64% of senior European bankers expect to see an increase in Qs 3 and 4, marking a shift towards greater optimism for the economic outlook.

A wide-ranging report published today predicts that private equity involvement in the European M&A market will continue to increase in the second half of 2003. This sentiment is echoed by a cautious confidence among the financial community, who predict some improvement in economic conditions over the next six months.

The report, produced by European private equity provider, Cinven, in association with mergermarket – the M&A intelligence company – canvassed the views of 195 managing directors in leading investment banks specialising in UK, French and German deals.

A comparison was made between sentiments expressed in this survey and the results of earlier surveys, reflecting market views for December 2002, June 2002, and December 2001.

Key findings of the report include:

  • 33% of bankers across Europe expect the overall economic climate to improve over the next six months. Only 12% expect deterioration in conditions, compared with 47% six months ago.
  • The majority of bankers surveyed (64%) expect to see an increase in private equity participation within the European M&A market over the next six months.
  • 49% of bankers expect company earnings across Europe to improve, compared with only 21% who envisaged this six months ago. Only 15% of bankers expect a decline in earnings in the next six months, compared with 48% in December 2002.
  • 77% of bankers expect assets to hold or increase their value over the next six months. Only 11% expect a decrease.
  • European bankers expect an increase in the volume of agreed and hostile transactions, compared with sentiments expressed six months ago.
  • 62% of bankers expect the volume of companies seeking to de-list from stock markets to increase. Only 6% predict a decrease.
  • Cautious optimism extends to the IPO market, with 44% of respondents envisaging an increased number of floatations over the next six months. This compares with 21% who shared the sentiment in December 2002.

Robin Hall, managing director of Cinven, commented:

“Despite difficult economic conditions, we are beginning to see some optimism within the financial community. This optimism serves to accelerate buyout activity and other types of corporate transaction. For this reason, we are not surprised that our research predicts a continuing increase in private equity activity over the next two quarters.”