1 Rory Earley Director Investment and SME Finance Small Business Service

2 Global Private Equity Trends in Investment and Fund Raising PricewaterhouseCoopers and 3i

3 The Global View Key Points At least $155 billion of private equity and venture capital invested globally in 2003 – increase of 43% on 2002 level of $109 billion Equivalent to 0.48% of worlds GDP (based on 2002 GDP from World Bank Development Indicators - $32,300 billion) Almost $82 billion of funds were raised globally in 2003 – down 12% from $93 billion in 2002

4 Key Points Technology investments totalled at least $42 billion in 2003 – 27% of total investment – down 11% on 2002 Around $19 billion was invested in expansion stages in 2003 – down 27% on 2002 levels Approx $118 billion invested globally in buyouts in 2003 – increase of 83% on 2002

5 Investment and Fund Raising Trends

6 Investment – compound average growth rate 10.81% Funds Raised – compound average growth rate – 9.20% Source – The PricewaterhouseCoopers/Venture Economics/National Venture Capital Association Money Tree Survey/Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review/EVCA Yearbook/ AVCJ Guide to Venture Capital in Asia/ Venture Equity Latin America/ SAVCA Private Equity Survey/ IVC Online

7 High Technology Investment Trends

8 Investments: Compound average growth rate 10.81% High Technology: Compound average growth rate 5.93% Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Association Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review/ EVCA Yearbook/ AVCJ Guide to Venture Capital in Asia

9 Expansion Investment Trends

10 Investments: Compound average growth rate 10.81% Expansion: compound average growth rate –1.54% Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Association Money Tree Survey/ Private Equity Analyst/ CVCA Annual Statistical Review/ EVCA Yearbook/ AVCJ Guide to Venture Capital in Asia

11 Buyout Investment Trends

12 Investments: Compound average growth rate 10.81% Buyouts: Compound average growth rate 16.00% Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Associate Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review/ EVCA Yearbook/ AVCJ Guide to Venture Capital in Asia

13 North America Key Points $108.2 billion of private equity and venture capital was invested in North America in 2003 – an increase of 67% on 2002 which had seen a decrease of 3% on 2001 This is equivalent to 0.97% of North American GDP (based on 2002 GDP for USA and Canada from World Bank Development Indicators - £11,116bn) £45.3 billion funds were raised in North America in 2003 – down by 21% on 2002 levels

14 Key Points At least $27.5 billion was invested in technology investments in North America in 2003 – up 6% on 2002 levels which were down 33% on 2001 levels Approx $10.4 billion was invested in expansion stages in 2003 – a decrease of 24% on 2002 which saw a decrease of 41% on 2001 At least $89.0 billion was invested in buyouts in 2003 – up 114% from $41.6 billion in 2002 which was up 78% in 2001

15 Investment and Fund Raising Trends

16 Investments: Compound average growth rate 11.25% High Technology: Compound average growth rate 3.96% Funds Raised: Compound average growth rate – 13.94% Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Associate Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review

17 Investment Trends by Stage

18 Investments: Compound average growth rate 11.25% Expansion: Compound average growth rate –1.80% Buyout: Compound average growth rate 16.75% Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Associate Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review

19 % Stage of Investments

20 Data for North America has been created by adding Money Tree/Buyout Newsletter and CVCA data Source: The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Associate Money Tree Survey/ Buyout Newsletter/ Private Equity Analyst/ CVCA Annual Statistical Review

21 Europe Key Points An estimated $27.1 billion of private equity and venture capital was invested in Europe in 2003 – a 16% decrease on 2002 This is equivalent to 0.28% of European GDP (based on 2002 GDP for Europe as calculated using the World Bank Development Indicators - $9,568 billion) Approx $32.5 billion funs were raised in Europe in 2003 – up 1% on 2002 levels

22 Key Points Approx $5.7 billion was invested in expansion stages in 2003 – decrease of 29% on 2002 which saw a decrease of 9% in 2001 The buy-out market totalled £18.1 billion in 2003 – down 9% on 2002 which had seen an increase of 65% on 2001 Technology investments totalled $7billion in 2003 – double 2002 levels ?

23 Investment and Fund Raising Trends

24 Investments: Compound average growth rate 9.82% Funds Raised: Compound average growth rate 6.37% (Source: EVCA Yearbook/ EVCA Preliminary Data

25 Investment Trends by Stage

26 Investments: Compound average growth rate 9.82% Expansion: Compound average growth rate 2.27% Buy out: Compound average growth rate 15.87% Source: EVCA Yearbook/EVCA Preliminary Data

27 % stage of Investments Source: EVCA Preliminary Data

28 Asia Pacific Key Points A predicted $17.5 billion of private equity and venture capital was invested in the Asia Pacific region in 2003 – a 91% increase on 2002 Equivalent to 0.23% of Asian GDP (based on 2002 GDP calculated using the World Bank Development Database - $7,479 billion) Only $3.3 billion of funds raised are predicted for 2003 – up 11% on 2002 levels

29 Key Points Technology investments in Asia Pacific totalled an estimated $7.3 billion in 2003 – up 100% on 2002 levels Approx $2.6 billion invested in expansion stages in 2003 – decrease of 28% on 2002 The buy-out market totalled a record $8.9 billion in 2003 – up 454% on 2002

30 Investment and Fund Raising Trends

31 Investments: Compound average growth rate 28.91% High Technology: compound average growth rate 33.17% Funds Raised: Compound average growth rate –14.87% Source: AVCJ Guide to Venture Capital in Asia/ AVCJ estimates

32 Investment Trends by Stage

33 Investments: Compound average growth rate 28.91% Expansion: Compound average growth rate 1.73% Buy out: Compound average growth rate 86.72% Source: AVCJ Guide to Venture Capital in Asia/ AVCJ estimates

34 % Stage of Investments Source: AVCJ Guide to Venture Capital in Asia/ AVCJ estimates

35 Data Sources North America The PricewaterhouseCoopers/ Venture Economics/ National Venture Capital Association MoneyTree Survey Buyouts, a Venture Economics publication The Private Equity Analyst, Asset Alternatives inc, Wellesley Massachusetts

36 Canadian Venture Capital Association (CVCA) Annual Statistical Review, Macdonald and associates Ltd Europe European Private Equity and Venture Capital Association (EVC) Survey, PricewaterhouseCoopers and Thomson Venture Economics Asia Pacific Asian Venture Capital Journal (AVCJ) Guide to Venture Capital in Asia and estimates from the AVCJ for

37 Central/South America Venture Equity Latin America 2003 Year-End Report Middle East and Africa The Kesselman and Kesselman PricewaterhouseCoopers MoneyTree Survey, Israel Israel Venture Capital Research Centre Annual Survey KMPG and South African Venture Capital Association (AVCA) Private Equity Survey

38 Summary Maturing but still very dynamic industry Cyclicality will continue to be a problem for funders of private equity Technology investing has unique attributes Future looking bright but challenging ?