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.
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. 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. 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. 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 $250mm
11.0x
9.1x
8.5x
8.5x 8.2x
7.7x 7.8x 7.7x
7.4x
6.8x 7.0x
6.7x 6.5x
6.2x
6.0x
5.2x
3.9x
3.5x
1.0x
2001 2002 2003 2004 2005 2006 2007
Strategic Buyers Financial Buyers
Source: Thomson Financial Includes only posit ive mult iples less t han 25x.
Source: Deal Drivers, The Comprehensive Review of North American Mergers & Acquisitions, Mergermarket Full Year 2007, Thompson Financial.
Eastern European Think & Act Tank, Pete Chatziplis: M&As and Private Equity in CEE, Conference, 3West Club, New York, April 24, 2008 4
6. European M&A Activity
2007 close to 2006 at historical high:
– Credit crunch affected mega deals but not volume
– Main Sectors: Financial Services (29%), Energy & Mining (12%),
Industrials (12%), TMT (16%); life sciences (5%)
– Drivers: Strategic activity; cash availability in PEs; weakening US$
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. 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. 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. 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. 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. 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. 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