Eastern European Think 
& Act Tank Conference
M&As and Private Equity in CEE

Pete Chatziplis, CFA, ACCA, CF

3 West Club,...
Topics
    Global M&A activity
    M&A trends in Europe
    M&A and Private Equity activity in CEE
    CEE Private Equity ...
Global M&A Activity
2007 a record year for Global M&As:
      – Total Global M&A Deal Value in 2007 $ 3.6 trillion ($3.7 t...
Top 2007 Deals Globally
       • RBS-Fortis-BSCH/ABN Amro                                                               €7...
Global M&A Activity - Some Themes
 Increase in valuations and cross border activities:
      Record year in transatlantic ...
European M&A Activity
      2007 close to 2006 at historical high:
      – Credit crunch affected mega deals but not volum...
European PE Activity- Slowdown
    Europe: €212 bn in 1,270 deals, 20% of total activity in 2007
       – Focus on middle ...
CEE M&A and PE Activity
      Increased importance of PEs
      – €150 bn, 840 M&As in 2007 (11% in value, 14% in volume)
...
Main PE buyouts in CEE (2007)
         Targets                                                      Buyers                ...
CEE PE Activity- Fall in Confidence
Main Themes:
    CEE in the focus of PEs; large
    funds have specialized teams
    1...
War Stories
    The Case:
       – Acquisition of manufacturing facilities (2002)
       – Southeastern Europe

    The Is...
Q&A ?



Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New Y...
Private Equity Trends in Central & Eastern Europe
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Private Equity Trends in Central & Eastern Europe

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Trends in strategic and private equity M&As in Central & Eastern Europe. Presented at the mindspeaker/Eastern European Think & Act Tank conference in New York as part of a series of presentations from dignitaries from Central & Eastern Europe, regarding business opportunities in the region.

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Private Equity Trends in Central & Eastern Europe

