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Central and Eastern Europe
M&A and Private Equity Forum 2008
30 September 2008,
Palais Ferstel, Vienna, Austria
Lead Strategic Partners




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Contents
Agenda                                                                    03

Foreword                                                                  05

Chair’s opening address                                                   07

Trends in CEE M&A markets                                                 08

The new energy landscape and its implications for M&A                     09

Role and limitations of strategic M&A                                     10

Focus on Financial Services deal heat in the CEE markets                  12

Focus on the Pharmaceutical/Healthcare sector                             13

Focus on the growing significance of
private equity involvement in CEE deals                                   15

Private equity’s impact on legislation and investment protection in CEE   17

Focus on the Telecommunications sector                                    18

Strategic M&A in the Balkans for Mercator                                 19

Chair’s closing remarks                                                   20

Penta case study                                                          21

PricewaterhouseCoopers case study                                         22

Wolf Theiss case study                                                    24

Historical data                                                           28

Raiffeisen company profile                                                37
                                                                                                                                               page 3




Central and Eastern Europe
M&A and Private Equity Forum 2008
30 September, Palais Ferstel, Vienna
Agenda
08:30   Registration and coffee                                               12:15   Panel discussion
08:50   Chair’s opening address                                                       Focus on the growing significance of Private
        Heinz Sernetz, Member of the Executive Board,                                 Equity Involvement in CEE deals
        Raiffeisen Investment                                                         •	 Where	will	the	next	deals	happen?
                                                                                      •	 What	is	the	outlook	for	liquidity	in	Private	Equity	going	
09:00   Trends in CEE M&A Markets                                                        forward?
        Chris Butters, Partner, PricewaterhouseCoopers                                •	 Will	investor	appetite	remain	strong	in	tough	global	
09:20   Keynote speech                                                                   economic conditions?
                                                                                      Jaroslav Haščák, Managing Partner, Penta Investments
        •	 The	new	energy	landscape	and	its	implications	for	M&A	
                                                                                      Robert Manz, Managing Partner, Enterprise Investors
        •	 Obstacles	and	pitfalls:	the	lessons	from	the	failed	OMV/MOL	
                                                                                      Stuart McMinnies, Partner, Head of CEE Buyouts,
           takeover
                                                                                      3i Group
        •	 Partnerships	across	the	value	chain:	a	new	philosophy	for	
                                                                                      Chris Mruck, Managing Partner, Advent International
           M&A
                                                                                      Mike Wilder, Partner, PricewaterhouseCoopers
        György Mosonyi, Group	CEO,	MOL
                                                                                      (moderator)
09:40   Panel discussion
                                                                              13:00   Lunch
        Role and limitations of strategic M&A
                                                                              14:30   Chair’s opening remarks
        •	 What	transaction	types	will	result	from	the	new	wave	
                                                                                      Heinz Sernetz, Member of the Executive Board,
           of overseas interest in the acquisition of resource and
                                                                                      Raiffeisen Investment
           distribution assets?
        •	 What	are	the	policy	implications	for	CEE	when	buyers	are	          14:40   Afternoon opening address - Private Equity’s Impact
           foreign and state-owned?                                                   on Legislation and Investment Protection in CEE
        •	 What	problems	do	the	current	energy	demand	and	policy	                     •	 The	development	of	secured	lending	legislation	in	CEE
           implications produce for energy companies in CEE?                          •	 Current	enforcement	of	investor	protection	rules
        Alexander Karpushin,	Director,	European	Office,	Rosneft	                      •	 How	private	equity	can	positively	impact	the	legal	and	
        Henning von Stechow, Managing Director, Head of                                  regulatory environment and improve transaction risk for
        Energy & Utilities, Raiffeisen Investment                                        investors and lenders
        Andre Sawyer, Managing Editor, mergermarket and                               Richard Clegg, Partner, Wolf Theiss
        Consultant Editor, Pharmawire (moderator)                             15:00   Panel discussion
10:20   Panel discussion                                                              Focus on the Telecommunications sector
        Focus on Financial Services deal heat in the CEE markets                      Boris Nemšić, CEO,	Telekom	Austria	Group
        •	 Where	do	the	deals	lie	in	CEE	financial	services	given	the		   	           Dušan Mitič, Vice President, Telekom Slovenije
           wider global financial services context?                                   Nikolaus Bethlen, Partner, Mid Europa Partners
        •	 Which	domestic	players	will	be	targets?                                    Robert Paterson, Partner, PricewaterhouseCoopers
                                                                                      (moderator)
        •	 What	are	the	likely	future	developments	in	the	sector?
        Martin Grüll, CFO,	Raiffeisen	International                           15:45   Case study - Strategic M&A in the Balkans
        Horst Ebhardt, Partner, Wolf Theiss                                           Ziga Debeljak,	CEO,	Poslovni	sistem	Mercator
        Laszlo Wolf, Deputy	CEO,	Commercial	                                  16:15   Chair’s closing remarks
        Banking	Division,	OTP	Bank	
                                                                                      Heinz Sernetz, Member of the Executive Board, Raiffeisen
        Sergey Vasiliev, Deputy Chairman, Management
                                                                                      Investment
        Board Member State Corporation, Vnesheconombank
        István Lengyel, Secretary General, Banking Association                16:30   Drinks and canapé reception
        for Central and Eastern Europe (moderator)
11:00    Coffee
11:30   Panel discussion
        Focus on the Pharmaceutical/Healthcare sector
   	    •	 What	are	the	best	M&A	strategies	going	forward	for		           	
           ambitious pharma and healthcare corporates?
   	    •	 What	are	the	areas	for	future	growth	in	the	sector?
        Michael Havel, CEO,	Futurelab	
        Peter Lednicky, CEO,	Alpha	Medical
        Dieter Spranz, Partner, Wolf Theiss
        Andre Sawyer, Managing Editor, mergermarket and
        Consultant Editor, Pharmawire (moderator)



