Private Equity Confidence Survey – Winter 2019/2020

Analysis

Private Equity Confidence Survey - Winter 2019/2020

Veteran resilience

The Private Equity Confidence Survey has been tracking the changing sentiments of the Central European investment community every six months since 2003. Deloitte Central Europe proudly presents the latest report which marks the 34th edition of the programme.

A further drop in confidence sees the index at its lowest level for seven years. With nearly half of respondents (46%) expecting the economy to worsen over the coming months, uncertainty around the economy is largely behind the dip, with the two barometers seemingly moving in tandem throughout the survey’s 17-year history. No respondents expect the economic backdrop to improve in the coming months.

Despite this concerning outlook, most CE economies are growing 2-3x faster than most of those in Western Europe: Poland and Romania are expected to grow at 3.5% and 3.1% respectively for 2020, against 1% for the eurozone.

It remains a sellers’ market, with a quarter of respondents (25%) expecting to focus on this, up from under a fifth (19%) last survey and the largest proportion since our spring 2015 index. This is likely due to a high-pricing environment, though this may be stabilising, with 65% of our respondents feeling pricing had remained the same over the last six months.  Prices may come down, with an
unprecedented 48% of our respondents expecting pricing to decline down further over the following year, more than double last survey. Only 15% expect pricing to increase further. 

Private Equity Confidence Survey

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In the past few years, transaction pricings have greatly contributed to several successful exits of private equity investors, promoting more fund raising in the region. The expected decrease of prices may drive investments, as funds with fresh financing will be ready to respond to sellers’ expectations

–stated Balázs Csűrös, Partner at Deloitte Financial Advisory.

A potentially uncertain period may favour well prepared transactions, especially in cases where sellers do not have a clear alternative for succession.

- the expert added.

Market leaders are considered the most sought-after assets, with 62% expecting these businesses to be the most hotly contested. The result is a change from our last survey, where fewer than half of respondents (47%) expected market leaders to be the most competitive in CE. Their rise came at the expense of middle-size growing companies, which last survey attracted 40% of the vote but this time came in at just 29%.

Veteran resilience