S&P Global Market Intelligence: EMEA Lags Behind U.S. and Asia-Pacific for IT Private Equity and Venture Capital Investments

New report finds that the EMEA region is losing ground to the US and Asia-Pacific

Jul 04, 2016 / 05:00 AM

The EMEA region has lost ground on its U.S. and Asia-Pacific counterparts in sponsor-backed tech investments over the last five years, according to a new report released today from S&P Global Market Intelligence, a division of S&P Global (NYSE: SPGI) offering global multi-asset class data, market research and portfolio analytics to global investors.

Despite the growth of EMEA tech hubs like London, Berlin and Tel Aviv over the last five years, interest from private equity and venture capital investors has failed to follow suit.  Capital deployed by these investors in EMEA companies, at €61.8 billion, is less than a third of investment in its U.S. counterparts, at €198.7 billion, and ten percent less than the €68.2 billion deployed into those in the Asia-Pacific region.

The majority of deals into EMEA have been start-up and growth investments, with 7,711 private placements made since 2011, compared to 790 M&A transactions over the same period.  However, in monetary terms, M&A still represents the lion’s share of the investment value, accounting for €34.2 billion, or 55%, of the total aggregate investment in EMEA.

One factor that S&P Global Market Intelligence attributes for EMEA’s slow growth is the lack of depth across its markets. The data for EMEA suggests that 89% (€55 billion) of the aggregate investment value through M&A and private placements was concentrated by only 9 countries, each receiving at least €1billion in investment over the 5-year study period. 

The U.K., which is the biggest recipient, captured almost 50% more investment –in value terms-- than Germany, the second largest country over the 5 year period (or €15.5 billion and €10.5 billion respectively).  The contrast is even more pronounced in the cases of France and the Netherlands, who received only around half the investment value for the United Kingdom at €8 billion and €7.2 billion respectively.

While EMEA has lagged behind US and APAC, the region is certainly not alone in feeling the pressure of lack of capital deployment in the IT sector, particularly of late. Private equity investments in IT have registered poor year-to-date performance, with quarter over quarter investment values down by double digit percentages across EMEA, US and APAC.

Silvina Aldeco-Martinez, Managing Director at S&P Global Market Intelligence, commented: “The data shows very clearly that the U.S. is still the uncontested global leader in tech, but EMEA falling behind APAC is clear demonstration that despite the growth of global IT hubs across Europe, the sector has not yet captured the favour of global private equity and venture capital investors over the last five years.”

“Sponsor-backed IT IPOs launched in the last 12 months have performed poorly in both EMEA and in the US, registering drops in average share price for the IPOs across the exchanges in each region. In contrast, sponsor-backed Asian IT IPOs are showing significant uplifts in share prices, which may provide new perspectives about what constitutes an effective pricing for US and EMEA markets.”

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S&P Global Market Intelligence
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