August 30, 2022
In Europe, venture capital deals are booming as an abundance of cash, public market turmoil, and falling valuations encourage companies to remain private for longer periods of time.
According to data from analytics firm PitchBook, European venture capital transactions raised nearly $57 billion in the first half of the year, a 4% decrease from the same period last year.
The war in Ukraine and a worsening energy crisis, as well as the threat of recession as central banks raise rates to combat runaway inflation, have dampened risk appetite, effectively shutting down initial public offerings around the world. Private investors flush with cash have been eager to put their money to work, allowing companies to postpone listing for longer than ever before.
“There’s still a lot of money to be invested, although private market investors are also being more careful, cautious and responsible,” said Jason Hutchings, head of private financing markets for Europe, the Middle East and Africa at UBS Group AG. “They are being more thorough in their due diligence, but we are still seeing more companies turn to private capital markets than pursue IPOs.”
This is bad news for Europe’s struggling IPO market, which raised only $6.4 billion in the first six months of 2022, according to Bloomberg data. According to the data, that’s an 88% drop from the same time last year.
To be sure, companies that grew up in an era of easy credit and financing are discovering that the path to private funding is fraught with its own challenges. Stock market volatility has weighed on valuations recently, forcing some startups to swallow significant markdowns.
Source: Luxembourg Times
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