German Private Equity Barometer: moderate start to the new year

• Business climate is cooling slightly
• End to early phase financiers' euphoria
• Improved exit opportunities fuel hope of market upswing

Following a high at the close of the previous year, the sentiment on the German private equity market has cooled slightly in the first quarter of 2014: the German Private Equity Barometer calculated jointly by BVK and KfW has decreased by 3.9 points to 46.5 balance points. "Despite the moderate start, the hope of a lasting positive business climate has not yet disappeared off the radar," explains Dr Jörg Zeuner, Chief Economist of the KfW Group, "as the business climate indicator is still well above its long-term average." At the same time, the sentiments in the two segments of the private equity market differ. In the early phase segment, the climate cooled again. This was especially due to the correction of the current business situation. In contrast, the mood in the late phase segment lifted again.

Furthermore, many underlying conditions which are important for the private equity market have continued to improve. In particular, there were gains in the quality of the deal flow and the exit opportunities which were lacking in the German private equity market in recent years. "The improved exit conditions should enable holding companies to clean their portfolios and concentrate on new investments again," continues Dr Zeuner. "This should contribute to the necessary upturn in venture capital investments in the medium term." BVK Managing Director Ulrike Hinrichs adds: "There are numerous attractive companies in Germany, which is why the deal flow still does not constitute a bottleneck for holding companies. Improvements in the exits and fundraising would have had the most positive and also the most lasting effect on the sector sentiment. We are optimistic that we will see more successful private equity sales this year. It would be extremely important for the sector and would also aid companies enormously in their fundraising activities."

KfW calculates the German Private Equity Barometer exclusively for the Handelsblatt together with the Bundesverband deutscher Kapitalgesellschaften e.V. (BVK; German Private Equity and Venture Capital Association). A detailed analysis is available for download at: www.kfw.de/gpeb (only in german).