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Since opening our first office in Vienna over fifty years ago,
we have expanded to become one of the leading law firms
in Central and Eastern and South-Eastern Europe (CEE/SEE).
Our team brings together over 600 talented people from a
diverse range of backgrounds, working in eleven offices
throughout the CEE/SEE region.




Mergers & Acquisitions is one of the main areas in which our
fir m has built its reputation. Our multinational team acts as
a one-stop shop, assisting companies in a wide range of
corporate challenges. We have been involved in some of the
largest transactions in the CEE/SEE region in the recent years.
We serve our clients by combining specialist local knowledge
and relationships with the capabilities, speed and experience
of a full-service international fir m.


Contact us at:                        Horst Ebhardt
                                      Tel. +43 1 515 10 5100
Wolf Theiss                           horst.ebhardt@wolftheiss.com
Schubertring 6
A - 1010 Vienna                       or your existing contact at Wolf Theiss.
Austria                               Find out more at www.wolftheiss.com


ALBANIA AUSTRIA BOSNIA & HERZEGOVINA BULGARIA CROATIA CZECH REPUBLIC HUNGARY
 www.mergermarket.com/events/
ROMANIA SERBIA SLOVAK REPUBLIC SLOVENIA            Office details at: www.wolftheiss.com/offices
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                                                                                                                          page 5


Foreword


Welcome to the Central and Eastern Europe M&A and Private Equity Forum 2008 post-event report.




The following pages provide a summary of key sentiment             Events such as this, which seek to get under the skin of what
and viewpoints expressed by leading CEE focussed M&A               is really happening in the M&A markets have never been more
dealmakers during the Central and Eastern Europe M&A and           important. Certainly, since the event took place CEE economies
Private Equity Forum 2008. It was a thought provoking and          have suffered a greater exposure to the downturn than was
stimulating day, that served to underlined the potential of this   predicted. Despite this, the underlying sentiment remains
exciting growth region.                                            positive.

Taking place at Palais Ferstel, Vienna on 30 September,            There are very solid grounds for this - markets will adjust and
Mergermarket and the Financial Times bought together some          realign to the current conditions and there remains sufficient
of the leading M&A and private equity players in the region, to    cash available for when confidence returns. Additionally, there
discuss		recent	deals	within	key	sectors	such	as	Energy,	Oil,	     are many strategic advantages in the region that were referred
Pharmaceuticals, Healthcare and Financial Services. The event      to repeatedly in the discussions and speeches during the event.
also focussed on future deals and trends.                          These include low levels of debt, a focus on the less risky
                                                                   mid-market rather than the mega-deal space and strong
                                                                   cross-border cooperation.

