Competitive Advantage
through Private Equity and
Venture Capital Financing
Dr. Jürgen Marchart
AVCO – Austrian Private Equity
and Venture Capital Organisation
28th March 2014
Agenda
1. What is AVCO?
2. What is Private Equity/Venture Capital?
3. Austrian Private Equity Industry
4. Competitive Advantage
5. Framework Conditions
What is AVCO?
AVCO – Austrian Private Equity und Venture
Capital Organisation is …
• …the umbrella organisation of the
Austrian Venture Capital industry
• Represents 80% of the Austrian Venture
Capital market
• AVCO’s mission is:
Mission of AVCO
Mission
•
Information and know-how services, to raise awareness for
benefits of VC
•
Networking, fostering the co-operation of all VC players
•
Lobbying, to improve framework conditions
•
Co-operation with EVCA, nVCAs, EC,…
Organisation
•
AVCO is a non-profit association
•
Financed by membership fee, sponsoring, projects
AVCO Services I
•
Fund location and legal framework conditions
o Representation of PE/VC industry in nationalen and European legal framework discussions
o Working groups, know-how generation and information of AVCO Members
o Interface to other national umbrella organisations and EVCA
•
Deals/Transactions
o Matching platforms
o Co-operation with potential targets (portfolio companies, ...)
•
Investors
o Co-operation with potential investors
o Information generation und dissemination about the Austrian PE/VC industry
•
Co-Investments
o Creation of matching platforms
o Investment cases, success stories, …
AVCO Services II
•
Marketing and visability of the know-how and the services of AVCO Members
o visability for know-how and services of AVCO Members to members of the PE/VC Community
o Generation of projects/business
•
Education
o PE/VC trainings and seminars
o Know-how transfer to young employees of AVCO Members
o Development of an education certificate
•
Information
o Newsletter
o News & changes at members
AVCO Services III
•
PR (image of the branche)
o Public relation
o Image building for activities of the PE/VC industry
o Active communication of topics
o Communication of positive effects of PE/VC for Austria
o Awareness building
•
Networks
o Network platforms
o Matching platforms
o Active community, matching of the players
•
Lobbying
o Competent and independent information und know-how provider
o Active discussion with representatives of the government
o Active creation and further development of PE/VC in Austria
AVCO Members – PE/VC
AVCO Members – Service Providers
Agenda
1. What is AVCO?
2. What is Private Equity/Venture Capital?
3. Austrian Private Equity Industry
4. Competitive Advantage
5. Framework Conditions
Financing Instruments
equity
silent participations
shareholder loan
subordinated loan
unsecured loans
credit & loan
debt
mezzanine
financing-risk
success participation
property interests
governance
intensity
Financing Mix – Over Time
Bösenkapital
Stock Equity
Fremdkapital
Debt Equity
Cash-Flow
Cash Flow
Private
PrivateEquity
Equity
Funding/ FFF /
Privatvermögen
Föderungen
Seed
Start-up
First-Stage
Second-Stage
Third-stage
IPO
What is Private Equity?
Private Equity provides equity capital to enterprises not quoted on a stock market.
Private Equity can be used to
•
develop new products and technologies
•
to expand working capital
•
to make acquisitions or to strengthen a company’s balance sheet.
•
to resolve ownership and management issues - a succession in family-owned
companies
•
to buy out or buy in of a business by experienced managers
What is Venture Capital?
Venture capital is, strictly speaking, a subset of private equity and refers to equity
investments made for
•
the launch
•
early development or
•
expansion of a business.
(Definition of EVCA – European Private Equity and Venture Capital Association)
One Day with PE/VC?
“Every day, each of you benefits from Private Equity. Your morning
starts with a Latte at Starbucks, you carry your internet research at
work via Google or Yahoo!, you talk to family and clients around the
globe over Skype and eat a quick lunch snack at Nordsee or Burger
King. You order books and CDs from Amazon.com and your kids
liaise with their friends over MySpace.com and U-Tube on their
Compaq computer powered by Intel. You shop for Tommy Hilfinger,
Jimmy Choo, Tumi bags and suitcases, Bally, Tag Heuer etc. in
the evening. Your doctor recommends you products from Actelion and
Genentech or Amgen and you work out at Fitness First or Holmes
Place and you finish your day off buying tickets over Ebay, drinking a
beer at Punch and watching TV on Cablecom or Sky.”
