The report indicates that 84% of respondents believe that this year will be good for investment activity, and over half (51%) predict that investment activity will remain at the current level. The data concerns the private equity market, i.e. capital investments in which funds and investors engage directly in private companies. This market segment therefore does not include stock exchange transactions.
Deloitte measures investor sentiment using the Trust Index. In the latest measurement, dated July, the indicator was 118 points, which is 11 points more than in December 2023 and as much as 60 points more than in June 2022, when it was the lowest in history (at that time the world was recovering from two years of the pandemic, and at the same time we were in the first months of the war in Ukraine). As the study shows, investor sentiment is improving permanently, because the July measurement was the fourth in a row when the value of the Trust Index increased.
“The current market recovery is more gradual and sustained, which indicates greater caution among investors resulting from their long experience in coping with different economic cycles and volatile market conditions,” the study commentary reads.
Optimism fueled by forecasts
Michał Tokarski, Managing Partner of Deloitte Financial Advisory in Poland, emphasizes that the aforementioned caution is reflected, for example, in the assessment of future investment conditions in the region – 59% of respondents expect economic conditions to stabilize, and almost one third expect them to improve. At the same time, there is a clear decrease in pessimism in this area – from 43% of negative indications a year ago, it has now fallen to just 10%.
According to Tokarski, the more optimistic attitude is undoubtedly reinforced by the solid performance of the region’s economies. According to forecasts from the European Bank for Reconstruction and Development, the economies of Central Europe are to grow by 2.2 percent this year, with Poland growing by 2.8 percent.
The market’s optimism is reflected in yet another aspect – as the Deloitte study shows, over two-fifths of respondents (41%) expect the average size of operations to increase, which is more than twice as much as in the last study.
What does this mean for the economy?
How optimism among investors from the private equity sector will affect our economy? We asked Mateusz Michnik, a junior economic analyst at FOR, about this. He points out that the improvement in sentiment may turn us towards larger investments, as well as new solutions.
– We should also be pleased that funds are implementing or planning to implement decarbonization strategies. Thanks to the free market and investments, we will have a situation of green economic growth – simultaneous improvement of economic conditions while improving environmental and climate protection – emphasizes the FOR expert.
He adds that looking at the economic prospects for Poland, one cannot count only on investments. private equity fundsbut it is also necessary to eliminate barriers to private investment to stimulate this sector.
– In this respect, the quality and predictability of regulations and taxation should certainly be improved. The fact that there is much to improve is evidenced by the very low investment rate compared to other EU countries – indicates Michnik.
Two incentives for markets
According to Grzegorz A. Dębowski, an expert at the Law for Development Forum, there are two elements that determine the market revival.
– Firstly, there are more and more opportunities for funds on the market, the number of post-succession and consolidation transactions is increasing, and thanks to greater liquidity, acquisition opportunities are easier – the expert points out. – In addition, business has already learned to implement new EU regulations. Companies are introducing tested models of solutions resulting from ESG or taxonomy, thanks to which they can focus on development – he adds.
According to Dębowski, together these phenomena are causing a revival in the private equity fund market, which will help maintain the conditions for economic growth and, above all, will enable an increase in the number of transactions on the market compared to the result in 2023.
ESG is becoming more and more present
The aspects discussed by the expert from the Law for Development Forum will also appear in the Deloitte study. The report shows that most private equity investors in Central Europe are taking the issue of equity more and more seriously. environmental issues and sustainable development.
“Over two-fifths of them (41%) declare that they have started to develop future commitments and targets for climate neutrality, and one-fifth have already implemented formal commitments and targets for decarbonization. In addition, more and more market participants are integrating ESG factors into their strategies,” we read in the document. Among the surveyed companies, 53% confirm that they have implemented an investment policy that takes into account ESG factors, and 18% have taken specific actions related to improving ESG among portfolio companies.
Julia Patorska, a partner at Deloitte, estimates that private equity firms around the world are increasingly incorporating sustainable development, environmental, social and corporate governance aspects into their business decisions and plans. – Central Europe is no exception in this situation. Given the clear impact of ESG scores on valuations, we expect private equity funds to play a significant role in helping companies in the region to continue to develop in this area – says the expert.
