Concerns driven by fears of Greece exiting the eurozone and the growing refugee crisis, along with disappointing data on Chinese growth, have eroded the confidence of private equity funds.
This is shown by the latest Deloitte survey on expectations and confidence of private equity funds in Central Europe.* However, the key is continued persistence in deal-making.
The economic and political climate in Europe has led to a decline in the index, considering that one-third of respondents expect worsening conditions – which contrasts with the spring when nearly the same percentage expected improvement. Despite this, private equity firms continue to insist on making new deals, with 50 percent of them intending to buy more and sell less in the coming months, which is double the amount from the last survey.
– The market for private equity firms in Central Europe has over two decades of experience behind it, and experienced investors at this moment are more than capable of recognizing the opportunities offered by a declining market, said Tomislav Čutura, senior manager in Deloitte’s financial advisory department.
It is also possible that the confidence reflects greater expected liquidity, with 53 percent of experts expecting greater availability of financial resources in the coming months, which is the highest percentage recorded since 2006.
– This news is encouraging and represents a significant increase compared to the 33 percent of respondents who indicated the same in the last survey. Financial resources are indeed available to the right companies, and the types of financing instruments are becoming increasingly sophisticated, whether they are those offered by banks or those available through funds.
Optimism is also re-emerging in the so-called startup scene: one in ten respondents expects that startups will be the most competitive investments.
– This is the highest recorded percentage throughout the duration of the survey. Central Europe has produced several top-tier startups, many of which, under the auspices of private equity firms, have reached leading positions in the world. We look forward to collaborating with such companies in the future, concludes Čutura.
* The survey results are based on a survey among employees of private equity funds in Central Europe conducted from April to September 2015.
