The expectations of Private Equity and Venture Capital operators for the second half of 2018 show signs of stability with regard to the current economic cycle and the volumes of PE activity compared to the previous half year. This is what emerges from the semi-annual report of Deloitte Italy Private Equity Confidence Survey,
"The Deloitte Private Equity Confidence Index, an index that summarizes the answers collected from operators in the sector, reports a value of 114 in the second half of 2018, a slight decrease compared to the values of the previous semesters" - he comments Elio Milantoni, Deloitte Financial Advisory Services Partner and M&A leader
Forecasts regarding the economic situation show a sentiment less positive on the part of operators, with 27,0% of respondents expecting a worsening of the economic scenario. Stable expectations as regards the number of deals expected: 62,2% of operators expect an unchanged number of transactions for the next six months.
“The value of PE portfolios will, according to 63,9% of the interviewees, be higher than the purchase values. The remaining operators expect a constant value of their investments. This figure, in line with past semesters, shows a sign of stability and strengthening of the sector – he comments Elio Milantoni. With regard to the return objectives (IRR) judged acceptable, the majority of operators (88,9%) place their expectations in the intermediate range (15%-25%)".
LBO transactions are confirmed as the type of greatest interest (44,4% of those interviewed), followed by Capital Expansion transactions (27,8%) and MBO/MBI support transactions (19,4%). Furthermore interest in sectors such as manufacturing is on the rise (+ 8,5%), Electronic Products and Agriculture (both +2,7 percentage points compared to the previous semester). Instead, the focus on sectors is reduced Luxury, Chemist and Retail (respectively -5,0, -4,6 and -4,4 percentage points compared to the first half of 2018).
The percentage of investors according to which the sale values will be stable (57,1%) or decreasing (8,6%) compared to the first half of 2018 is increasing.
Significant growth is expected exit means Trade Sale (indicated by 54,3% of the interviewees, up by 17,9 points compared to the previous six months), against a drop in the percentage of the interviewees who report the possibility of exit means Secondary Buy-Out (-13,6%) and through IPO (-3,6%).
The percentage of PE investors interviewed who identify commercial banks as the main source of financing has increased (from 73,5% to 81,3%). Investment bank loans also increased (+3,5 percentage points).
"The expectations of the financial structure of the new deals show a slight growth in the preference for financial structures with a greater use of the share of equity." observes Elio Milantoni.
In fact, 34,3% of those interviewed expect to finance their future investments with an equity quota between 61,0% and 100,0%, up by 10,0 percentage points.
We note a slight decrease in the average spreads applied. A quarter of the traders surveyed financed their operations with one spread on the Euribor below 200 basis points.
