Confidence has been renewed, with Europe's private equity market expected to enjoy an upturn over the next 12 months, according to a survey by Mergermarket and financial advisory Duff & Phelps.
Three-quarters of European respondents said they are aiming for returns of 15 per cent to 25 per cent over the next year. Respondents cite the return of credit and record dry powder as key reasons for growth in private equity ahead.
While activity is expected to return, almost half of overall respondents, from both North America and Europe, expect equity to make up more than half of new deals. This is a stark contrast to the ten to 15 per cent equity during the buyout boom of 2005 to 2007.
Europeans remain bearish on leverage multiples, while 36 per cent of North Americans anticipate an upswing.
When it comes to portfolio company capital restructures, 36 per cent of European respondents said they will choose to negotiate banking covenants, whereas 57 per cent of North American respondents aim to refinance.
Sophie Moreau-Garenne, a managing director at Duff & Phelps, said that this difference in approach boils down to the maturity of the junk bond market in Europe.
"In Europe, the high-yield market is thinner and less developed and dynamic. Covenant renegotiation is the preferred option versus a straight refinancing,” she said.