Club deals in private equity in Russia

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Club deals in private equity in Russia

  1. 1. Co-investment in private equity in Russia Alexander Lupachev, Delta Private Equity November 2, 2007
  2. 2. <ul><li>Co-investment in PE in Russia: status quo </li></ul><ul><li>New trends in private equity syndication </li></ul><ul><li>Pros and cons of co-investment in PE in Russia </li></ul>Overview
  3. 3. Co-investment in PE in Russia: status quo Private equity in Russia is booming like never before Source: RAVI , DPEP 1994 200 6 200 7 11 80 10 0+ Number of PE funds 2005 … 1999 … 1 6 7+ Funds under management, $ bln . 1994 200 6 200 7 2005 … 1999 …
  4. 4. Co-investment in PE in Russia: status quo New funds and macroeconomics drive up the average deal size, the fact that makes syndication more practical Source: RAVI , DPEP
  5. 5. Co-investment in PE in Russia: status quo There are four key drivers for syndication in Russian private equity Syndication Local PE funds <ul><li>Limit portfolio risks </li></ul><ul><li>Diversify value added </li></ul><ul><li>Return a favor </li></ul>Global PE funds <ul><li>First deal in Russia </li></ul><ul><li>Local expertise </li></ul><ul><li>Control going forward </li></ul>Entrepreneurs <ul><li>Leverage investors’ experience </li></ul><ul><li>Minimize influence of one single investor </li></ul><ul><li>Need a lead investor in equity </li></ul><ul><li>Bundle debt & equity </li></ul>Int’l Financial Institutions
  6. 6. Co-investment in PE in Russia: status quo Local funds are the most active in doing club deals = + 1995 2001 = + 2005 = +
  7. 7. Co-investment in PE in Russia: status quo Syndication between local and global funds is gaining grownd 1998 + = 2005 = + 2007 = +
  8. 8. Co-investment in PE in Russia: status quo Syndication between local funds and international financial institutions remains popular 2003 + = 2005 = + 2007 = +
  9. 9. <ul><li>PE funds co-investing with their limited partners </li></ul><ul><ul><ul><li>EBRD – limited partner in VTB funds , Tamir Fishman, Troika, Russia Partners, Norum </li></ul></ul></ul><ul><ul><ul><li>Hedge funds </li></ul></ul></ul><ul><li>Syndication between pure-play private equity funds and local pools of capital </li></ul><ul><li>Club deals between Russian and global funds outside of Russia </li></ul>New trends in private equity syndication Clubs deals in Russian PE become more sophisticated
  10. 10. <ul><li>Bigger deals, larger companies </li></ul><ul><li>Diversify portfolio risks – important for more invested funds </li></ul><ul><li>Leverage value added by various groups of PE investors (complementary skill set) </li></ul><ul><li>More cash for follow-on rounds </li></ul><ul><li>Access to equity AND debt </li></ul>Pros and cons of co-investment in PE in Russia Club deals generate more value but take a lot of effort and time to put together <ul><li>More sophisticated deal structures </li></ul><ul><li>Need more time (and lawyers’ fees!) to close the deal </li></ul><ul><li>Need to sync time to liquidity for all investors </li></ul><ul><li>Herd mentality undermines proper risk assessment / due diligence </li></ul><ul><li>More cumbersome corporate governance (too many cooks) </li></ul>Pros Cons
  11. 11. About Delta Private Equity Delta Private Equity – pure play international fund operating in Russia since 1995 . More than $ 400 mln . invested into 5 2 companies . Financial Services Consumer Goods & Services Telecoms, Media & Technology

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