CE Private Equity Confidence Survey, November 2012
Creating value in challenging times
“See-saw” pattern of Private Equity optimism continues across Central Europe
The optimism of Central Europe’s investors has fallen in this edition of the Deloitte CE Private Equity Survey, which was launched nearly a decade ago in March 2003. The 30-point fall reported in the most recent edition, from 101 to 71, is significant but not as severe as the drops recorded in October 2007, October 2008 and October 2011.
According to Deloitte partner Garret Byrne, who is the firm’s Private Equity Leader across Central Europe, “Sentiment has been up and down for the last two years, making this the fourth six-monthly survey in a row where the positive or negative trajectory of the previous issue has been reversed. After some apparent recovery in sentiment last April, this fall is an expected response to issues that include economic growth prospects of trading partners and the overall uncertainty in the Eurozone, doubts about recovery in Czech Republic and Hungary and prospects for slower growth in Slovakia, Romania and even Poland.”
Worries about the economic climate are highlighted by the fact that 59% of respondents – Private Equity practitioners from leading PE funds across Central Europe’s largest economies – anticipate a further decline in the economic climate and none anticipated improvement in the economic climate.
Mr Byrne is quick to point out, however, that not everything is negative about the sentiment of the region’s Private Equity practitioners. “For example 17% of respondents are still building up their investment war chests to carry out a full-on purchasing assault when the time is right. 35% still anticipate buying more than they sell over the next six months, and 21% are expecting the efficiency of their investments to improve between now and next spring.
Only in the last few weeks we have seen Advent International win a bidding battle for Polish retailer, EKO, in a public to private deal; we have seen Mid Europa announce acquisitions of Walmark and Alpha Medical; and we have seen Abris doing financial services deals in Poland and Romania.”
“What’s more, there is widespread agreement that private equity portfolio companies will be active on market-consolidation opportunities over the next six months.”
PE professionals have needed to significantly change their approach in recent years. “They need to match the prevailing conditions no matter the uncertainties among which they have to operate,” he continues.
“One thing is sure – as circumstances change faster and more dramatically than ever before, Central Europe’s private equity practitioners continue to aim at creating value and sustainable profitable businesses in challenging times in Central Europe. This should be a positive driver for overall economic growth”.