While Europe’s politicians buy time, private equity investors are buying assets. The endless muddle-through summits, the austerity plans and the deleveraging among all institutions points to low growth which is bad news, right?
In December, the European Banking Authority (EBA) estimated that European banks need to recapitalise, in aggregate, to the tune of just under €115bn, but that may now be conservative, and the problem is not limited to the periphery.
German banks accounted for almost 10% of the shortfall. Stricter capital rules with Basel III and other regulatory initiatives will not make the situation any easier, adding to the need for fresh funding.
Popova said it is not surprising banks are hoarding profits, selling assets and trying to access funding where they can. Nor does the situation look set to get better soon.
"Tight credit is never good for business," she said. "In Europe, where for various reasons companies tend to be heavily reliant on bank financing as opposed to corporate debt markets, it is even less good."
There was a sharp slowdown in Q3 last year, followed by an up-rick in Q4, but the ongoing crisis has depressed activity again. Renewed bank retrenchment is driving down LBO volumes, and economic headwinds are making it hard for sellers of companies to find buyers in their desired price range.
But on the supply side, with banks not lending - or only at expensive rates and with a bias toward stable industries - traditional forms of refinancing are unattractive for many European companies. Weal equity markets make raising public funds more difficult.
"Many firms look to private equity as a white knight, and are willing at times to give up a large portion of their equity to keep their businesses going," said Popova.
Tough times steer firms to divest non-core assets, or shut up shop altogether, meaning fewer firms are up for sale. Banks themselves are divesting assets as they try to meet capital requirements.