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Private equity rebounds but VC thin on the ground

Local private equity investment bounced back in 2011, to the tune of 88 percent, but venture and early stage funding fell by nearly two-thirds.

That's according to the latest Ernst & Young NZ Private Equity and Venture Capital Monitor, whichrecorded an increase in total investment value to $554 million, up 88 percent on 2010, and the best level since 2007 before the GFC struck.

NZVCA chairman Kerry McIntosh said 2011 was an active year for private equity in New Zealand with levels of activity similar to pre-GFC levels.

But the fact venture and early stage investment declined from $94.4 million in 2010 to only $36.6 million in 2011 was a concern.

"An NZVCA report last year alerted government to the currently unsustainable state of the New Zealand venture market.  Companies seeking to raise capital in the $2-10m range, to fuel growth plans, will find very limited capacity in the New Zealand market, until new funds are established."

Buy-out private equity activity grew from $70 million in 2010 to $294.5 million in 2011 and mid-market private equity activity rose from $130 million to $223 million.

"The New Zealand market for private equity deals matched previously recorded highs as mid-market and buy-out activity increased while companies sought new capital for growth," says Andrew Taylor, partner at Ernst & Young.

A total of 84 investments were made in 2011, two up on the 82 in 2010, with average deal value increasing from $3.6 million to $6.6 million.

Mid-market investment value in 2011 was the highest on record, and mid-market divestment value also reached its highest level since 2003.

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