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Private Equity & Venture Capital in Central & Eastern Europe Robert J. Manz Partner Enterprise Investors September 20, 2005
Enterprise Investors - Overview <ul><li>Enterprise Investors is the leading private equity fund manager in Central & Easte...
Private Equity in Central & Eastern Europe <ul><li>Over  €7.5 bln  raised to date for CEE private equity funds </li></ul><...
Private Equity in Central & Eastern Europe <ul><li>PE/VC investments by CEE country 2002 – 2004  ( €1.3 bln) </li></ul><ul...
Types of CEE transactions <ul><li>Distribution of 2004 Investments </li></ul><ul><li>Buyouts </li></ul><ul><ul><li>MBO/MBI...
Case Study – Lukas (Poland) <ul><li>Pre-investment: </li></ul><ul><ul><li>Developed by 3 entrepreneurs </li></ul></ul><ul>...
Lukas - continued <ul><li>D evelopment: </li></ul><ul><ul><li>Goal was to transform Lukas into an integrated personal fina...
Lukas - continued <ul><li>P erformance ($ ml n ): </li></ul><ul><li>Value  C reation: </li></ul><ul><ul><li>Lukas bec a me...
Case Study – Comp Rzeszów (Poland) <ul><li>Pre-investment: </li></ul><ul><ul><li>Small but growing provider of banking sof...
Comp Rzeszów - continued <ul><li>P erformance ($ mln): </li></ul><ul><li>Value  C reation: </li></ul><ul><ul><li>EI design...
Ďakujem Robert J. Manz Partner Enterprise Investors Sp. z o.o. ul. Emilii Plater 53 00-113 Warsaw, Poland e-mail: robert.m...
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Private Equity

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  1. 1. Private Equity & Venture Capital in Central & Eastern Europe Robert J. Manz Partner Enterprise Investors September 20, 2005
  2. 2. Enterprise Investors - Overview <ul><li>Enterprise Investors is the leading private equity fund manager in Central & Eastern Europe </li></ul><ul><ul><li>Capital: $1.1 billion raised to date in 5 investment funds </li></ul></ul><ul><ul><li>Experience: actively investing since 1990 </li></ul></ul><ul><ul><li>Regional: investments in Poland, Slovakia, Romania, Bulgaria and Czech Republic </li></ul></ul><ul><ul><li>Track Record: $955 million invested in 100 companies to date </li></ul></ul><ul><ul><li>Professional: team of 30 investment professionals; headquarters in Warsaw and office in Bucharest </li></ul></ul><ul><ul><li>Active: actively work with investee companies to create additional value, improve corporate governance and build world-class corporations </li></ul></ul><ul><ul><li>Sectors: consumer goods, retail, financial services, telecom, IT, manufacturing, healthcare, energy </li></ul></ul>
  3. 3. Private Equity in Central & Eastern Europe <ul><li>Over €7.5 bln raised to date for CEE private equity funds </li></ul><ul><li>Approximately 75 fund managers actively investing in CEE companies </li></ul><ul><ul><li>30 can invest in Slovakia </li></ul></ul><ul><li>Since 1990, almost €6 bln invested in over 1 , 000 companies in CEE </li></ul><ul><li>Investment levels are rising each year : </li></ul><ul><li>But, investment levels are below European averages by a factor of 3x </li></ul><ul><li> </li></ul>Source: EVCA , EI estimates € 547m € 448m € 274m 2 0 04 2003 2002 0.1% 0.3% PE/VC investments as % of GDP CEE Europe
  4. 4. Private Equity in Central & Eastern Europe <ul><li>PE/VC investments by CEE country 2002 – 2004 ( €1.3 bln) </li></ul><ul><li>In 2001, one of the top 5 largest PE/VC transactions in CEE was the $180m investment in Orange Slovensko </li></ul>
  5. 5. Types of CEE transactions <ul><li>Distribution of 2004 Investments </li></ul><ul><li>Buyouts </li></ul><ul><ul><li>MBO/MBI – purchase of company with current or outside management </li></ul></ul><ul><ul><li>Secondary Purchase – purchase of shares, no special cooperation from management </li></ul></ul><ul><ul><li>Public to Private – purchase of quoted company </li></ul></ul><ul><ul><li>Examples : entrepreneur’s exit, spin-off, ownership change, privatization </li></ul></ul><ul><li>Expansion Capital </li></ul><ul><ul><li>Capital increase to finance development/growth/turnaround </li></ul></ul><ul><ul><li>Examples : new production capacity, new product s, debt re-payment, acquisitions / expansion </li></ul></ul><ul><li>Start-up/seed </li></ul><ul><ul><li>Financing for companies at an early stage of development </li></ul></ul><ul><ul><li>Examples : R&D, bring first product to market, cover initial losses </li></ul></ul>1% Start-up /Seed 38% Expansion 61% Buyouts