                                                                   We hope you find the report a useful guide to the strategies,
                                                                   thoughts and plans of the key M&A players in the region.




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                                  6 reasons
                                 out of 30…




                                     …why we were awarded
                          “Central Europe M&A Adviser of the Year 2008”




                                               www.raiffeisen-investment.com



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RAInvest_AnzA4 englisch.indd 1                                                 19.09.2008 13:35:54 Uhr
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                                                                                                                                 page 7


Chair’s opening address



Heinz Sernetz, Member of the Executive Board, Raiffeisen Investment



The day started with a scene-setting speech by Heinz Sernetz from the event’s lead sponsor firm, Raiffeisen Investment.
Mr Sernetz heartily extolled the prospects of the Central and Eastern Europe region and its M&A environment. In his
view the three main strengths of the CEE market are: no subprime exposure; generally smaller, and low levered M&A
transactions; and high domestic and regional GDP growth.
In Mr Sernetz’s view it is this combination of factors that affords   In the future, Mr Sernetz predicts a buyers’ market in the
the region’s M&A market greater shelter from the economic             region’s M&A space. This will occur when valuations fall or
storm witnessed in other western European markets.                    normalise, and will provide opportunities for financial and
                                                                      strategic buyers. Unlike past years in the west, M&A deals in
Setting the further context, Mr Sernetz talked of how far the
                                                                      the region going forward will be structured along conservative
region has come in the past 15 years. In particular, he referred
                                                                      financing models. Most significantly, cash, not debt, will
to the privatisation programmes which have brought in foreign
                                                                      be king.
know-how and to the private sector which has contributed an
estimated 75-80% of the region’s GDP.                                 More than ever Mr Sernetz expects that mid-market
                                                                      transactions will dominate deal flow. Additionally, in his view,
At present intra-regional consolidation is taking place across
                                                                      there will still be a market for private equity. Indeed, the region
many sectors, creating regional champions that are ambitiously
                                                                      will draw in ever greater private equity interest as the asset
looking west to boulster M&A growth. Additionally, consumer
                                                                      class faces difficulty elsewhere. In addition the CEE region’s
price inflation is forecast to come down significantly in the
                                                                      higher growth more than compensates for the loss of leverage
coming years – which will allow interest rates to fall – and boost
                                                                      available in the market post credit crunch.
growth prospects in the longer term. Even though growth in the
region will slow from the 8% witnessed in 2008, it is forecast to     In summary, Mr Sernetz underlined that the region has been
remain around 5% in 2009/2010.                                        less affected by the financial turmoil and remains the second
                                                                      fastest growing region in the world after Asia.
For Mr Sernetz, one of the region’s key strengths is that its
banking system is not as ‘overblown’ as in Western Europe.
For example, the banking system asset base is around 50-80%
of GDP as opposed to 235% in Western Europe. Crucially,
this means there is still space in the banking system for
increased lending.




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Address:	Trends	in	CEE	M&A	Markets



Chris Butters, Partner, PricewaterhouseCoopers



Chris Butters gave a comprehensive and thought provoking presentation on future M&A trends in the CEE region. Firstly he
described how whilst western financial markets are living through cursed times, the events of September 2008 represented
an historic shift in financial power eastwards. The question he asked was: is the CEE region insulated from the turmoil?


