August 6, 2012
The German Private Equity Barometer published by BVK/KfW posted a steep decline from 42.1 points in Q1 to 23.7 in Q2. The reasons for this decline include the downturn in the overall economic outlook, a fear of writedowns on portfolio companies and a deterioration of the exit channel. On the upside, respondents say that demand for private equity in Germany is still robust and that venture capitalists receive high-quality business plans.
Regular readers will be unsurprised by this turn of sentiment, of course. It is well in line with elevated and rising difficulties in European debt markets. In fact, debt market conditions and economic performance never fully backed the exuberant/strong PE sentiment of H1 2011 and Q1 2012. While current data points to a weaker Q3, actual deal flow during July so far already appears to be stronger than expected. One explanation may be that some deals were postponed from May/June, when debt markets tightened sharply, towards Q3. However, the outlook is unusually volatile and depends strongly on further developments of the euro debt crisis.
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