  1. 1. Eastern European Think  & Act Tank Conference M&As and Private Equity in CEE Pete Chatziplis, CFA, ACCA, CF 3 West Club, New York April 24, 2008
  2. 2. Topics Global M&A activity M&A trends in Europe M&A and Private Equity activity in CEE CEE Private Equity Outlook War Stories Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 1
  3. 3. Global M&A Activity 2007 a record year for Global M&As: – Total Global M&A Deal Value in 2007 $ 3.6 trillion ($3.7 trillion in 2006) – North America: $ 1.58 trillion, 9% growth/ 4,950 deals – Europe: $1.4 trillion, same as in 2006/ 6,290 deals – Asia: $ 430 billion, 5% growth/ 2,700 deals 2007 Deal Value by Region 4,000 2007-2006 Deal Value 3,500 $440m $180 $430 3,000 $410m * Other, $180, North 2,500 5% $1,400 America, $1,400m $1,580, 44% 2,000 Asia-Pacific, 1,500 $430, 12% 1,000 $1,450m $1,580 500 Europe, $1,400, 39% 0 2006 2007 Other includes: Latin America, Africa, Middle East. North America Europe Asia-Pacific Other Source: Mergermarket, The Comprehenisve Review of North American Mergers & Acquisitions, Mergermarket Full Year 2007. Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 2
  4. 4. Top 2007 Deals Globally • RBS-Fortis-BSCH/ABN Amro €71bn Banks • Altria Group/Kraft $61 bn Consumer • Enel&Acciona/Endesa €48 bn Energy • Providence,Madison,Teachers/BCE $44 bn Telecoms • KKR,TPG,GS/TXU Corp $44 bn Energy • Rio Tinto/Alcan €32 bn Industrials • Unicredit/Capitalia €22 bn Financials • KKR&Pessina/Alliance Boots €18 bn Consumer • KKR/First Data $27 bn Business Services • TPG,GS/Alltel $27 bn Telecoms • Blackstone/ Hilton $25 bn Leisure • Bank of America/LaSalle €15 bn Financials Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 3
  5. 5. Global M&A Activity - Some Themes Increase in valuations and cross border activities: Record year in transatlantic deals Average multiple reached 10x in 2007, PEs compete with corporations Fall in activity and valuations after 2Q07 Deals take longer time Rise of Sovereign Wealth Funds Transatlantic Deals (Value) Median EV/EBITDA-Global Median Enterprise Value to EBITDA Multiple Strategic vs. Financial Buyers - Global Deals Less than $250mm 11.0x 9.1x 8.5x 8.5x 8.2x 7.7x 7.8x 7.7x 7.4x 6.8x 7.0x 6.7x 6.5x 6.2x 6.0x 5.2x 3.9x 3.5x 1.0x 2001 2002 2003 2004 2005 2006 2007 Strategic Buyers Financial Buyers Source: Thomson Financial Includes only posit ive mult iples less t han 25x. Source: Deal Drivers, The Comprehensive Review of North American Mergers & Acquisitions, Mergermarket Full Year 2007, Thompson Financial. Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 4
  6. 6. European M&A Activity 2007 close to 2006 at historical high: – Credit crunch affected mega deals but not volume – Main Sectors: Financial Services (29%), Energy & Mining (12%), Industrials (12%), TMT (16%); life sciences (5%) – Drivers: Strategic activity; cash availability in PEs; weakening US$ Deal Value - Europe Deal Value Split- Europe Source: Mergermarket, Deal Drivers, A Comprehensive Review of European M&As, Full Year Edition 2007. Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 5
  7. 7. European PE Activity- Slowdown Europe: €212 bn in 1,270 deals, 20% of total activity in 2007 – Focus on middle market and turnarounds – Cash deals / at discount – IPO exits less often than secondary placements US: $500 bn in buyouts in 2007; 35% of total activity; Asia: $42 bn, 700 deals (India $10 bn, China $9.5 bn, Taiwan $5.8 bn) PE Buyouts and Exits by Value Buyout Deals-Breakdown by Size Source: European Private Equity in Review, Mergermarket, February 2008 Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 6
  8. 8. CEE M&A and PE Activity Increased importance of PEs – €150 bn, 840 M&As in 2007 (11% in value, 14% in volume) – PE represent € 8.5 bn, 90 deals (5.5 % of total value, 10% of volume) – Sectors: Consumer 24%, TMT 17%, Industrials 15%, Energy 11%, Business Services 9%, Pharma 7%, Financial 5% PE Buyouts and Exits by Volume PE Buyouts and Exits by Value Source: European Private Equity in Review, Mergermarket, February 2008 Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 7
  9. 9. Main PE buyouts in CEE (2007) Targets Buyers Price(€ m) Sector • Bulgarian Telecom (BTC) AIG Capital Partners 1,080 Telecoms • Bite Group (Baltics) MidEuropa Partners 450 Telecoms • Lattelecom (Latvia) Blackstone 425 Telecom • Antenna Hungaria TPG/Axa/Charterhouse 327 Telecoms • SBB Kablovkse (Serbia) Mid Europa Partners 170 Cable TV/ISP • Zabka Polska (Poland) Penta Investments 131 Retail • UAB Palink (Lithuania) CVCI 113 Food retail • Expander (Poland) Innova Capital 115 FSI • SC Digital Cable (Romania) AIG Capital Partners 45 Video Trsm. • Grupa Jaan/Nordglass Enterprise Investors 82 Manuf’g • Komfort (Poland) Enterprise Investors 64 Retail Central European Private Equity Confidence Survey, Deloitte, January 2008 and June 2007. Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 8
  10. 10. CEE PE Activity- Fall in Confidence Main Themes: CEE in the focus of PEs; large funds have specialized teams 14 funds setup in 2007: €5.4bn raised; mainly in 1H Confidence decreased in line with global markets in 2ndH 2007 Private equity market activity is expected to stay about the same Central European Private Equity Confidence Survey, Deloitte, Rationalization of valuations January 2008 There’s room for growth; it’s just started…. Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 9
  11. 11. War Stories The Case: – Acquisition of manufacturing facilities (2002) – Southeastern Europe The Issues: – Deadline (1 month) – Translation (?) – Inflation – Data Quality – Nuisances – Deal Structuring The Aftermath Lessons Learned Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 10
  12. 12. Q&A ? Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 11

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