Mr Butters joked that his first slide, which summarised the        3 – Increasing consumerism will drive M&A
recently failed banks was compiled before the weekend but
                                                                   The region has a very solid mid-market for M&A deals – some
was already out of date. Events of the past month, in his view,
                                                                   70% of deal flow takes place below $100m. There are also
represented a regulatory failure and a crisis of confidence. But
                                                                   expected to be significant succession issues in coming years
he was keen to underline that the CEE region is characterised
                                                                   and a need for expansion capital. Retail is a big opportunity in
by a conservatism in banking, low personal debt, and high home
                                                                   the region, with consolidation in food and drink space driven
ownership (without mortgage more importantly).
                                                                   by private equity funds. At the same time there is significant
Despite these positive factors, however, Mr Butters did admit      potential in developing domestic brands.
the CEE region suffers from some weaknesses, albeit ones
                                                                   4 – Consolidation in electricity
which emanate from the region’s economic progress. These
are:	reducing	cost	competitiveness,	appreciating	currencies,	      Butters described how there is €42bn of investment required
and some competitive impact from BRIC markets.                     in the region’s electricity market in distribution, general
Nevertheless, Mr Butters stressed that PWC remains very            privatisation and renewable projects. Furthermore, opportunities
optimistic about the region mainly based on the promise of a       are not just in the large-cap but often also in the mid-cap space.
younger generation in the CEE who live and consume, but are        5- Competition between private equity firms will intensify
also low borrowers.
                                                                   With more and more leading funds focussed on the region,
Mr Butters then outlined eight key future trends for the region    PWC expects buyout deal values to rise above the current
as	examined	in	a	recent	PWC	thought	leadership	publication:        typical average of €100m. Furthermore, debt finance is still
1 – Rising middle class                                            available
                                                                   for deals in the region.
This is driving development and M&A deals, in particular in the
Healthcare sector based on expectations of better provision.       6 – Central Asia
There is a 50% growth in deal flow. According to the EBRD,         More and more is expected from Central Asia with opportunities
the region has the most rapidly ageing population, providing       for CEE companies. In particular there will be scope for
opportunities in the private clinic and hospital space.            investment in infrastructure and logistics and M&A in non-oil
2 – Diversifying real estate                                       areas.	IPOs	of	companies	from	the	region	are	expected	to	
                                                                   grow significantly.
Butters described ‘second city syndrome’ – which is the lure
of real estate in cities beyond the region’s capital cities, as    7 – Need for IPOs
well	as	the	drift	eastwards.	Other	opportunities	identified	       The Warsaw Stock Exchange has seen 81 flotations this year,
were shopping centres in Russia, and expectations that more        making it the second most active in Europe.
multinationals would relocate to the region.
                                                                   8 – Commercial due diligence

                                                                   Commercial due diligence is becoming an essential part of
                                                                   M&A in the region.




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Keynote:	The	new	energy	landscape	and	its	
implications for M&A


György Mosonyi, Group	CEO,	MOL



Next up was the corporate perspective of György Mosonyi, Group CEO of MOL, the Hungarian oil and gas company. MOL
is Central Europe’s foremost independent integrated oil and gas group with interests in exploration, production, refining,
marketing and petrochem.


Mr Mosonyi outlined the new energy landscape in the region          MOL	was	established	in	1991	as	a	result	of	the	merger	of	
and its implications for M&A. The key drivers of energy in the      nine	companies	–	former	members	of	the	National	Oil	and	Gas	
region	in	his	view	are:	resource	constraints,	security	of	supply	   Trust.	In	following	years	MOL	integrated	and	privatised.	Among	
and global warming.                                                 other	moves,	in	2003	MOL	purchased	a	25%	stake	in	INA	in	
                                                                    Croatia. It also bought refinery businesses in Slovakia, and Shell
He also explored the obstacles and pitfalls of doing deals,
                                                                    Romania, as well as moves in Italy.
particularly in the light of the lessons learned from the
failed	takeover	of	MOL	by	OMV.	He	also	explored	the	                In	June	2007,	Austrian	energy	company	OMV	made	an	
importance of partnerships across the value chain as a              unsolicited	bid	to	take	over	MOL,	a	move	which	was	rejected	by	
new philosophy for doing M&A deals; from partnerships               the Hungarian company. The European Commission launched
with	businesses	in	Oman	to	partnerships	with	ExxonMobil	            an in-depth investigation, eventually issuing a statement of
regarding unconventional exploration.                               objections.	As	Mosonyi	said:	competition	remedies	would	
                                                                    have destroyed the value of the deal.




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Panel	discussion:
Role and limitations of strategic M&A


Alexander Karpushin, Director,	European	Office,	Rosneft
Henning von Stechow, Managing Director, Head of Energy & Utilities, Raiffeisen Investment
Andre Sawyer, Managing Editor, mergermarket and Consultant Editor, Pharmawire (moderator)



Alexander Karpushin introduced Rosneft as a company with 1.4% of crude reserves and 2.6% of crude oil production.
Number one now in Russia with 150,000 employees and, Rosneft exports 80% of production, 70% of which goes to Europe.



