Volume of financial investment halved by economic crisis

In the year 2008 there was significantly less financial investment in Germany as compared to 2007. The investment volume fell by 50% from 30 billion to 15 billion Euros and the number of financial transactions decreased by 8% to 165. This is the finding of a study by the Ernst & Young advisory firm. The transaction volume fell in particular during the second half of last year. Thus, as compared to the first half of 2008 the transaction volume plummeted by 64% from 11 to 4 billion Euros. In particular major transactions worth billions of Euros are virtually not taking place any more. Private equity businesses are currently carrying out in particular small and medium-sized transactions for which they do not need bank loans.

In the year 2008 there were just six transactions with a volume of more than 1 billion Euros in Germany, whereas in the years 2007 and 2006 the respective numbers had been 10 and 13 respectively.

Since the bankruptcy of the Lehman Brothers investment bank in September 2008 the German private equity market has almost come to complete inactivity. Thus, in the fourth quarter there were just 15 transactions with a total investment volume of 70 million Euros.

The experts from Ernst & Young are currently registering a change in attitude and strategy of private equity investors. The old common strategy of investing into a company in order to sell it a few years later is not seen to be acceptable any more. Making profit using financial leverages only (deleveraging) does not work any more. Nowadays investors have to take responsibility in the operative business of a company, identify potentials for saving and improvement and ensure the survival of this company.

The complete study as well as a presentation containing the most importing findings are available for free-of-charge download. GERMAN