Great Expectations Private Equity Confidence Survey Central Europe
Total Page：16
File Type：pdf, Size：1020Kb
Great expectations Private Equity Confidence Survey Central Europe January 2021 This publication contains general information only. The publication has been prepared on the basis of information and forecasts in the public domain. None of the information on which the publication is based has been independently verified by Deloitte and none of Deloitte Touche Tohmatsu Limited, any of its member firms orany of the foregoing’s affiliates (collectively the “Deloitte Network”) take any responsibility for the content thereof. No entity in the Deloitte Network nor any of their affiliates nor their respective members, directors, employees and agents accept any liability with respect to the accuracy or completeness, or in relation to the use by any recipient, of the information, projections or opinions contained in the publication and no entity in Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies thereon. Great expectations | Private Equity Confidence Survey Central Europe Great expectations What a truly extraordinary year 2020 was. As an a larger-than-usual number of exits, defying for full prices: going forward, half of the people and opportunity for the region’s deal-doers. unprecedented and global health crisis quickly expectations of lowered pricing to generate we surveyed expect pricing to increase over this We are standing by to work with them on became a financial one, heavy tolls were felt on strong returns for backers of ambitious year, up from a third in our last Survey, and just helping to recapitalize the many companies societies and economies. The private equity management teams. Many of CE’s longest- a fifth (22%) expect them to come down ripe for the right financial backer in this (PE) market in Central Europe (CE) has been established private equity houses have clocked – down markedly from over half (51%) since dynamic region. impacted by the pandemic, though the latest up multiple divestments in the second half the summer. Deloitte Survey suggests the hit was less steep of 2020, enabling them to furnish their limited and quicker to recover than in the 2008 Global partners with lucrative distributions. These, It is likely this pricing paradigm is because of Financial Crisis. There are myriad reasons for in turn, should support future fundraisings firms’ abilities to reduce costs quickly when they this, and confidence reflects it, with the Index and ensure that the healthy PE ecosystem in needed to, undertaking measures to protect doubling from 62 to 123, the steepest climb CE continues – crucial as recapitalizing many existing revenues whilst assessing what costs in the Survey’s 17-year history. companies will be key in the coming months could be cut to stabilize in the spring before and years. re-evaluating plans back to growth. While the The market’s strongest defence during the impact varied by sector, many firms have not course of 2020 has been its experience, and Appetite for private equity by global institutions only survived 2020 but even emerged stronger this wasn’t as robust in 2008. Many PE firms has been growing and is expected continue to as they accelerated their plans to digital have more than two decades’ experience do so as investors seek superior risk-adjusted amidst a reduced cost base. The support of to draw on, and we’ve seen the positive returns. A survey by data provider Preqin experienced private equity backers in many of impact that has – for investors in those funds suggests such investors will further increase these businesses will have been invaluable. benefitting from handsome distributions as well their PE allocations: 23% expect a significant as on the businesses they back, which typically increase and 56% a slight expansion. And it’s shone in H2 2020, with a large number grow their revenues and profits as their PE of PE-backed divestments showcasing the backers help them to expand their offering Expectations for deal-doing in 2021 are great: value-add experienced financial backers can and geographic footprint, creating wealth and nearly two-thirds of respondents to our Survey bring. The headline-grabbing IPO of Allegro cast employment along the way. As such, the capital expect market activity to increase in the coming a very positive light on PE’s ability to grow a CE and expertise of many GPs in CE may prove months, up from under a fifth in the summer. business: the €9.8bn market capitalisation saw vital to many companies in the region to survive These deals will be supported by the region’s the share price swell thereafter. and even thrive in today’s new backdrop. leverage markets, as the