Moderator Andre Sawyer asked Henning von Stechow of                 Looking	across	the	region	at	relevant	alternative	technologies	
Raiffeisen Investment what opportunities existed for private        to nuclear, panellists felt that Romania and Bulgaria lack many
equity funds in energy in the region. Mr von Stechow pointed        other options. Panellists felt that Romania and Bulgaria lack
to opportunities in the deregulation and liberalisation of          many other options than nuclear. The Ukraine, Baltics, Russia,
power generation as well as in distribution and transmission.       Turkey, and Czech Republic are also heavily discussing
Climate change would also provide relevant opportunities in         pursuing nuclear.
renewable assets.
                                                                    Panellists also stressed that M&A is not the only way to
When pressed on the role of the state in national oil companies     expand in the CEE region, with partnering a strong strategy
like Rosneft, Mr Karpushin stressed that since its listing on the   too. For example, it is difficult to acquire in the generation
London	Stock	Exchange	in	2006,	some	15%	of	the	company’s	           sector in Eastern Europe, but JVs are possible.
shares are listed, and held by 140,000 shareholders. In his
                                                                    Panellists were at pains to suggest you cannot adopt a
belief “Rosneft works on a commercial markets basis.”
                                                                    blanket approach to the region. Furthermore, whilst there is a
Talking about alternative or renewable energies, Mr von             tremendous need for investment, there is money ready to be
Stechow believes that nuclear energy is inevitable. Wind power      invested. The question is finding the right projects.
is another important area for significant development because
it could, with offshore projects, make a substantial contribution
to the renewable target of 20% by 2020. All other technologies
have their potential but remain second tier choices (including
geothermal, biomass and solar) have their potential but remain
second tier choices.




                                                                    Henning von Stechow makes a point




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Panel	discussion:
Focus on Financial Services deal heat in the
CEE markets

Martin Grüll, CFO,	Raiffeisen International
Horst Ebhardt, Partner, Wolf Theiss
Laszlo Wolf, Deputy	CEO,	Commercial	Banking	Division,	OTP Bank
Sergey Vasiliev, Deputy Chairman, Management Board Member State Corporation, Vnesheconombank
István Lengyel, Secretary General, Banking Association for Central and Eastern Europe - (moderator)



Martin Grüll felt that the CEE region is still a very attractive banking market, with traditional customer lending practices.
The banking market is, however, not homogeneous. The Czech Republic, for example, is relatively consolidated whereas
Bulgaria, the Ukraine and Russia are still very fragmented. In these markets second and third tier banks have no future
except as acquisitions for larger banks.
The drivers of consolidation are increasing competition and          Mr Vasiliev. Felt no, because there is too much domestic
more stringent capital limits. The sector does present a bright      consolidation for them to attend to first. The rest of the panel
future for buyers, a buyers’ market, so buyers can afford to         was in agreement.
be selective.
                                                                     Looking	at	future	potential	activity,	Martin	Grüll	of	Raiffeissen	
Laszlo	Wolf	of	regional	giant	OTP	underlined	the	great	potential	    admitted that whilst they had made significant buys in the
of the market, with banking penetration and asset coverage still     Ukraine and Russia, they would always look at opportunistic
very low compared to western Europe standards.                       acquisitions	and	deals.	Organic	growth	was	also	a	strong	
                                                                     imperative.
Horst Ebhardt, Partner, Wolf Theiss, highlighted that crisis deals
in the banking sector can be expected to take place rapidly.         Laszlo	Wolf	of	OTP	claimed	he	was	always	ready	to	sell	assets	
                                                                     but insisted that it has to be for a good price. Russia, he feels,
Sergey Vasiliev of Vnesheconombank believed that big private
                                                                     is not quite ready. It has to be a good price he underlined.
commercial Russian banks will buy mid-sized banks, expanding
                                                                     Russia he feels it not quite ready, but will consolidate in the
into Russian regions. There would, he underlined, be significant
                                                                     next one to two years.
consolidation among large private Russian private banks.
Foreign and western buyers can be expected to come in, but           Horst Ebhardt, Partner, Wolf Theiss, admitted that he had been
only at the next stage.                                              involved in two disposals and one acquisition in the banking
                                                                     sector this year, none of which had been major transactions.
István	Lengyel,	moderator,	asked	whether	Russian	banks	will	
                                                                     The CEE region has been a bright spot during the current
look outside of Russia for M&A. Mr Vasiliev felt that this would
                                                                     crisis he proclaimed. However, the wider financial crisis can be
be premature as there is too much consolidation for them to
                                                                     expected to trigger M&A deals deals in the long term at least.
attend to first.




