Senior European investment banking official believe that the subdued European M&A market will present private equity investors with the opportunity over the next six months to be involved in an increasingly large proportion of deals.
This is the conclusion of a survey published by Cinven, the European buyout firm, and Mergermarket, the M&A research firm. The report canvassed the views of over 150 managing directors in leading investment banks specialising in UK, French and German transactions.
78 per cent of those polled said they expected the participation of private equity players within the overall M&A market to accelerate in the next six months. This view is strongest in continental Europe, with 90 per cent of French respondents and 79 per cent of German interviewees expecting an increase, compared with 63 per cent of UK respondents.
John Brown, deputy managing director of Cinven said: “The report confirms our belief that the restructuring of European industry will lead to increased opportunities for private equity, even if the overall economic climate becomes more difficult. With more pressure on share prices, the pressure on corporate management to deliver greater focus to their businesses by divesting non-core assets will intensify.”
The findings are published at a time when activity in the public equity market remains hampered by uncertainty and volatility. 46 per cent of respondents expect to see a decrease in rights issues and secondary fundraising, compared to 26 per cent seeing an increase. Demergers are expected to increase by 51 per cent of respondents with only 13 per cent anticipating a decrease.
Views expressed by those surveyed also reflect the difficult overall economic climate: only 8 per cent of respondents expect an improvement in company earnings over the next six months, compared to 57 per cent expecting a decline.
Nevertheless, the survey gives further support to the view that the recent decrease in private equity and venture capital investment activity should not be interpreted as an overall downturn for the industry. Last month VentureEconomics said that investment activity had dropped by more than 70 per cent in the first quarter of 2001.
At the time, many observers suggested they did not see this as a sign of a beginning private equity slow down, pointing to well-filled deal pipelines across the market. Similar expectations prevail among those polled by Cinven, a majority of whom predicted the bulk of new private equity investment to come via deals worth between E850m and E1.7bn.
As far as the European technology market is concerned, the survey offers little to support an optimistic view. 53 per cent of respondents anticipated a further fall in indices compared to only 15 per cent expecting an increase in the next six months.