Although we observe a bullish stock market in the beginning of 2019, Europe still faces major uncertainties such as Brexit, trade wars or country debt, which translated into severe stock price adjustments at the end of 2018. P/E multiples decreased by 18% between December 2017 and June 2018. At the end of December 2018, larger companies (Top 20) have exhibited a continued decrease in P/E ratios, while smaller listed companies have undergone some positive recovery.
Despite geopolitical issues and upcoming tighter monetary policies, we continue to expect demand for good assets and companies to remain very high.
The high level of demand continues throughout 2018, whether it’s large corporates with significant cash or private equity money seeking transactions. Private equity investors are still sitting on substantial amounts of dry powder money to be invested and actively looking for attractive assets.
Analysts expect a continued improvement of the funding capacity for both larger and smaller corporations. Corporates are starting to reshape the balance sheet in anticipation of a weakening economic conditions.
Forward multiples have continued to decrease for larger firms in the second half of 2018, while small and mid-sized traded firms have shown more resilience amidst an uncertain market environment.
The graph above shows trailing statistics for deals completed worldwide involving Belgian bidders. The deal flow remained strong over 2018 after record-high levels in 2017, fueled by a high activity of private equity players in the market and Belgian corporates aiming to enlarge their international footprint. We’ve observed a slight decline in transactions in the second half of 2018, most likely explained by the volatility and uncertainty on the financial markets. Mid-market transactions continue to be a driver of volume.