The panel take in Martin Grull’s assessment



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Panel	discussion:
Focus on the Pharmaceutical/Healthcare sector


Michael Havel, CEO,	Futurelab
Peter Lednicky, CEO,	Alpha Medical
Dieter Spranz, Partner, Wolf Theiss
Andre Sawyer, Managing Editor, mergermarket and Consultant Editor, Pharmawire - (moderator)



Futurelab and Alpha Medical are two of the leading providers of laboratory services for medical diagnoses in Central
and Eastern Europe



Michael	Havel,	CEO	of	Futurelab	began	by	outlining	his	             Peter	Lednicky	also	talked	about	the	importance	of	IP	and	staff	
company’s ambitious new market entry strategy of being in           retention post-sale. It is crucial to keep staff motivated and
the top three players within a two year timeframe. A priority       informed and to negotiate their management contracts as
is to look for companies with stable insurance regimes              much as any non-compete clauses.
he explained.
                                                                    Dieter Spranz described his role as a lawyer on these
Peter	Lednicky,	CEO	of	Alpha	Medical,	talked	of	the	fragmented	     transactions as being the unpleasant one of having to think
healthcare market in the CEE region, and how he feels that a        about worst case scenarios, in which case non compete clauses
buy & build strategy is increasingly viable.                        are very relevant.

Dieter Spranz, Partner with Wolf Theiss, believes that              Andre Sawyer asked how commonplace earnouts were in the
reimbursement by health insurance funds is an important             sector. The consensus among the panel was they could be rife
consideration. In his view, companies of a certain size look        for disputes but they were often best way to balance buyer/
for a code of compliance that exceeds local levels and meets        seller views on value.
more rigourous international standards. IP rights can differ from
                                                                    Michael Havel described the strength of the CEE market
company to company.
                                                                    being its optimism, dynamism and openness to new ideas.
Andre Sawyer, Managing Editor, mergermarket and Consultant          Dieter Spanz, meanwhile, believes that at present the larger
Editor of Pharmawire, asked if a blanket approach could be          economies are more attractive than niches for M&A. Peter
applied to doing M&A deals in CEE healthcare. In response           Lednicky	identifies	Bulgaria	and	Romania	as	having	the	most	
Michael Havel believes a blueprint approach can work but            fragmented markets. Meanwhile, Michael Havel believes that
it is important to collaborate with the same advisers. Peter        Russia has numerous co-operation opportunities. Significant
Lednicky,	however,	wants	to	underline	that	whilst	there	are	        levels of opportunity also exist in Bulgaria, Romania, Turkey
often similarities, reimbursement regimes vary from country to      and the Ukraine.
country. For instance in the Ukraine there is no reimbursement,
but in Slovakia it is almost 100%.

Michael Havel underlined that small laboratories in the
CEE region are often managed by former owners – who are
often doctors – and they need to be carefully and sensitively
supervised.

Peter	Lednicky	agreed	that	businesses	are	often	pretty	small,	
and deals are done without datarooms and there is a hands-on
and flexible approach to due diligence. There can, he admitted,
often be tax optimisation in the books of companies.



                                                                               Andre Sawyer moderates this panel discussion



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page 14



 Real experience, real deals in Central and Eastern Europe
                                                         From Almaty to Zagreb
             CEE 2006                          CEE 2006                            CEE 2007                         CEE 2007                           CEE 2007

              Sale of                      Sale of 66% of                  Disposal of 100% stake in               Acquisition of                 Sale of 66% stake in
                                           SLOVENSKÉ                                                                                                 subsidiary of
                                         ELEKTRÁRNE, a.s.                                                      DELTAX SYSTEMS
                                                 to                                                              (software firm)
                                                                          (steel materials merchant) to                by                          to a consortium of

        non-core business
                                           Lead advisor to
       Lead advisor to seller            Slovak Government                   Lead advisor to seller           Lead advisor to buyer              Lead advisor to seller




