Private Equity – Proceeding with caution

Contact: Garret Byrne
Deloitte Central Europe
Partner, M&A Transaction Services Leader
+420 246 042 339

Riga – 16 June, 2008 — In line with the global sentiment in the private equity industry, the confidence of private equity professionals in Central Europe has fallen recently, something that is reflected in the Deloitte Central Europe Private Equity Confidence Survey.

But while private equity practitioners may be less confident in the short term, Garret Byrne, M&A Transaction Services Leader for Deloitte in Central Europe says that Deloitte expects strong medium-term growth in activity in Central Europe driven by the substantial number of new global name entrants to the Central European market and the increase in people now chasing private equity deals in the region. While the region tends to have lower multiples versus Western Europe, competition with other investors is comparatively low, and over the next five years, economic growth in Central Europe is expected to outpace Western Europe.

“We continue to see high growth prospects for private equity in the region given that Central European economies are hitting on all cylinders, for example posting the highest GDP growth rates in the past decade in 2007” commented Byrne. The rates he refers to are, for example, the annual GDP growth rates in constant prices of 6.5% in the Czech Republic and 10.4% in Slovakia.

Over a period of nearly 20 years the face of private equity in Central Europe has considerably changed. The conditions for private equity in Central Europe continue to develop in a positive way despite a world liquidity crunch and Central Europe, continues to lead the list of locations where European private equity and venture capital firms plan to assess future investment opportunities.

Key Findings of the Deloitte Private Equity Confidence Survey

Private equity funds and investment companies refocused on add-on acquisitions to increase their portfolio companies, including Penta and its acquisition of meat companies in Hungary and Slovakia, MidEuropa partners’ acquisition of Centrum Medyczne and the acquisition of Atlas.cz by NetCentrum, a Warburg Pincus portfolio company. Add-on investments are currently seen as the best way to improve portfolio efficiencies.

A downturn in the financial markets kept private equity professionals’ confidence low, even below the levels last seen in 2003. Byrne commented on this downturn, “Despite the low confidence level, the past 6-12 months have seen several big name global and European funds establish offices and hire private equity professionals in Central Europe. We at Deloitte, therefore, expect significant growth in the private equity market in the medium term”.

For more information or to download the Deloitte Central Europe Private Equity Confidence Survey please visit www.deloitte.com/lv/private-equity-confidence.

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