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Sentiment on private equity market in Germany improved greatly

Staff Writer |
The business climate index of the German Private Equity Barometer improved significantly in the third quarter 2016, rising by 12.0 points to 59.6 balance points.

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The business situation indicator rose by 10.9 points to 60.2 balance points, while the expectations indicator climbed 13.0 points to 58.9 balance points, KfW says.

The business climate in the early-stage segment improved most of all. Its indicator rose by 19.7 points to 61.1 balance points in the third quarter and is now nearly as high as a year ago, when it reached a record high of 66.8 balance points.

This increase occurred on the back of a significantly more positive assessment of the current business situation (+15.3 points to 58.0 balance points), but was mostly due to the sharp increase in business expectations (+24.2 points to 64.1 balance points).

The improvement in the business climate in the early-stage segment went hand-in-hand with an equally steep increase in the fundraising climate, which rose to 39.7 balance points, very close its record high of 42.4 balance points.

The business climate in the later-stage segment of the equity market also improved, although more moderately. The corresponding indicator gained rose by 7.5 points to 58.7 balance points.

Not only did later-stage financiers rate their current business situation more positively; they also had significantly more positive business expectations.

The indicator for the current business situation increased by 8.5 points to 61.4 balance points, while the indicator for business expectations climbed 6.6 points to 56.0 balance points.

Thus, the decline in sentiment observed during the first half year has stopped for the time being.

The more upbeat sentiment is likely to be due mainly to the improved fundraising climate and higher demand for capital. Yet at the same time, later-stage investors are more dissatisfied than ever with the quality of their deal flows.