             CEE 2007                          CEE 2007                            CEE 2007                         CEE 2007                           CEE 2007


       Long term lease of the           100% acquisition of               Acquisition of a hydrocarbon      Joining the Consortium                   Acquisition of
             enterprise              ARTIMA supermarkets from              exploration license in Libya       SKANLED which is
       formed by 3 hospitals                                                            by                developing gas pipeline from
                 for                                                                                          Norway to Sweden
                                                                                                                 and Denmark                               by

                                                by
                                    Carrefour Romania for €55m
        Financial advisor to
         Olomouc Region                 Lead advisor to seller                 Financial advisor                 Financial advisor                  Financial advisor




             CEE 2007                          CEE 2007                            CEE 2007                         CEE 2007                           CEE 2007

           Acquisition of                  Acquisition of                        Acquisition of                    Acquisition of
                                          Germanos Polska
                                                                                                                                                Sale of Albinuta Shops
                                                                                                                                                  (supermarket chain)
                 by                                                                                                      by                           by Maxima
                                                    by                                 by
                                                                                                                                              (Leading Lithuanian retailer)
                                                                                                                                                           to
                                                                                                                                                    Profi Rom Food
          Financial advisor                Financial advisor                   Financial advisor                 Financial advisor                  Seller advised by




             CEE 2007                          CEE 2008                            CEE 2008                         CEE 2008                           CEE 2008


     Siemens financial services                                                                            Strategic advisor in the buy side   SUMMIT AUTÓ HUNGARY
                                                                                                            process (sale of 75% stake)
                                    (electricity distribution & supply)          Sale of 99.9%             Megaink Digital purchased by
    Sold its Hungarian subsidiary                                          of Diana Forest by Fadesa        INX Group Limited a wholly
                                                Sale of                                                   owned subsidiary of Sakata INX      Sold its Hungarian subsidiary
                to                     Electrica Muntenia Sud                          to
          De Lage Landen                 to ENEL for €820m                      Barlinek Poland                                                            to
                                                                                   for €23m                                                              Gablini

        Siemens advised by                 Seller advised by                   Seller advised by                  Buyer advisor                    Summit advised by




 For any information or questions relating to deals in Central Eastern Europe please call:

 Chris Butters          CEE Leader                       +420 602 714 492                   Raikhan Kozhamseitova             Kazakhstan            +7 3272 980 448
 Tomas Horacek          Czech Republic                   +420 251 151 111                   Tanja Gligorevic                  Serbia                +381 11 3302 100
 Gennadiy Greblov       Ukraine                          +380 44 490 6777                   Ivailo Vatev                      Bulgaria/Bosnia       +359 2 9355 200
 Bojidar Neitchev       Slovenia                         +359 2 9355 200                    Radu Stoicoviciu                  Romania               +40 21 202 8640
 Geoff Upton            Poland                           +48 22 523 4000                    Zuzana Lachova                    Slovakia              +421 259 350 111
 Michael Knoll          Russia                           +7 95 967 6000                     Laura Qorlaze                     Albania               +355 69 202 1370
 Clifford Isaak         Georgia/Azerbaijan/
                        Armenia                          +995 32 508061
 Philippe Bozier        Macedonia                        +389 2 3116 638
 Ferenc Geist           Hungary                          +36 1 461 9100
 Robert Paterson        United Kingdom/CEE               +44 207 583 5000



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                                                                                                                          page 15


Panel	discussion:
Focus on the growing significance of private
equity involvement in CEE deals

Jaroslav Haščák, Managing Partner, Penta Investments
Robert Manz, Managing Partner, Enterprise Investors
Stuart McMinnies, Partner, Head of CEE Buyouts, 3i Group
Chris Mruck, Managing Partner, Advent International
Viera Kucerova, Partner, PricewaterhouseCoopers - (moderator)



On the panel, new market entrant 3i sat alongside established CEE buyout veterans from Advent International, Enterprise
Investors and Penta Investments. Chris Mruck, Managing Partner of Advent International, a private equity house that has
been focussed on the region since 1994, discussed how his firm had earlier this year closed its latest €1bn fund.

