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Growing investor confidence drives major M&A deals and expectations of fundraising success

Growing investor confidence drives major M&A deals and expectations of fundraising success Private Equity Survey 2013 Bratislava, 18 July 2013 – Optimism has started to return to Central Europe’s M&A private equity practitioners, reflected in a 30-point rise in the Deloitte Private Equity Confidence Index, a substantial number of major deals completed in the region and fundraising success that underlines the continuing attractiveness of CE to foreign investors.

Speaking following the publication of the May 2013 Deloitte Private Equity Confidence Survey, Deloitte Partner and Private Equity Leader Garret Byrne commented: “We are now in a buyers’ market and CE lenders have liquidity and appetite to lend.”

“It will be interesting to observe investor behaviour against this new backdrop, when an increasing number of deal-doers will have fresh funds to deploy in what many see as a great buyers’ market. Such sentiments are refreshing to see on the tenth anniversary of when we started to publish the PE Confidence Survey.”

The 30-point growth in the Confidence Index since the last survey in October 2012 was largely driven by a significant fall in those respondents predicting a further decline in the economic outlook (down from 69% to just 21%), increased optimism about the efficiency of financial investments and growth in the proportion of those planning to buy more than they sell over the next six months.

Examples of substantial deals completed include the largest exit by a Private Equity firm to take place for many years in Poland, in the shape of the €400 million sale of Lux-Med by Mid Europa Partners and Accession Mezzanine Capital to BUPA. The sale of RWE’s Czech gas grid, Net4Gas, to Allianz Capital Partners and Borealis for €1.6 billion is another powerful indicator that concrete confidence is returning to Central Europe’s M&A market place.

However, despite these indications, there is clearly some way to go before we can hail the full return of investor confidence. Expectations of ‘no change’ remain high in this latest edition of the survey, as investors wait for these signals of growing optimism to turn into a substantial adjustment in overall market sentiment.

One of the most telling metrics in this regard is always the proportion of investors who intend to focus on portfolio management over the next six months rather than raising new funds or making investments. That this figure now matches the October 2008 peak of 55% shows that a majority of investors remain cautious.

Other metrics indicating similar sentiments include the 72% of respondents who expect the level of competition for deals to remain the same over the next few months and a rise in those expecting the availability of debt finance to stay unchanged; this rose from 69% last October to 76% today, the highest share since April 2007.

According to Garret Byrne, “Overall, though, these results show an encouraging upwards trend following the bleak outlook of late 2012. Most encouraging of all is today’s busy fundraising environment, best exemplified by Abris Capital Partners’ success in reaching its €450 million hard-cap for its second fund, which suggests that fresh pools of capital could soon translate into reinvigorated deal activity.”

 

About Deloitte

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© 2013 Deloitte Slovakia

 

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