European News Briefs, May 2013

LONDON 

VC Drops in Q1

The volume and value of venture capital deals continued their tumble into Q1 2013, when less was invested worldwide than in any quarter since the third quarter of 2010.

The slump was driven mainly by a 10% quarter-on-quarter fall in the number of U.S. deals, though volume was also down 5% in Europe, research company Preqin reported.

After hitting a low of roughly $6.5 billion in early 2009, global aggregate deal value had climbed to more than $14 billion by the second quarter of 2011, but has been on the wane since then, hitting $8.5 billion in the most recent three-month period.

The Internet sector accounted for about $2.1 billion of that, while software and health care investments comprised 21% and 19%, respectively, of global deal value in the most recent quarterly figures. 

BRUSSELS

Ranking European Invention

Innovation in Europe has climbed steadily since the start of the financial crisis in 2008, despite a 3.1% annual decline in venture capital investment, according to the European Union’s latest innovation scoreboard.

Sweden retains its position atop the rankings, closely followed by Germany and Denmark. The United Kingdom ranked eighth. Bulgaria, on the bottom of the list, is more than 50% less innovative than the EU average.

Internationally, the study shows that Europe’s top performers still trail South Korea, the United States and Japan.

Each country’s score was based on dozens of indicators, including patent applications, VC investment, R&D outlay, education and the amount of employment in knowledge-intensive activities.

LONDON

BoE Highlights PE’s Systemic Risk

The Bank of England has sounded a warning that private equity’s raft of leveraged buyouts in the mid-2000s could pose “a risk to the stability of the financial system in the United Kingdom.”

Much of the debt loaded onto companies in pre-crisis buyouts is approaching maturity, and the central bank fears refinancing difficulties and the possibility of widespread corporate default in the present era of tighter credit.

The British Private Equity & Venture Capital Association has countered that private-equity-owned companies are less likely than others to become insolvent, and that they are better at securing financing “for the long-term interests of their investors.”

The Bank of England has stated that an analysis of the health of debt-acquired businesses will only emerge once private equity firms pick up the pace of their exits.

It also acknowledged that private equity could play a role in the U.K.’s economic recovery through turnaround and restructuring investment.

MILAN

Berlusconi Offers Ads for Equity

Italy’s under-developed venture capital market has received a boost from Silvio Berlsconi’s Mediaset broadcasting group, which has launched a new VC arm to focus on digital technology.

Targeting Italy and Spain, Ad4ventures will invest mainly in growth-equity stage, but will also do early-stage deals where a strong case for value creation can be made.

However, instead of direct equity funding, Ad4ventures will provide promotions and advertising across the Mediaset network, which encompasses about one-third of Italy’s free-to-air TV market, as well as Spanish channels.

German TV channel Prosieben also operates a media-for-equity model through its Sevenventures arm.

ISTANBUL

Advent Flight and Mediterra Delight

Money continues to flood into Turkey, Europe’s hottest emerging private equity market, but not everyone is finding it easy to spend.

Boston-based Advent International has closed its Istanbul office after three years in which no deal was completed. The firm is also thought to be shuttering its Milan, Italy operation.

In Turkey, Advent actually had more success without an office, making three co-investments with local firm Turkven prior to 2010.

Mediterra, another Istanbul-based firm, closed its €164 million ($213 million) debut buyout fund in the same week that Advent shut its doors. Turkish industrialists and international institutional investors were behind the fund, which will invest from €25 million to €250 million ($32.5 million to $325 million).

Mediterra could still compete or co-cooperate on Turkish deals with Advent, which will continue to cover the Turkish market as part of its European operations.

BERLIN

Babbel Raises $10M

Reed Elsevier Ventures and Nokia Growth Partners have taken part in a $10 million Series B round for language-learning website Babbel.com.

Reed Elsevier, the VC arm of the London-based publishing group, led the round, which was also supported by German growth finance bank IBB Beteiligungsgesellschaft and Karlsruhe, Germany-based Kizoo Technology Ventures.

Lesson Nine, which operates Babbel, had already raised $2.2 million in funding and now plans further international growth and the widening of its product line. Prior to the new funding, Babbel acquired San Francisco-based Playsay, a Spanish-language learning app, to give it a foothold in the U.S. market.

PARIS

AXA Private Equity Prepares for Independence

Following the lead of several of Europe’s largest banks, Paris-based insurer AXA intends to spin off its private equity unit.

AXA Private Equity’s management and staff will acquire about 40% of the firm in a deal that values it at €510 million ($663 million), while institutions and French family offices will take one-third of the business.

LONDON

Binned Crosby Jumps from Bridgepoint

Former HBOS bank CEO Sir James Crosby has quit the European advisory board of London-based buyout house Bridgepoint shortly after a public report questioned his ability to work in the financial sector.

Investigating the 2008 collapse of HBOS, the Parliamentary Commission on Banking Standards concluded that “primary responsibility… should rest with Sir James Crosby, architect of the strategy that set the course for disaster.”

The commission was also critical about Andy Hornby, Crosby’s successor as CEO, and Lord Stevenson, chairman of HBOS from 2001 to 2008.

Crosby served as CEO of HBOS until 2005 and joined Bridgepoint in 2006, the year he received a knighthood for “services to the financial industry” and served as a non-executive director of the Financial Services Authority.

Compiled by Alex Derber