Deloitte: Central European private equity activity levels stay healthy as economy, leverage support deals

The strong momentum underway in Central Europe’s private equity markets is set to continue,  the latest Deloitte Central Europe Private Equity Confidence Survey shows.

The high level of deal activity in Central Europe’s private equity 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 percent) expect activity to increase further from its currently high level, and just 2 percent expect activity to slow down – the lowest level in five years.

It then comes as no surprise that two-thirds of respondents (69 percent) expect to focus mostly on deal-doing 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 percent) expecting the availability of debt finance to remain the same over coming months. This is up from two thirds (67 percent) in the last survey, when a fifth (21 percent) expected leverage to be increasingly available.

“Considering the survey’s positive results, I am confident that we will continue to see Private Equity firms participating in more and more transactions in Romania, both on the exit and buy side. If we look at the past 18 months, one third of the deals have involved an investment fund or a PE fund. This can only be a good indicator of Romania’s attractiveness and good position on the market,” said Radu Dumitrescu, Deloitte Romania Partner. “With a series of large transactions involving Private Equity firms in the past 18 months, Romania is expected to continue to be an interesting territory for financial investors.”

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Vitruvian Partner’s acquisition of minority stake in BitDefender from Axxess Capital, Profi’s sale to Mid Europa by Enterprise Investors, Revetas’ acquisition of Radisson Hotel as well as Oresa’ exit from Fabryo are proof of the busy PE activity locally during the past 18 months. J.C. Flowers will probably continue to expand locally after acquiring a bank.

“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 Mark Jung, Deloitte Partner and Private Equity Leader for Central Europe. “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. 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.”

Healthy leverage markets and increasing interest in the region has supported toppy valuations, but pricing increases may have reached a plateau: nearly a fifth of respondents (17 percent) expect vendors to decrease their pricing expectations in the next semester, more than double the 8 percent recorded in our last survey.