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Cinven index predicts deal acceleration

Private equity activity in the UK, France and Germany looks set to increase in the second half of 2002, according to a report by Cinven, canvassing the views of over 150 senior bankers specialising in deals in those regions.

Optimism is strongest in France where 72 per cent of respondents expect an increase in deal flow, compared with 68 per cent in Germany and 66 per cent in the UK. Contrary to recent sentiments and limited activity in the mega deal segment, almost half of respondents anticipate an increase in average deal size. German bankers are most confident with 67 per cent predicting larger deals for the second half of the year.

The report confirms Cinven’s belief that opportunities for private equity in the M&A market will continue to grow in the second half of 2002, says Robin Hall, managing director of Cinven. “We are seeing an injection of optimism into the M&A market, which is serving to accelerate buyout activity as well as other types of corporate transactions,” he said.

Seventy per cent of respondents predict the greatest increase to be in mid-market deals of between EURO85 million and EURO850 million. This is closely followed by larger deals of between EURO850 million and EURO1.7 billion where 61 per cent anticipate an increase.

Over two thirds of those sampled envisage an increase in the number of agreed transactions, which is a significant improvement on the December 2001 survey’s prediction of 43 per cent.

Public to privates look set to make a comeback with 35 per cent of canvassed UK bankers predicting an increase in the number of UK companies delisting. This compares to 46 per cent in France and 52 per cent in Germany.

In France, conglomerate divestiture is seen as the biggest driver of French M&A activity (67 per cent), followed by consolidation of stock markets (22 per cent) and public to private transactions (11 per cent). Thirty-six per cent of German bankers see deal flow emanating from divestments from large companies, while eight per cent credit Mittelstand consolidation. The remaining 56 per cent believe a mixture of the two will drive M&A activity.

Looking at the overall economic climate, bankers across Europe are predicting a rosier future. Fifty-four per cent of respondents predict an improvement in economic conditions for the second half and only seven per cent foresee a decline. Optimism is strongest in France where 60 per cent predict an upturn.

Robin Hall concludes: “Despite difficult conditions, significant funds have been raised for private equity investment and the improving economic climate is creating interesting opportunities for the industry to put the capital to work.”