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Deloitte Private Equity: Stability persists despite gentle drop in confidence

The Brexit vote has dented confidence amongst deal doers in the latest Deloitte Central Europe Private Equity Confidence Survey. The dip is gentle, and the Index remains higher than a year ago.

Following a small surge in the spring, confidence in Central Europe (CE) has come down a bit. This is almost certainly on the back of economic expectations, which are less optimistic than in the spring following the EU Referendum in June. Just 7% expect the backdrop to improve, down from nearly a quarter (24%) in the spring, though less than a third expect the situation to worsen, similar to six months ago. Nearly two thirds expect no change, suggesting a stabilisation of the economies in the region. CE remains Europe’s strongest region for GDP growth, with 2.9% estimated for Q3 2016[1].

Despite the gentle decline in economic expectations for CE, deal doers continue to perceive CE’s debt markets as very stable. More than four fifths (83%) expect no change in the availability of debt finance, up on last survey’s already healthy 70%.

This should buoy deal activity: 70% intend to focus on new deals over the next six months, on a par with the spring survey and together the highest level since the region’s ‘golden age’ between 2004 and 2007.

“Europe and indeed the world is pausing to reflect on what the Brexit vote may mean,” says Mark Jung, Deloitte Partner and Central European Private Equity Leader. “There is evidence that deal activity has slowed in Western Europe, particularly in the UK since the Referendum. That the Index didn’t drop more dramatically is vindication of the region’s resilience and ability to persevere.”

While market leaders continue to be the most competitive deals to win, start-ups hit an all-time high in this survey, with 13% of respondents deeming them the most competitive segment. “Start-ups hardly registered in the survey’s first ten years, but a handful of success stories have encouraged entrepreneurs and investors alike to back this important part of the market.”

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