(Javier Echarri, former EVCA Secretary-General)
PE & VC – More than Money
Captial Call Concept
Fundraising
Investment
Profit
Fundmanagement
Investor
SME
Fund
Institutional investors
like Pension funds,
Insurances, Banks
Capital
PE/VC as Asset class
Growth support ,
Innovation …
Investment plus Information, Coaching,
Management Know-how
PE/VC as Financing-Tool
EXIT
Performance
Agenda
1. What is AVCO?
2. What is Private Equity/Venture Capital?
3. Austrian Private Equity Industry
4. Competitive Advantage
5. Framework Conditions
European PE/VC Industry – Statistics
PEREP_Analytics™:
(Private Equity Research Exchange Platform)
Private Equity non-commercial pan-European private equity database
Industry statistic: PE/VC activities of PE/VC funds located in Austria
(Fundraising / Investments / Exits at national and international SME).
Market statistic: PE/VC activities at SME located in Austria
(Investments / Exits of national and international funds).
Private Equity & Venture Capital in Austria
Incl. funds located in Austria,
investing in Austria and abroad
Austrian
Funds
2012
Austrian
Companies
Fundraising
173 Mio.
-31%
Investments
115 Mio.
-7%
261 Mio.
-19%
83 Mio.
-76%
182 Mio.
-37%
Deinvestments
Industry statistic – Austrian Funds: PE/VC activities of PE/VC funds located in Austria
(Fundraising / Investments / Exits at national and international SME).
Market statistic – Austrian Companies: PE/VC activities at SME located in Austria
(Investments / Exits of national and international funds).
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Europe
Investments 2012
GDP share: PE & VC
Funds in Europe
in %
21
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Europe
Investments 2012
GDP share: PE & VC
Austrian Companies
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Europe
Investments 2012
GDP share: VC only
Austrian Funds
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Europa
Investments 2012
GDP share: VC only
Austrian Companies
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Investments 1999 - 2012
Development: PE & VC
Austrian Funds
in Mio. €
in Mio. €
Seed
Start-up
Later stage venture
Growth
Rescue/turnarournd
Replacment capital
Buyout
2011
7
6
11
21
4
12
63
2012
9
10
6
20
2
1
67
Source: EVCA PEREP_Analytics | AVCO (May 2013)
PE/VC Investments Austira vs. Europe
Investments 1995 - 2012
Development Austria vs. Europe: PE & VC
Austrian Funds
in Mio. €
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Investments 2007 - 2012
Development: PE & VC
Austrian Companies
in Mio. €
around € 500 Mio.
around € 590 Mio.
Communication Deal
around € 180 Mio.
Statistics since
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Investments 1999 - 2012
Development: VC share
Austrian Funds
in Mio. €
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Investments 2011 / 2012
Branches: PE & VC
Austrian Funds
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Investments 2011 / 2012
Branches: PE & VC
Austrian Companies
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Investments 2011 / 2012
Life Cycle phases: PE & VC
Austrian Funds
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Investments 2011 / 2012
Life Cycle phases: PE & VC
Austrian Companies
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Investments 2012
Flow: PE & VC
in Mio. €
Germany
Czech Republic
Switzerland
Hungary
Liechtenstein
17,2 Mio.
11,5 Mio.
2,1 Mio.
1,6 Mio,
0,3 Mio.
abroad
32,9
0,037 %
GDP share
€ 115,4 Mio. Investments
made by Austrian Funds
178,7
82,5
von österr.
