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Buyouts September 2009_Panel_Case


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Buyouts September 2009_Panel_Case

  1. 1. Country SpecificCaseStudy<br />Czech, Hungary, Romania<br />1<br />Nordcap Limited 2009<br />
  2. 2. Crisis through the numbers perspective … <br />Czech Republic<br />Hungary<br />Romania<br /><ul><li>External financing at comfortable levels
  3. 3. Flexible monetary policy
  4. 4. Low vulnerability of financial sector
  5. 5. Significant IMF and EU balance of payments support
  6. 6. Strong influence on fiscal policy by IMF/EU
  7. 7. Significant IMF and EU balance of payments support
  8. 8. Low public sector debt levels and high roll-over rates of banks’ external financing
  9. 9. EU convergence with long-term growth potential supported by EU structural and cohesion funds</li></ul>+strenghts+<br />-weaknesses-<br /><ul><li>High budget deficit with risk of revenue shortfalls
  10. 10. Wide external financing gap and C/A rebalancing risk
  11. 11. High FX leverage in domestic private sector
  12. 12. Heavy reliance on external demand
  13. 13. High share of the automotive sector in total value added
  14. 14. Interim government lacks political mandate
  15. 15. High public sector debt levels (above 80% in 2009)
  16. 16. Still wide external financing gap
  17. 17. High FX leverage in domestic private sector</li></ul>Data: UCG MIB<br />
  18. 18. Czech Republic is perceived as a „winner”<br /><ul><li>This crisis means the end of perceiving CEE as a homogenous region
  19. 19. Some countries will take it longer to recover what might be observed in unstable currencies and extreme debt to GDP
  20. 20. Romania and Hungary are clear examples of such countries
  21. 21. Contrary Czech Republic seems to cope with the crisis much better
  22. 22. In general that means the end of „one fit all” private equity model for CEE countries – each country must be evaluated separately
  23. 23. Additionally in many CEE countries banks have expropriated capital hence financing must be also contemplated separately</li></ul>Nordcap Limited 2009<br />3<br />
  24. 24. Central Europe PE confidence level is going up … <br /><ul><li>The consensus view as at April 2009 shows much higher levels of optimism compared to October 2008, with the Deloitte’s Private Equity Confidence index gaining 30 points
  25. 25. However concern about the economic environment still exists with 51% respondents still expecting further economic deterioration.</li></ul>Nordcap Limited 2009<br />4<br />Source: Deloitte<br />
  26. 26. Czech Republic gains in terms of investment value (2007/2008)<br />Nordcap Limited 2009<br />5<br />
  27. 27. And moves up in the ranking of investments / GDP<br />Nordcap Limited 2009<br />6<br />
  28. 28. Czech Republic has got also more promising structure<br />Nordcap Limited 2009<br />7<br /><ul><li>In each of the three countries later stage investments overwhelm venture investments
  29. 29. However in Czech Rep there was much more growth capital put to work
  30. 30. That might be reflection of better development prospects and more „innovation”</li></li></ul><li>Romania and Hungary lead the divestments ranking<br />Nordcap Limited 2009<br />8<br />Exit value at investment cost<br />
  31. 31. Funds committed to CEE are still rising<br /><ul><li>According to various estimates there is at least 7bn EUR in commitments to funds dedicated to CEE region
  32. 32. That money sooner or later will need to be put to work
  33. 33. However new funds are still being raised: </li></ul>Nordcap Limited 2009<br />9<br />Source: Deloitte<br />
  34. 34. Selected investments in last half of the year<br />Nordcap Limited 2009<br />10<br />Source: Deloitte<br />
  35. 35. Conclusions<br /><ul><li>Funds need to have players on the ground who understand each country’s specifics as the CEE region as a whole cannot be perceived as homogenous anymore
  36. 36. Czech Republic is the clear winner of the three countries discussed, Hungary is characterized by strong uncertainty on how much worse the economy will detoriate while Romania additionally is the least mature of the three
  37. 37. As the result we may expect more deals in Czech than elsewhere
  38. 38. Mega buy-outs model seems to be a dead one so fund managers need to be creative and flexible
  39. 39. New deals may include distressed assets, mezzanine finance opportunities, small deals in the €10-25 million range and family-owned companies with succession issues
  40. 40. We can also expect some extra VC activity caused by the state sponsored actions
  41. 41. Due diligence is utmost important, valuations should be more market based and planned exit scenarios should be realistic
  42. 42. It is a good time to evaluate the relative strength of existing portfolio companies with a view to managing towards increased efficiency and, as concerns non-performing or troubled assets, developing a realistic plan to address these problems</li></ul>Nordcap Limited 2009<br />11<br />
  43. 43. About Nordcap<br /><ul><li>Nordcap is a venture capital firm, established in 2002 to provide equity and equity-related investments in Emerging Europe's growth industries.
  44. 44. In November 2007 Nordcap sold its seed investment DRSA, to an industrial conglomerate listed on the Warsaw Stock Exchange.
  45. 45. Nordcap’s professional team consist of business analysts with expertise in information technology, telecoms, marketing and real estate.
  46. 46. Nordcap provides both:</li></ul>Venture capital<br />Mezzanine capital<br />Nordcap Limited 2009<br />12<br /><br />