I shouldn’t consider a significant improvement in results due to the Private Equity market picking up as nearly certain:
The valuations of many growth companies have come down in the stock market, and this also pressures PE market valuations. For example, in the Nordics, QT, Admicom, Revenio, Talenom, Novo Nordisk, Ambu, Tomra, Nibe have faced enormous valuation compression, where multiples may have more than halved from earlier levels. Share prices may have fallen 70-80% from their peaks. Thus, it is harder to sell less known businesses if quality can be bought from the stock market at a relatively cheaper price. I acknowledge that the peer group here is completely wrong in relation to PE peers. The purpose is to illustrate what the rise in interest rates did to the average valuation of growth companies. Inderes’ model portfolio is a great example of this: the model portfolio primarily consisted/consists of high P/E growth companies. The consequences have been accordingly in recent years.
Can PE exit multiples be defended in the reality of elevated interest rates and declining stock market valuations?
There is a huge willingness to sell in the PE market. PwC estimates it to be worth a trillion dollars. Will the bottleneck open without having to lower the price level of the assets for sale?
Analyst forecast changes over the last year summarized: down, down, down, down, down, down. It is concerning that this is not just about the 2025 results, but also 2026 and 2027 have decreased on the same scale. It is illustrative that EQ was forecast a year ago to make cumulatively about 150 million in operating profit for 2025-2027. That figure today is about 100 million. Thus, the can has not merely been kicked down the road. The direction of 2026 surprises for EQ is likely downwards.
https://www.marketscreener.com/quote/stock/EQ-OYJ-1412428/consensus-revisions/
Communication from within the industry is also quite grim reading:
“Per Franzén says inability to raise fresh funds may leave many firms only managing existing investments in coming decade”
https://www.ft.com/content/49d2cb79-5e0b-4c71-9258-b3fea4ca70c4