German Private Equity Barometer: Record business senti-ment on VC market

• Mood of market as a whole continues to brighten
• Early-stage financiers’ business expectations rocket
• Fundraising climate at an all-time high

The upward trend of the business climate on the German private equity market stabilised further in late summer. The German Private Equity Barometer’s business climate index increased by 2.0 points to 59.8 balance points in the third quarter of 2015. The business situation improved (+2.6 points to 63.7 balance points), as did business expectations (+1.4 points to 55.8 balance points).

The more positive sentiment of the early-stage segment is particularly evident. Early-stage financiers are reporting a further strengthening of their current business situation and their business expectations reflect a new and pronounced level of optimism. Both partial indicators have reached new record highs. This improvement is being accompanied by a recovery in the fundraising and demand climate, both of which had deteriorated in the first six months of the year. “The underlying conditions are better than ever. I am confident that sentiment will remain positive for the foreseeable future,” said Dr Jörg Zeuner, Chief Economist at KfW Group. Ulrike Hinrichs, Managing Director of the German Private Equity and Venture Capital Association (BVK), concurs: “We can also feel this optimism as the positive mood is also evidenced in measurable investments. The first half of 2015 saw greater investment than at any time since 2008.” “The upswing in sentiment on the German private equity market consolidated late this summer and the market is no longer experiencing a high level of uncertainty,” added Dr Zeuner.

In contrast to the early-stage financiers, sentiment within the later-phase segment waned slightly, though remained high. The later-phase financiers report that their current business situation had barely changed but remains good, although they are again more tentative as regards their business expectations. In the third quarter, pressure to write down asset values was measured at a historical low. This, together with an exit climate that has never been so healthy and a record fundraising climate, did much to bolster sentiment during the later-phase segment.

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). You can find a detailed analysis with a spreadsheet and graph for the latest German Private Equity Barometer at: www.kfw.de/gpeb