Crashing deal values aren’t discouraging the private equity industry. More than half of the respondents of Grant Thornton’s Private Equity Barometer concluded that private equity investments will pick up. 

Crashing deal values aren’t discouraging the private equity industry. More than half of the respondents of Grant Thornton’s Private Equity Barometer, a quarterly survey of 100 executives, concluded that the volume of UK private equity investments will pick up in the next twelve months.

“Clearly private equity managers are feeling very optimistic in spite of recent bad news,” comments Mo Merali, head of private equity at Grant Thornton.

In line with the anticipated rise in deals, 56 per cent of respondents expected to increase the number of companies in their portfolio in the twelve months, while 42 per cent expect to achieve annual returns of more than 20 per cent over the next three years.

Merali notes: “Our survey shows that the majority of private equity firms have significantly changed their investment strategy to adapt to market conditions. A quarter of respondents have shifted their focus to distressed assets, while one in five is content with acquiring minority stakes.”  

Although the mood is buoyant, private equity executives predict that valuations will continue to fall. “About one quarter of our clients expect the average deal size to drop by between 25 to 50 per cent,” comments Merali.

A recent study by market research company Zephyr showed the value of private equity-backed transactions in the EU has fallen by 79 per cent in the past six months.