Private Equity in Emerging Europe

Septembrie 2008

DANIELA NEMOIANU ISTOCESCU - Advisory Partner KPMG ROMÂNIA

The political and economic landscapes of Central and Eastern Europe (CEE) have undergone rapid and significant change over the past 20 years and the region now appears to be an emerging private equity (PE) market. This market is attracting PE houses from Western Europe and North America for a number of reasons, including:

• Growth potential of portfolio companies – for example in Romania during 2005-6 when many investments from the late 1990’s were exited, typical return rates were in the region of four to six times the initial investment
• PE transactions in the CEE have been less reliant on debt than in other markets and are therefore likely to be less affected by the credit crunch than Western Europe and North America
• It is a relatively less crowded market place with fewer auctions and is, therefore, not as competitive on price.

 

Positive economic trends in all CEE countries are obvious and most of them enjoy high real GDP growth and FDI inflow:

• Other countries in the region with similar investment potential: Bulgaria, Serbia, Croatia
• Russia, Ukraine and Turkey provide opportunities for larger value deals
• Hungary and the Czech Republic have been picked over, few interesting opportunities remain visible
• Political risks somewhat overshadow the economic outlook in Serbia and Ukraine
• In Turkey the inflation trends are uncertain.

 

According to merger market’s “Private Equity in Emerging Europe” research report, Poland and Romania “attracted the most attention from respondents in terms of which countries would see the bulk of private equity activity in the region over the next year. Sixty percent thought that Poland would lead the region, while 51 percent backed Romania”. In this context KPMG’s comments below focus in particular on these countries.

1

2

3

The tricky lag LUCIAN CROITORU Adviser to the Governor - BANCA NAŢIONALĂ A ROMÂNIEI Lucian Croitoru, Adviser on monetary policy issues to the National Bank of Romania Governor, talks about the NBR’s next moves and explains why the decrease ofthe policy rate hasn’t been reflected into lower interest rates on bank loans. mai mult... The turnaround CRISTIAN SPORIS Secretar de Stat - MINISTERUL ECONOMIEI ŞI FINANŢELOR Cristian Sporis, Secretary of State at the Ministry of Public Finance, in charge with the national treasury and public debt, explains how the state managed to borrow money at the lowest costs in the last seven years and how it turned from a clear market taker into a player with a strong position on the market. mai mult...