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Outlook brightens for UK private equity industry

UK private equity firms are confident that the worst of the downturn is over. A renewed sense of optimism should drive venture deal activity in the coming months according to Deloitte & Touche's latest private equity confidence survey.

Approximately 25 per cent of those surveyed expected the economic climate to improve in the next six months, with just 13 per cent expected conditions to deteriorate further. Increased confidence is expected to make deal pricing easier, which is expected, in turn, to boost transaction activity. Some 66 per cent of respondents said they anticipated an increase in deal volume over the next six months.

‘Vendor and purchasing price expectations are finally converging, with sellers accepting that prices have fallen,' said Mark Pacitti, a Deloitte & Touche partner. ‘This helps explain why 67 per cent of venture capitalists expect entry multiples on transactions to remain the same over the next few months, compared with 43 per cent last quarter.'

‘Private equity activity has already started to ramp up in recent weeks with Selfridges, Chubb and Debenhams among the high profile businesses that are being approached by venture capitalists,' Pacitti continued.

Group subsidiary sell-offs are expected to provide the most significant source of transactions, followed by secondary buy-outs, according to those surveyed.

The British Venture Capital Association's quarterly survey released in April also indicated an expected up turn in deal flow. But in contrast the BVCA's study suggested an increase in private equity deal flow would be in spite of, rather than because of, confidence in the marketplace.

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