Investor confidence in Central Europe (CE) is at a two-year high, according to the latest Deloitte CE Private Equity (PE) Confidence Index. It is the first time in four years the survey has shown improvement for two consecutive six-month periods.
According to Deloitte CE Partner and Private Equity Leader Garret Byrne, “A number of reasons support this uptick in optimism. First, the threat of the imminent collapse of the Eurozone has receded, and a return to growth, albeit modest, has helped to boost confidence right across Europe”. The report shows a more than four-fold increase in the proportion of respondents who anticipate further economic improvement in the months to come.
Indeed nearly 60% of respondents expect to focus on new deals over the next six months. Further good news came from the fundraising trail, with three CE PE Funds (3TS Capital Partners, Abris Capital Partners and Enterprise Investors) raising close to Euro 1 billion between them to continue fuelling investment activities in the region.
A marked shift in sentiment sees market leaders slip from the most in-demand – the first time in the survey’s 10.5-year history. An increased interest in mid-sized businesses has been the main detractor, with an equal number of respondents expecting this segment to be the most competitive.
“This trend is not surprising. While large-scale deals signed by international PE funds are expected to remain very limited, «local» PE funds are focused on mid-market buyouts and growth capital deals”, said Hein van Dam, Partner in Charge Financial Advisory Deloitte Romania. “As banks continue to deleverage, mid-market businesses are striving to diversify their funding sources, providing continued opportunity for private equity.”
There are also signs that Central Europe is increasingly perceived as an integral part of Europe, with respondents naming price and terms as the key differentiators in winning a deal. This stands in contrast to several years ago, when much importance was placed on a local presence and resultant understanding of risk appetite in the region. Tellingly, these two differentiators have fallen considerably in perceived significance. This is a refreshing sign that the region has made great strides in its quest towards convergence with Western Europe and is no longer deemed an “emerging market”.
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