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Slump in confidence levels hits VCs, says Grant Thornton

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The confidence levels of mid-market venture capitalists have dipped significantly during the second quarter of 2005, according to a survey of mid-market VCs conducted by Grant Thornton Corporate Finance. In the first quarter of 2005, nearly the totality of VCs predicted that deal values and volumes would either remain stable or increase over the next twelve months, whereas during the second quarter, 65% and 70% respectively anticipated such activity.

In terms of the sectors most likely to witness intense M&A activity during the next twelve months, for the first time in over a year the healthcare sector (22%) was singled out as being the most popular, followed by business services (20%), which habitually takes the top spot and financial services (10%).

In terms of deal volumes 30% of respondents expect the number of transactions to decrease over the next twelve months, compared to just 2% during the first quarter of the year; 51% anticipate similar activity levels whilst just 19% predict an increase. In terms of future deal values over the next twelve months, 35% expect a fall in market valuations, (5% in Q1), 39% anticipate consistent levels (50% in Q1), whilst a further quarter take the view that valuations will increase in the year ahead.

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