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Private Equity: Investor Confidence Is Growing in M&A

"We are now in a buyers' market and CE lenders have liquidity and an appetite to lend."

- Garret Byrne,
Deloitte Partner and Private Equity Leader

Prague, 3 June 2013 – Optimism has started to return to Central Europe's M&A private equity practitioners, reflected in a 30-point rise in the Deloitte Central Europe Private Equity Confidence Index, a substantial number of major deals completed in the Central European region and fundraising success that underlines the continuing attractiveness of the region to foreign investors.

"We are now in a buyers' market and CE lenders have liquidity and an 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 for investment. Such sentiments are refreshing to see on the tenth anniversary of when we started to publish the PE Confidence Survey," said Deloitte Partner and Private Equity Leader, Garret Byrne, following the publication of the results of the Survey in May.

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.

"Specific 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 EUR 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 EUR 1.6 billion is another powerful indicator that concrete confidence is returning to Central Europe's M&A marketplace," commented Deloitte Financial Advisory Partner, Vladimír Šolc, on the Survey.

"In most transactions, we see at least twice as many potential Private Equity investors as industry investors. However, the proportion of final buyers will be substantially more balanced," added Vladimír Šolc.

However, 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.

"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 EUR 450 million hard-cap for its second fund, which suggests that fresh pools of capital could soon translate into reinvigorated deal activity," commented Garret Byrne.



The complete wording of the Deloitte Central Europe Private Equity Confidence Survey is available at www.deloitte.com/ce-private-equity-confidence.

 

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Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's approximately 195,000 professionals are committed to becoming the standard of excellence.

© 2013 Deloitte Czech Republic

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