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VCS WEATHER CRISIS

VC confidence levels are at an all-time low in terms of expectations on portfolio performance, deal activity and availability of funds. A mere one per cent of VCs foresee an improvement in the economic climate in the next six months, according to the quarterly Deloitte & Touche Private Equity Confidence Survey. The survey monitors Deloitte & Touche’s Corporate Finance network of over 770 venture capitalists.

The majority of VCs (82 per cent) expect that the economic situation will deteriorate further with fund raising becoming an increasing challenge and 79 per cent expect debt finance to become harder to raise.

However, 24 per cent of those surveyed expect deal activity to pick up in the next six months. Restructuring activity by UK PLCs as a result of economic uncertainty is also expected to create investment opportunities.

Quintin Barry, Deloitte & Touche corporate finance partner, said: “Given world events since the last survey, pessimism is to be expected. Indeed, the Centre for Management Buyout Research recorded a sharp fall in deal activity for September and October, with about half as many buyouts compared to the same period last year.” He added that in the current M&A environment with pressure on pricing, VCs are unlikely to sell, unless forced, in what is most definitely a buyers’ market.