The strong momentum underway in Central Europe’s private equity markets should continue, although pricing increases may have reached a plateau, according to the Deloitte Central Europe Private Equity Confidence Survey.
The high level of deal activity in Central Europe’s private equity (PE) markets is set to continue, with two-thirds of respondents expecting market activity to remain the same, the highest level in three years. Nearly a third (31%) expect activity to increase further from its currently high level, and just 2% expect activity to slow down – the lowest level in five years, the survey shows.
As a result of the above, more than two-thirds of respondents (69%) expect to focus mostly on deals in the coming months, in line with the survey over the last two years. Expectations will be buoyed by liquid leverage markets, with three-quarters of respondents (74%) expecting the availability of debt finance to remain the same over the coming months. This is up from two-thirds (67%) in the last survey, when a fifth (21%) expected leverage to be increasingly available, Deloitte notes.
"The promising activity seen in the CE PE markets over the last 18 months continues, with strong economic fundamentals continuing to support high levels of exits and deals," said Balázs Csűrös, Partner at Deloitte Advisory.
"Local deal-doers are nurturing many of the region’s maturing owner-managed businesses, while foreign investors – financial as well as trade – are increasingly looking to the region for some of the more established businesses," Csűrös continued. "Their interest is testament to the successful businesses which have grown into leading, global companies, many under the stewardship of the region’s local private equity houses," he added.
Healthy leverage markets and increasing interest in the region have supported "toppy" valuations, but pricing increases may have reached a plateau, the survey finds. Nearly a fifth of respondents (17%) expect vendors to reduce their pricing expectations in the next semester, more than double the 8% recorded in the last Deloitte survey.