Private equity market healthier

New Zealand's private equity market is looking healthier as it emerges from the recession and the financial crisis, a report released yesterday shows.

The report, released by Ernst & Young and the New Zealand Venture Capital Association (NZVCA), has shown an increase in activity from 2008 to 2009 in terms of number and value deals.

The overall rise saw $645.1 million of activity in 2009, compared with $224.6 million in 2008.

The report showed medium-sized private equity deals were resilient and angel investor-led venture capital activity increased significantly.

NZVCA chairwoman Franceska Banga said the report focused specifically on investment into non-listed New Zealand companies and that it was primarily through fund managers.

The results from the report show a significant rise in optimism in the sector, 93 per cent of respondents are positive or neutral about the next six months, up 46 per cent on 2008.

"This is good news for New Zealand investors. It's been a bit of wait and see since the global financial crisis but there is a return to confidence now. What we are seeing is confidence returning to capital investment and companies being able to raise capital," Banga said.

In 2008, the market was very quiet but there is a return to healthier market activity, she said.

"Over the past 12-18 months, $500 million of capital has been raised for future investment in New Zealand. Investors are feeling more comfortable about the potential productivity of New Zealand companies. This kind of growth potential will make a significant contribution to our economy.

"With so many New Zealand companies in private ownership, private equity is a crucial source of capital. There are attractive investment opportunities as we emerge from the recession. The recent Capital Markets Development Taskforce report noted more private equity is needed to support growth and expansion."

In 2009, 108 deals occurred, similar to 2006 and up from 2007 and 2008 levels. But the average deal size decreased from $2.2 million in 2008 to $1.6 million in 2009, reflecting the influence of the angel investment activity.

The report is based on 19 responses from venture capital and private equity participants in the New Zealand market, including firms here and in Australia.