metals. Industrials Construction and materials Aerospace and defence General industrials Electronic and electrical equipment Industrial engineering Industrial transportation Support services Economic Group Sectors Subsectors Consumer goods Basic materials Healthcare Consumer Services Automobiles and parts Beverages Food producers Household goods Leisure goods Personal goods Tobacco Chemicals Forestry and paper Industrial metals Mining Healthcare equipment and services Pharmaceuticals and biotechnology Food and drug retailers General retailers Media Travel and leisure Economic Group Sectors Subsectors Telecommunications Utilities Financials Technology Fixed-line telecommunications Mobile telecommunications Electricity Gas, water and multi-utilities Banks Non-life insurance Life insurance Real estate General financial Equity investment instruments Non-equity investment instruments Software and computer services Technology hardware and equipment Building materials and fixtures, heavy construction. Aerospace, defence. Containers and packaging, diversified industrials. Electrical components and equipment, electronic equipment. Commercial vehicles and trucks, industrial machinery. Delivery services, marine transportation, railroads, transportation services, trucking. Business support services, business training and employment agencies, financial administration, industrial suppliers, waste and disposal services. Automobiles, auto parts, tyres. Brewers, distillers and vintners, soft drinks. Farming and fishing, food products. Durable household products, non-durable household products, furnishings, home construction. Consumer electronics, recreational products, toys. Clothing and accessories, footwear, personal products. Tobacco. Commodity and specialty chemicals. Forestry, paper. Aluminium, non-ferrous metals, steel. Coal, diamonds and gemstones, general mining, gold mining, platinum and precious metals. Health care providers, medical equipment, medical supplies. Biotechnology, pharmaceuticals. Drug retailers, food retailers and wholesalers. Apparel retailers, broadline retailers, home improvement retailers, specialised consumer services, specialty retailers. Broadcasting and entertainment, media agencies, publishing. Airlines, gambling, hotels, recreational services, restaurants and bars, travel and tourism. Fixed-line telecommunications. Mobile telecommunications. Electricity. Gas distribution, multiutilities, water. Banks. Full line insurance, insurance brokers, property and casualty insurance, reinsurance. Life insurance. Real estate holding and development, real estate investment trusts. Asset managers, consumer finance, specialty finance, investment services, mortgage finance. Equity investment instruments. Non-equity investment instruments. Computer services, internet, software. Computer hardware, electronic office equipment, semiconductors, telecommunications equipment. Disclaimer The data provided has been collected from different sources. BVCA has taken steps to ensure the reliability of the information presented. However, BVCA cannot guarantee the ultimate accuracy of the data and therefore BVCA does not accept responsibility for any decision made or action taken based on the information provided. BVCA Private Equity and Venture Capital Report on Investment Activity 2014 17
For further information contact the BVCA British Private Equity & Venture Capital Association 5th Floor East, Chancery House, 5-64 Chancery Lane, London WC2A 1QS T +44 (0)20 7492 0400 bvca@bvca.co.uk www.bvca.co.uk