Private Equity Confidence Survey 2016

Insights

CE Private Equity Confidence Survey 2016

Resilience amidst uncertainty

Our 28th survey reaffirms stability in Central Europe’s (CE) private equity (PE) market, with most metrics suggesting little change expected over the coming months. This is refreshing and in contrast to the mood further west, where Britain’s EU Referendum result has caused uncertainty in much of the European Union and its financial markets. Of course Central Europe isn’t entirely immune to the impact of Brexit; being part of the EU means deal doers are aware of the potential impact on markets, and the Index pulled back to 109. That the drop wasn’t higher is vindication of the region’s resilience and ability to persevere.

Economy aside, most results point to a mood of confidence. For example, despite the gentle drop in economic expectations for the region, deal doers continue to perceive CE’s debt markets as very stable. More than four fifths (83%) expect no change in the availability of debt finance, up on last survey’s already healthy 70%. Leverage is crucial to driving buyouts, and the expectation of its availability means houses are looking forward to backing businesses – 70% intend to focus on new deals over the next six months, on a par with the spring survey and together the highest level since the region’s ‘golden age’ between 2004 and 2007.

Adding to the positivity for the future, we have recorded a couple of fund closes, namely first closes for Abris and Arx Equity, while Genesis Capital reached a final close for its fourth vehicle. Others are expected to make announcements in the coming months, such as CEE Equity ($1bn), Resource Partners and Value4Capital (EUR 150m targeted). What is further encouraging is some of the vehicles raised since the spring have attracted local capital, a fairly new phenomenon in CE PE, a market which has historically relied (almost exclusively) on foreign institutions.

Despite an unusually large number of mega-deals currently in various stages of development, the market continues to be a mid-market one, which institutions – local and abroad – find attractive given the perceived pricing levels achievable. In fact our survey reveals that more than half of deal doers expect average deal sizes to stay the same, even as averages have come down markedly in Western Europe and Britain in particular since the Brexit vote (CMBOR Statistics for Q3 2016).

We look forward to continuing to work with CE deal doers to see whether this positive sentiment bears out as they drive the asset class forward in the region.

 

Private Equity Confidence Survey 2016
Resilience amidst uncertainty
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