Though this is up markedly from last survey’s 17%, it remains the case that most CE economies are growing 2-3x faster than most Western European ones: Poland and Romania are expected to grow at 3.5% and 3.1% respectively for 2020, against 1% for the eurozone. Also significant, no respondents expected the economic backdrop to improve in the coming months.
It is a sellers’ market, with a quarter of respondents (25%) expecting to focus on this, up from under a fifth (19%) last survey and the largest proportion since our spring 2015 index. The results break an 18-month spell of consistent findings which saw the majority expecting to focus on buying, a quarter of deal-doers planning to buy and sell equally and a fifth expecting to focus on divestments.
Vendor price expectations may be at an inflection point, with 80% of our respondents feeling pricing had remained the same (65%) or decreased (15%) over the last six months. These may fall further, with an unprecedented 48% of our respondents expecting pricing to come down further over this year, more than double last survey. Only 15% expect pricing to increase further.
Confidence among professionals in Central European (CE) private equity (PE) houses has been declining gradually for two years to reach a seven-year low. As ever, confidence and economic expectations are linked, and this survey revealed nearly half of respondents (46%) are expecting conditions to worsen, up markedly from last survey’s 17%.
Additionally, times of potential uncertainty can be fertile grounds for the well prepared to do deals, particularly where there may be sentiment that can help support an exit thesis for those entrepreneurs who lack a clear succession alternative.
“At this moment, Romania seems to be a sellers’ market, but their expectations regarding prices may adjust slightly, considering that prices may decrease in 2020, according to 48% of respondents, However, we still see a big appetite of private equity funds for transactions in Romania, with the bulk of local players being actively involved in this type of projects, especially as buyers”, said Radu Dumitrescu, support services partner in transactions at Deloitte Romania.
“In Romania, the activity of private equity funds has continued to grow, in terms of acquisitions, with a total 22 transactions in 2019, compared with 11 transactions in 2018, whose value was estimated at nearly EUR2 billion. We expect these investors to remain active in 2020, but the total value of transactions may be lower, considering the atypical situation in 2019, namely, the closure of two large transactions”, stated Ioana Filipescu Stamboli, corporate finance partner at Deloitte Romania.
The Deloitte Central Europe Private Equity Confidence survey has been conducted twice a year since 2003 and reflects the evolution of the private equity market.