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Confidence in Central Europe’s PE sector tumbles amid deteriorating economic climate


2011-11-20



During the six months to October 2011 confidence among Central Europe’s Private Equity (PE) professionals has taken the biggest hit in eight years, according to the 18th edition of the Deloitte Central Europe Private Equity Confidence Survey, a bi-annual study by the global professional services firm. However, PE firms in Poland appear to be less pessimistic than in most other CE countries, with the majority reporting several deals in progress that are likely to be closed over the next six months, said Agnieszka Zielinska, deputy head of Deloitte Polska’s financial advisory group.

The survey shows that 50% of the respondents expect overall market activity to decline during the next six months, up from just 2% in April, and 45% foresee no change. The proportion of optimists plunged to 5% from 55% six months earlier, the lowest level on record. Also, 61% of the respondents expect the availability of debt finance to decline over the next six months, compared with 0% in April. With a further 37% anticipating no change, the proportion of optimists, at 3%, is at its lowest since October 2008.

Furthermore, 66% of the respondents now anticipate a deterioration in general economic conditions, up from just 10% six months earlier and the highest proportion in three years; 34% expect no change, and none predict an improvement (compared with 43% in April).

As a result, the Deloitte Central European Private Equity Index tumbled to 70 points from a post-crisis high of 153 in April, and is now at its second-lowest level since the Index was launched in 2003.

According to Deloitte, the fall in confidence reflects fears over a second wave of recession and the break-up of the eurozone, and slowing growth in Poland, the Czech Republic and Slovakia.

One silver lining is that the share of respondents expecting to spend the majority of their time focusing on new investments during the next six months, despite a fall of 19 points, is still at a respectable 58%, which according to Deloitte means the PE community remains relatively bullish about new projects.

The survey was carried out in October 2010.



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