The mood on the German private equity market is positive at the start of the year—at least according to the German Private Equity Barometer, which is calculated by KfW together with the Federal Association of German Corporations (BVK).
The German Private Equity Barometer's business climate index rose by 2.4 points to 66.7 balance points in the first quarter of 2018. The indicator for the current business situation climbed to 71.2 balance points (+2.1 points), and the indicator for business expectations rose to 62.1 balance points (+2.5 points). The assessments of the level and quality of deal flow, as well as the exit and funding environment, changed only marginally. The fundraising and innovation climates declined slightly but maintained their upward trend.
The business climate in the early-stage segment cooled slightly again at the beginning of the year. The corresponding indicator fell by 3.3 points to 63.0 balance points in the first quarter. The indicator for the current business situation reached a new record high of 67.7 balance points (+0.4 points). The indicator for business expectations fell by 7.1 points to 58.2 balance points. Investors' expectations were last this pessimistic relative to their business situation three years ago.
Good conditions for fundraising and exits
The late-stage segment is recovering from its previous decline at the start of the year. The very positive assessments of the fundraising climate, exit environment, write-down pressure, and innovation climate are offset by dissatisfaction with entry-level valuations, which are almost at their lowest point. The business climate indicator rose by 7.1 points to 70.0 balance points in the first quarter. The indicator for the current business situation rose by 4.1 points to 74.5 balance points, and the indicator for business expectations rose by 10.1 points to 65.6 balance points.
“In Europe, short-term interest rates are firmly anchored at rock bottom for the foreseeable future,”
says Dr. Jörg Zeuner, Chief Economist at KfW.
"We therefore expect continued good conditions for fundraising and exits. We are on the way to providing startups in Germany with significantly better access to venture capital at every stage of their development. I am pleased that this market environment is helping us achieve this."
Ulrike Hinrichs, managing BVK board member, adds:
"The persistently positive sentiment is good for the market and the economy. A stable venture capital market, in particular, is best placed to fulfill its mission of financing startups and medium-sized companies with equity. However, the signs of caution in business expectations reflect the general uncertainty about how long the low interest rate environment and the unusually long economic upswing in Europe will last. However, there is currently no end in sight."
KfW calculates the German Private Equity Barometer together with the Federal Association of German Corporations (BVK) for the Handelsblatt newspaper. A detailed analysis with data tables and charts on the current German Private Equity Barometer is available at www.kfw.de/gpeb available.
