Private Equity Investors - Europeans Particularly Concentrate on Established Markets With Strong Competition

The extraordinary growth of international private equity transactions in recent years already earned private equity investors a reputation as the secret multinational companies of the new millennium. European private equity investors actively participate in this internationalization wave.

Surprisingly, they do not invest in those countries where they reckon only little competition, but prefer countries with well-expanded private equity markets and strong competitors. Thus, particularly Great Britain, apart from the United States, is a coveted target country for internationally operating European private equity investors. These investors seek for strong local partners on the established private equity markets with whom they conjointly invest. By implementing this strategy investors intend to avoid competition in the target countries on the one hand, and, on the other hand, try to profit from the specific know-how of their partners. This is the result of a recent study published by the Centre for European Economic Research (ZEW) in Mannheim, the Christian-Albrechts-University Kiel and Bureau van Dijk Electronic Publishing based on the ZEPHYR database.

Likewise other international capital flows, international private equity investments are determined by economic growth as well as the respective geographical and cultural vicinity of two countries. Countries with strong economic growth attract more private equity investments than countries with a stagnating economy. Furthermore, minor areal distances, a common language and the same tradition in law lead to higher private equity investments between two countries. In addition to that, the extent of bilateral private equity investments depends on the corporate climate, the liquidity of the equity markets and the availability of human resources in the home country of the investors and in the target country.

Contact

Prof. Dr. Tereza Tykvova (ZEW), Phone: +49/621/1235-147, E-mail: tykvova@zew.de 

Dr. Andrea Schertler (Christian-Albrechts-University Kiel), Phone: +49/431/880-4748