Cinven index forecasts continued rise in private equity activity across Europe78% of senior bankers expect to see an increase in 2003, despite bleak predictions for the overall economic climate
A wide-ranging report published today predicts that private equity involvement in the European M&A market will increase in the first half of 2003. This sentiment is set against a backdrop of deepening pessimism as to the overall economic climate.
The report, produced by Cinven, one of Europe’s leading private equity providers, in association with mergermarket - the M&A intelligence company - canvassed the views of over 180 managing directors in leading investment banks specialising in UK, French and German deals.
A comparison was made between sentiments expressed in this survey and the results of earlier surveys, reflecting market views for June 2002, December 2001 and June 2001.
Key findings of the report include:
- 47% of bankers across Europe expect a decline in the overall economic climate over the next six months, compared with 7% six months ago. 43% predict no change: only 10% predict improved conditions.
- The majority of bankers surveyed (78%) expect to see an increase in private equity participation within the European M&A market in the next six months: this represents a 9% improvement in sentiment since June 2002. This view is strongest in the UK, where 89% of bankers expect an increase; compared with 80% in France, and 65% in Germany.
- European bankers expect greatest opportunity for private equity to exist in the Manufacturing (21%), Business Services (19%) and Consumer (19%) sectors.
- 29% of bankers surveyed expect asset values to significantly decrease over the next six months, rising from 8% six months ago.
- Bankers across the UK, France and Germany (86%) are confident that cheaper assets will provide opportunities for private equity firms. This view was most strongly held in Germany (94%).
- In Europe overall, bankers expect to see the greatest increase in private equity activity occur in mid-market deals of €85 million – €850 million (39%); and large deals of €850 million – €1.7 billion (37%).
- However, there has also been a slight increase in the number of bankers (19%) expecting private equity to play a greater part in very large deals, of over €1.7 billion.
- 48% of bankers expect company earnings across Europe to decline, in sharp contrast to the 11% who envisaged this six months ago. This is particularly true of the UK, where 59% share this view.
- Only 21% of the European bankers surveyed now believe that the volume of IPOs will increase in the next six months. A much higher 79% of bankers expressed this sentiment in June 2002.
- 69% of European bankers expect the volume of companies seeking to de-list from stock markets to increase, a rise on the 44% who expressed this view six months ago.
- Only 25% of bankers expect hostile bids to increase in the next six months.
Robin Hall, managing director of Cinven, commented:
“This report confirms our belief that despite economic conditions, opportunities for private equity in the M&A market will continue to grow in the first half of 2003.
Falling asset values, an increase in de-listings, and the pressure on corporate management to divest non-core assets, all make for an active buyout market where capital can be put to good use.”