Dáil Éireann Debate, Thursday - 23 January 2014
103. Deputy Terence Flanagan asked the Minister for Jobs, Enterprise and Innovation his views on the write off of moneys invested in Enterprise Ireland companies that failed over the past five years; and if he will make a statement on the matter. [3427/14]
View answerEnterprise Ireland’s (EI) mission is to partner with entrepreneurs, Irish businesses and the research and investment communities to develop Ireland’s international trade, business investment, innovation, leadership and competitiveness with the ultimate objective of job creation. Start-up companies in particular are a very valuable source of job creation.
In support of this mission EI invests in a significant number of Small and Medium Enterprises (SMEs), a proportion of these being start-ups in the early stage of development, many developing disruptive new technological applications. Investing in SMEs is inherently risky, particularly so in the case of early stage and seed investments. It should be emphasised that Enterprise Ireland supports companies in an effort to alleviate the market failure for Irish companies in accessing finance. It should also be borne in mind that EI’s focus is on the economic return from any investment, i.e. jobs and exports, and not just the financial return.
EI, when making an investment, will always seek that the company raises matching funding from the private sector where, at a maximum, Enterprise Ireland accounts for less than fifty percent of any investment. This ensures that the private sector shares a larger proportion of the investment risk. Private sector participation can be from the promoters, private investors and business angels, venture capital or private equity funds. In advance of making an investment, EI undertakes an in-depth commercial evaluation process.
The investment write offs for the period 2008 to 2012 can be attributed to companies not achieving market success, in what was a difficult economic period. EI would, in many cases, be writing off investments in line with other private sector investors in any particular company. Equity investment write off over the period 1999 - 2012 (€67m) on foot of investments made over the same period (€427m), represents a 16% write off. The return from investments in shares for the period 1999 – 2012 amounted to €376m. The original cost of these shares (including investments written off €67m) amounted to €208m, resulting in a profit of €168m.
EI writes off investments where market failure has occurred and a company is being liquidated or wound up. Before any investment or grant is written off, Enterprise Ireland conducts a thorough due diligence process to ensure that all monies, if any, which are recoverable by EI, have been recovered. Enterprise Ireland’s recovery due diligence process is often carried out in tandem with the recovery processes undertaken by the private sector investors.
Notwithstanding the challenges of developing SME’s into successful growth companies, Enterprise Ireland client companies continue to have a significant economic impact on the Irish economy, spending more than €19bn per annum and being collectively responsible for more than 300,000 jobs in every county throughout the State. In 2013, EI companies created 18,033 jobs resulting in a net increase of 5,442 jobs. In the same year, EI clients export performance continued to be strong and are expected to rise from the €16.2bn level achieved in 2012. These figures will be published later this year.