  6. 6. Case Study – Lukas (Poland) <ul><li>Pre-investment: </li></ul><ul><ul><li>Developed by 3 entrepreneurs </li></ul></ul><ul><ul><li>Started as chain of electronic stores </li></ul></ul><ul><ul><li>In 1992 started offering installment loans </li></ul></ul><ul><ul><li>Became intermediary offering consumer financing with funding from banks </li></ul></ul><ul><ul><li>By 1997 present in 16 , 000 retail outlets nationwide </li></ul></ul><ul><ul><li>$285 m ln of loans ; revenues of $19m ; net profit $7m ; 600 , 000 customers </li></ul></ul><ul><li>Investment: </li></ul><ul><ul><li>Enterprise Investors provided $15 m ln of expansion capital for 28% of shares (1997) </li></ul></ul><ul><ul><li>Founders sought EI’s prior banking experience and contacts </li></ul></ul><ul><ul><li>Allowed founders to maintain independence and control of the company </li></ul></ul>
  7. 7. Lukas - continued <ul><li>D evelopment: </li></ul><ul><ul><li>Goal was to transform Lukas into an integrated personal finance banking institution </li></ul></ul><ul><ul><li>EI identified a small bank and helped Lukas acquire a controlling stake </li></ul></ul><ul><ul><li>EI brought in specialized banking managers and new financial management </li></ul></ul><ul><ul><li>A new banking strategy was developed, rolling out 100 modern mini-branches, telebanking and e-banking </li></ul></ul><ul><ul><li>Products were diversified to include cash loans, car loans and retail deposits </li></ul></ul><ul><ul><li>Importantly , Lukas developed its own funding base with $700 m ln of deposits </li></ul></ul>
  8. 8. Lukas - continued <ul><li>P erformance ($ ml n ): </li></ul><ul><li>Value C reation: </li></ul><ul><ul><li>Lukas bec a me a leading nationwide retail financial institution with household brand recognition </li></ul></ul><ul><ul><li>By 2001, international institutions were very interested to take over Lukas as an entry into Poland (more than 30 interested buyers) </li></ul></ul><ul><ul><li>Credit Agricole purchased EI and founders for a total value of $340 m ln , 5.6 times the 1997 valuation </li></ul></ul>
  9. 9. Case Study – Comp Rzeszów (Poland) <ul><li>Pre-investment: </li></ul><ul><ul><li>Small but growing provider of banking software </li></ul></ul><ul><ul><li>50% owned by Comp S.A., leading Unix-based IT systems integrator </li></ul></ul><ul><ul><li>Separate management organizations for both companies </li></ul></ul><ul><li>Investment: </li></ul><ul><ul><li>EI invested $5.2 m ln of expansion capital for 55% of Comp S.A. in 1999 </li></ul></ul><ul><ul><li>Comp interested in EI’s IT experience and company development know-how </li></ul></ul><ul><ul><li>New c apital used to develop new products (eg. encryption technology) and acquisitions </li></ul></ul><ul><li>Development: </li></ul><ul><ul><li>Comp Rzeszów developed quickly in banking software products </li></ul></ul><ul><ul><ul><li>17% overall market share in banking segment </li></ul></ul></ul><ul><ul><ul><li>35% market share of cooperative banks </li></ul></ul></ul><ul><ul><ul><li>45% market share of small and medium size banks </li></ul></ul></ul><ul><ul><li>Product development into transaction systems, electronic banking, date warehousing, outsourcing </li></ul></ul><ul><ul><li>Regional expansion to Slovakia (Asset Soft) </li></ul></ul>
  10. 10. Comp Rzeszów - continued <ul><li>P erformance ($ mln): </li></ul><ul><li>Value C reation: </li></ul><ul><ul><li>EI designed and negotiated separation of the two companies; became 50% owner of Comp Rzeszów </li></ul></ul><ul><ul><li>EI helped analyze acquisition of Asset Soft </li></ul></ul><ul><ul><li>IPO on Warsaw Stock Exchange (Sept. 2004) led by EI to raise capital for acquisition </li></ul></ul><ul><ul><li>IPO allowed founder to sell small portion yet retain effective c ontrol ; EI exited fully </li></ul></ul><ul><ul><li>Most successful private company IPO in 2004 ; 10 times oversubscribed </li></ul></ul><ul><ul><li>Valuation of $101 m ln ; 25 times 2004 net profit ; 20% premium to Polish IT companies </li></ul></ul><ul><ul><li>Post IPO, Comp Rzeszów making more acquisitions, valuation now $134 mln </li></ul></ul>
  11. 11. Ďakujem Robert J. Manz Partner Enterprise Investors Sp. z o.o. ul. Emilii Plater 53 00-113 Warsaw, Poland e-mail: robert.manz@ei.com.pl www.ei.com.pl
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