Frankfurt/Main – The sceptical attitude of banks towards private equity deals appears to be evaporating: private equity investors operating in Germany have again seen a sharp improvement in access to buy-out finance, while financing terms are also becoming more favourable. The industry believes it is well prepared for the upcoming new regulatory regime. Those are the key findings of the latest private equity panel survey, which is conducted three times a year by CMS Hasche Sigle and FINANCE magazine. Some 40 private equity (PE) firms provide anonymous assessments of the market for the survey.
"This seems to release the biggest brake on German private equity activity in recent years," is the verdict of Dr Tobias Schneider, partner at CMS Hasche Sigle. The PE investors surveyed in the German SME sector assess access to external financing for acquisitions as 13% better than in February. "Compared to the interim low experienced in February 2012, the rise is more than 50%, revealing a robust and sustainable uptrend," added Schneider. The assessment of financing conditions has also improved significantly after more than 20 months of subdued readings, rising 20% in May alone compared to the January survey. "The rising willingness on the part of banks to finance attractive acquisition targets is evidently now being accompanied by better terms, with the result that the disadvantage compared to strategic investors is shrinking," said Schneider. "This is a good sign for the PE market, which is currently in a pretty weak state. It raises the prospect of investment proposals increasingly turning into completed transactions."
Preparing for more acquisitions
The more favourable environment has also led to an increase in the proportion of PE professionals aiming to acquire assets. The number of firms focusing more on selling has now fallen to less than two thirds, after two years during which the proportion was higher almost throughout. The target industries for new investments nevertheless remain the same, being primarily services, food and healthcare. At the lower end of the ranking, the automotive industry has slipped to bottom place, behind financial services providers and renewable energy companies. "The popularity of particular sectors seems to reflect general economic expectations. This means that sectors which are not near the top of the list get dragged down even further, thus reinforcing the negative trend," said Schneider.
AIFMD Directive as a challenge?
60% of respondents consider themselves well prepared for the EU's Alternative Investment Fund Managers Directive (AIFMD), which is due to be transposed into national law in July. Awareness is highest with regard to establishing new AIFMD-compliant investment funds, which is also the topic that respondents see as being of greatest importance for their own company. "The results indicate that the sector has not rushed its response, bearing in mind the substantial amendments made to the draft legislation, like the issue of alternative depositaries," commented CMS Hasche Sigle partner Dr Joachim Dietrich. However, 15% of the panellists admit that they are very unclear about the new regulation, while almost all respondents are taking a very passive approach to implementing the more wide-ranging aspects of the AIFMD package. Dr Joachim Kaetzler, CMS Hasche Sigle expert on banking and financial market regulation, concluded: "The sector still needs to deal with issues around implementing the measures at a practical level, some of which will be challenging. The real practical test of the new regulations is yet to come."