According to Deloitte's semi-annual report, Private Equity Confidence Survey, the prospects of Private Equity and Venture Capital operators in Italy for the second half of 2016 show stable expectations regarding the economic situation, confirmed by 63,9% of operators. The majority of investors interviewed are also confident about a possible end to the effects of the economic crisis in the PE/VC market within the next 12 months.
“Once again for the next six months, the majority of operators expect to focus their attention on the search for new investments, an activity indicated as a priority by 66,7% of the interviewees – comments Elio Milantoni, Partner of Deloitte Financial Advisory Services and Leading M&A – Fundraising activity takes a slight decline in PE/VC investor priorities along with portfolio equity management activity.
The PE/VC transactions will mainly be aimed at medium-sized companies: 60% of the interviewees confirm that the average turnover of the companies subject to the greatest attention will be between 30 and 100 million euros, an average size higher than the values indicated in the semester previous. 72,2% of the sample is preparing for replacement capital, leveraged buy-out (LBO) or expansion capital transactions.
“Despite the growing attention towards replacement and LBO operations, the operators interviewed report a contraction in the level of financial leverage that operations can support: all of the interviewees stated that they believe operations with a medium/low degree of leverage are sustainable , remaining within a value of 4x (Debt/EBITDA)”, observes Elio Milantoni.
The debt conditions for PE/VC transactions also improved compared to previous periods: the percentage of acquisitions financed with spreads on the Euribor lower than 250 bp increased from 50,0% to 65,7%.
In line with the trend of the previous six months, the majority of those interviewed expect to exit their investments by selling them to strategic buyers (58,3% of operators). Furthermore, among the various exit alternatives, preferences towards MBO/buy-back operations are increasing as a possible exit option from investments in the face of yet another drop in IPOs.
There is an increase in the concentration of operators who expect a level of return (IRR) between 15% and 25% (88,6% vs. 79,4% in the previous edition). Furthermore, 73,5% of those interviewed see EBITDA expansion as the main driver of the generated return.
