Central European private equity firms hit lowest confidence level

Central Europe’s private equity (PE) firms’ confidence hits lowest level since the global financial crisis, as a result of the COVID-19 impact, but deal-doers are more optimistic than during the 2008 crisis, according to the latest Deloitte CE Private Equity Confidence Survey.

The confidence index, which has been decreasing since the end of 2017, is now at 62, the second historical lowest after October 2008, when it reached 48.

Seven in ten professionals in Central Europe private equity houses forecast a decline in market activity and worsening economic conditions, given that the regional economies, which are largely consumer-driven, are expecting significant GDP contraction in 2020 amid demand shrink caused by unemployment rise.

The survey results also indicate a noteworthy proportion of believers in a quick economic recovery, as 13% of respondents actually expect conditions to improve.

The pandemic is creating a buyers’ market, with 74% of the survey respondents believing 2020 will be a good vintage.

Nearly half (45%) of them believe vendors have decreased their price expectations over the last six months, and over half (51%) believe they will continue to do so. As a result, the proportion of PE firms expecting to focus on new investments in the coming months remains relatively high, of 45%.

In terms of deal sizes, most private equity houses expect them to stay the same (58%) or decrease (43%). Also, 62% of the survey respondents expect liquidity to decrease over the coming months.

The survey results also show a steep increase in the proportion of respondents who feel the efficiency of their CE financial investments will decline, the second-highest percentage in the survey’s history, after the one reported in the autumn of 2008.

Nearly a third (30%) expect efficiency to decline, up from just 6% in the previous survey and 0% a year ago.

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