proportion of deal- Mark Jung doers expecting liquidity to improve is the This sentiment on market activity and pricing Partner, Private Equity Leader Our assessment period for this Survey highest in three years. Such financing will be is consistent with our own recent experience, Deloitte Central Europe is telling as it runs from the summer to the crucial to support high pricing. Despite initial and watching vendors work with buyers to meet end of November, a period of growth amidst expectations of reduced pricing as the crisis their expectations on pricing. Sourcing and ongoing uncertainty. In that time, we’ve seen impacted companies, strong assets are going assessing these opportunities is a challenge 3 Great expectations | Private Equity Confidence Survey Central Europe Central European Private Equity Index: Key findings Our latest Survey reveals a complete reversal on market sentiment since our last Index, with the vast majority of deal-doers (63%) expecting an increase in activity, up from just 17% in the last Survey. Likewise, just 17% expect a reduction, down from 70% over the summer. Backing this up, nearly three-quarters of deal-doers (73%) expect to buy more in the coming months, the highest proportion since 2011. In a sign of dramatically renewed confidence, there has been a near 50% uptick on the proportion of respondents expecting to focus on new investments since our last Survey, with two thirds (65%) now prioritizing that over the coming months, up from 45% in our last Survey. This upturn comes as a portfolio management focus halves, from 45% over the summer to 22% now. This is likely a reflection of the fact that most GPs put a firm focus on nurturing their portfolios in the spring and summer as the pandemic unfolded, and now, in more robust shape and with a clearer picture of how firms are performing, houses can turn their sights to new deals once again. Deals will be supported by robust leverage markets, with 76% of respondents expecting the availability of debt finance to remain the same (63%) or increase (13%) over the coming months, a refreshing change from our last Survey, when most (62%) expected a decrease. 10 10 12 12 14 14 16 18 expecting market activity to increase over the coming months, more than triple last Survey’s 17%. Survey. This confidence is fuelling expectations of renewed deal doing, with 63% of respondents economy, with 37% expecting an improvement in the economic backdrop, up three-fold on our last Myriad indicators in our Survey reflect this, including the heightened optimism around the survey climb in our report’s history, nearly doubling from 62to 123. This Survey revealed aspectacular and welcome return to positivity, with the largest survey-on- 5 Central Europe PE Confidence Index 20 20 40 40 60 60 80 80 0 0 0 0 0 0 0 0 - - ar. 2003 10 0 ep. 003 15 6 ar. 2004 14 8 ep. 004 13 9 ar. 2005 15 4 ep. 005 14 9 ar. 2006 15 5 Oct. 006 15 3 pr. 007 15 9 Oct. 2007 11 8 pr. 008 Great expectations | Private Equity Confidence10 Survey Central Europe 2 Oct. 008 48 pr. 009 78 Oct. 009 11 7 pr. 010 14 0 Oct. 010 13 8 pr. 011 15 3 Oct. 011 70 pr. 012 10 1 Oct. 012 71 pr. 013 10 1 Oct. 013 12 7 pr. 014 14 4 ep. 014 11 4 pr. 015 13 0 ep.2015 92 pr. 016 12 4 ep. 016 10 9 pr. 017 11 3 ov. 017 13 0 ay. 018 12 3 ov. 018 10 5 Jul. 019 10 2 ov. 019 87 Jun. 020 62 ec. 020 123 Great expectations | Private Equity Confidence Survey Central Europe Economic climate (June 2020 vs December 2020) Survey Results Economic climate 13% Sentiment around the economy is improving at last, with more Economic expectations have always been correlated to than a third of respondents (37%) expecting an improvement in confidence in our Survey, and just as the economic barometer the economic climate, a near tripling from 13% in the last Survey is improving, we’ve seen a near doubling of the Index against last and the highest level of optimism in six years. The increase in Survey’s low result, from 62 to 123. This represents the single optimism is mirrored by a halving of those expecting conditions largest climb in our Survey’s history. 19% to worsen, from 68% in the summer Survey to 33% now. June Economic growth should resume this year, with Covid-19-induced 2020 Our Survey canvassed opinion at the end of an unprecedented contractions in 2020 giving way to a recovery. Preliminary data year of difficulty, with mounting uncertainty eventually giving way suggests Central Europe’s reduction in output was less stark to hope when a vaccine for the coronavirus was approved and than that seen in wider Europe: Poland, CE’s largest economy, 68% a roll-out announced in early December. This hope, mixed with saw GDP contract by 9% in Q2 2020, against 11.3% for the EU.