Confidence levels approach 2007 peak as CE private equity rebounds

Investor confidence in CE has continued its ascent and is now approaching levels not seen since the region’s peak period between 2003-2007, according to the latest Deloitte CE Private Equity Confidence Survey.

The region’s downturn may at last be coming to an end: the proportion of respondents expecting deal activity to pick up has doubled to 60% since the last survey – which itself revealed the highest confidence levels in two years. “This is not merely a case of improving on a low base,” explains Deloitte CE Partner and Private Equity Leader Garret Byrne. “The sentiment we are picking up from deal doers is more upbeat, and our latest research backs this up. We are very encouraged by it.”

There are a number of factors that may contribute to the improved confidence. Says Byrne: “Europe is no longer perceived by some to be ‘on the brink of collapse’, which has meant investors – particularly in the US – are again looking to Europe and indeed CE. We witnessed a number of fund closes last year, with others expected imminently. This means fresh funds are ready to put to work.”

And more may be on the cards, with the proportion of respondents expecting to focus on fundraising doubling to nearly a fifth this survey (19%).

Economic conditions are helping put rhythm back into the market: two thirds of respondents expect the economic backdrop to improve, up from 43% in the previous survey. This marks the highest level of economic confidence since 2004, when eight CE countries joined the EU. “Belief that things will get better is crucial to getting deals done – confidence allows business owners to plan for growth, rather than remain in defensive mode. Private equity is well positioned to partner with these businesses as they set out to achieve their plans,” Byrne stresses.

And at long last, debt is expected to be more readily available by a quarter of respondents (27%). Says Byrne: “This is the highest level of confidence in debt markets for three years. Access to finance enables businesses – and private equity funds – to invest for the future.”

Fresh funds raised by private equity houses combined with leverage availability may help propel CE back into peak performance.

"Despite the fact that Slovakia, due to its size, is not the most attractive country for investing by private equity investors, we have noticed increased interest from private equity players in all sectors of the economy, especially technology and software solutions, utilities, financial services and manufacturing," added Ivana Lorencovičová, Director of Transaction Advisory Services at Deloitte Slovakia.

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© 2014 Deloitte Slovakia

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