A report from Deloitte, the business advisory firm, highlights how Russia’s private equity players plan to use the current market uncertainty to their advantage.

With the list of postponed IPOs increasing, public company valuations at 2-year lows and extremely difficult debt markets, private equity is emerging as the preferred financing solution for ambitious Russian companies. 50% of private equity professionals viewed the global liquidity crisis as a positive development for private equity activity in Russia at the same time as only 53% expected competition for new investments to increase (compared to 91% in 2007).

Stefan Reutter, head of Corporate Finance Advisory for Deloitte CIS, commented: “It is clearly a buyer’s market with funds which have just raised new capital being in the driving seat. Spending time to seek out the best companies at good valuations will undoubtedly lead to 2008 and 2009 being the best vintage years for private equity.”

Vitalij Farafonov, of Deloitte’s Moscow Corporate Finance Advisory team, added: “Currently most companies are really left with only 2 sources of funding; private equity or a strategic investor. This provides a great opportunity for private equity houses which can be more selective and buy well. However, the scarcity of capital could also have a negative impact on private equity in the future by slowing the economy and therefore slowing the performance of their portfolio companies. This is especially true for consumer-driven industries which remain the most popular home for private equity money.”

Key findings:

• 50% of private equity managers viewed the global liquidity crisis as a positive development for private equity activity in Russia;
• Sharp decline in confidence in the economic climate with only 7% of respondents expecting an improvement within the next 6 months (compared to 55% in 2007);
• 53% of respondents expect a decrease in entry multiples over the next 6 months compared with just 9% a year ago;
• 56% of respondents expect the size of private equity transactions in Russia to either decrease or remain the same over the next 6 months, compared with 18% a year ago;
• 28% of respondents expect market activity to increase over the next 6 months, compared with 82% a year ago; and
• 47% of respondents expect to focus on opportunities in the consumer-driven sectors.

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Notes to editors

About the research

Deloitte surveyed 65 private equity houses engaged in investments in Russia, 31 of which were overseas funds active in Russia and 34 were local Russian funds. The survey was conducted between 16 July and 20 August 2008.

About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP, which is among the country's leading professional services firms.
Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities.  Please see www.deloitte.co.uk\about for a detailed description of the legal structure of DTT and its member firms.
The information contained in this press release is correct at the time of going to press.