Fonds: 115,4
in Austrian Companies:
261,3
0,084 %
GDP share
€ 261,3 Mio. Investments
in Austrian Companies
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Exits 1999 - 2012
Development: PE & VC
Austrian Funds
in Mio. €
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Exits 2007 - 2012
Development: PE & VC
Austrian Companies
in Mio. €
Statistics since
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Exits 2011 / 2012
Exit Route: PE & VC
Austrian Funds
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Exits 2011 / 2012
Exit Route: PE & VC
Austrian Companies
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Fundraising 1999 - 2012
Development / Sources: PE & VC
Austrian Funds
in Mio. €
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Fundraising 2011 / 2012
Sources: PE & VC
Austrian Funds
2011
2012
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Private Equity & Venture Capital in Austria
Fundraising 1999 - 2012
Sources: PE & VC – Share Government Agencies
Austrian Funds
in %
Source: EVCA PEREP_Analytics | AVCO (May 2013)
Agenda
1. What is AVCO?
2. What is Private Equity/Venture Capital?
3. Austrian Private Equity Industry
4. Competitive Advantage
5. Framework Conditions
PE & VC – Intelligent Money
Financing Function:
no alternative finance sources available for
specific project
Selection Function:
limited financial resources are allocated to
projects with highest profit-potential at high
risks
Added Value:
(„smart money“) input of active investors is not
only money, but also management know-how,
networking, consulting, …
PE & VC Investment Phases
Pre-Seed Stage
 Business Angel
Investment
Early Stage
 Seed Financing
Expansion Stage
 Start-up Financing
 Second Stage
Financing
 First Stage
Financing
 Third Stage
Financing
Later Stage
 Management
Buy-out/Buy-in
(MBO, MBI)
 Bridge Financing
(Pre-IPO)
 Turnaround
Financing
Business Angel
Venture Capital
Private Equity
PE & VC – The Process
Analyse &
Valuation
Closing
Stop or Go
Preliminary Offer
Supervisory Board
Contract
LOI
Negotiations
Due Diligence
Business Due Diligence
Legal Due Diligence
Financial Due Diligence
Pre Due Diligence
Post Due Diligence
Effects of PE/VC on Company Development
5.6%
8.5%
2.8%
36.6%
company would not exist (any longer)
without PE/VC
favourable impact on development
due to PE/VC
no impact on development
due to PE/VC
unfavourable development
due to PE/VC
other
46.5%
N = 71
Effects of PE/VC on Company Development
PE/VC financed companies show:
70 % higher turnover
50 % higher employment
Agenda
1. What is AVCO?
2. What is Private Equity/Venture Capital?
3. Austrian Private Equity Industry
4. Competitive Advantage
5. Framework Conditions
Tax & Legal Situation Austria
Fund Structures
Taxation at a fund
level
Taxation at a
company level
Taxation of
employees
Fiscal Incentives
Structure
Permanent
Domestic
Non-Domestic Undue
Establishment Transparency Transparency Restrictions
Mittelstandsfinanzierungsgesellschaft (MiFiG)
No
No
No
Yes
VAT on management fees
Capital Gains Tax
Withholding Tax
Stamp Duties or Transaction Taxes Anti-abuse
Payment
Reclaim
Stamp
Transaction
Rules
Yes
No
25%
25%
Yes
No
Yes
Company Tax Rate
Special Tax Regime for SMEs
Related party loans interest
Unrelated party loans interest
deduction
deduction
25%
No
Yes
Yes
Income Tax
Social security
Capital Gains
Tax on Stock Options
Special Tax
Regimes
Min.
Max.
Min.
Max.
Min.
Max.
0%
50%
40%
€53,280
25%
25%
50%
No
Limited Fund
Business R&D R&D Capital Contracting
Technology Cooperative Innovative Young
Partners Management
Expenditure
Expenditure Researchers Transfer
External
Spin-out
companies
Research
No
No
Yes
No
No
No
No
No
Yes
Status Quo in Austria
Legal Framework Conditions
•
AIFMD implementation, adoption necessary
•
Future national PE/VC regulation for sub-threshold area is depend on AIFMD
implementation
•
MiFiG ended 2013
•
IGG / ”MifiG new” is under discussion
Status Quo in Austria
AVCO Community
•
16 Fund Members represent the relevant players in the market
•
Service Provider are well educated and highly experienced with PE/VC
•
Austrian SME landscape provides an attractive pipeline for portfolio companies
•
Austrian investors seek for investment opportunities abroad and/or Austria, and
for syndication partners
Contact
Jürgen Marchart
Managing Director
juergen.marchart@avco.at
T +43 1 526 38 05
F +43 1 526 38 05-6552
AVCO
Austrian Private Equity and
Venture Capital Organisation
www.avco.at