Mruck admitted that the timing of Advent’s fund had been           Chris Mruck, meanwhile, was positive that new entrants will
fortuitous, stating that although the region is not decoupled      take	the	region’s	buyout	market	to	“the	next	stage”.	Other	
from global events, the effect felt may not be as pronounced in    panellists agreed that deal flow in the region is now too large to
experienced more developed markets. For Mruck the extent of        be serviced by just two or three firms. Robert Manz of Enterprise
the impact will be largely dependent on how long the current       explained that it is now about funds in the region becoming
market disruption lasts.                                           more and more differentiated. In terms of competition with
                                                                   strategic buyers, the panellists conceded that the pendulum
Stuart McMinnies, Head of CEE Buyouts with 3i, also agreed
                                                                   was	swinging	back	towards	corporates,	and	that	the	IPO	
that there will be an impact on deal making in the region.
                                                                   market remains pretty much closed for exits. As a result, it is
However, along with all other panellists, McMinnies underlined
                                                                   foreseeable that private equity funds in the short term will have
that the CEE is a market where lower leverage deals are more
                                                                   to sit tight, work closely on value creation in portfolio companies
commonplace, and as a result the impact of reduced leverage
                                                                   and wait for the market to stabilise.
is less of a factor. Indeed, Jaroslav Haščák, Managing Partner,
Penta Investments, saw some positives to have emerged from         Despite current global uncertainty, however, the collective
the credit crunch for deals in the region. Namely that with less   consensus of the panel was that the CEE region is in relatively
LBOs	around,	funds	had	to	focus	more	than	ever	on	value	           good shape. Furthermore, the region’s lower leveraged deals
creation and a flight to quality assets.                           and favourable GDP outlook means that cash rich private
                                                                   equity funds are likely to continue to actively pursue targets
Viera Kucerova, Partner from PWC, the panel’s moderator,
                                                                   in the region.
asked if the CEE region could expect to see more new firms
entering in coming months. All panellists felt this would be the
case	and	Stuart	McMinnies	of	newcomer	3i	said:	“Sadly,	yes,	
the genie is out of the bottle.” The agreement was that even in
the current market there is plenty of headroom for the growth
of the asset class in the CEE. This is principally due to the
private equity market still being significantly less competitive
than other Western European markets such as Paris where
SBOs	account	for	almost	60%	of	all	buyouts.	Furthermore,	
buyouts as a percentage of the CEE region’s GDP are still far
lower than in Western Europe.




                                                                   Viera Kucerova filled in at the last minute to moderate this
                                                                   excellent panel discussion




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We see
  opportunities
   where others don’t.
   Unprecedented flexibility                       Real hands-on
   We only use evergreen fund supplied            We focus on businesses in which
   by our shareholders. That’s why our            we can use our expertise. We take
   reaction to new opportunities and              a very active part in managing the
   changes is both fast and flexible.              companies in our portfolio.




   Penta is an investment group founded in 1994. It is active in the area of private equity
   and real estate, controls almost 30 companies and provides more than 20,000 jobs.
   In 2007, its portfolio companies reported consolidated revenues of EUR 1.3 billion.
   Penta’s private equity investments have recorded an average IRR of 50% since 2000.
   www.pentainvestments.com
                                                                                                                             page 17


Afternoon	opening	address:
Private equity’s impact on legislation and
investment protection in CEE


Richard Clegg, Partner, Wolf Theiss



After lunch Richard Clegg, Partner with Wolf Theiss, gave an informative presentation on the legal environment for private
equity in the CEE region. After a brief introduction introduction he outlined the development of secured lending legislation
in CEE, current enforcement of investor protection rules, and how private equity can positively impact on the legal and
regulatory environment and improve transaction risk for investors and lenders.
Richard Clegg started off by quoting from mergermarket’s             Richard Clegg then went on to outline some of the more
Private Equity in Emerging Europe thought leadership study,          colourful incidents or cautionary tales witnessed in the region
in which 71% of interviewed private equity funds placed legal        in previous years where private equity funds encountered local
risk as the most serious factor when contemplating deals in the      partners that fraudulently altered asset agreements.
region.	Legal	risk	in	Clegg’s	view	is	always	significant	and	is	a	
                                                                     Despite such risks, however, Richard Clegg remains optimistic
function of the relative youth of most jurisdictions in the CEE
                                                                     that private equity can solve many of the issues of corruption
region. But how, he asked, can buyout firms help themselves?
                                                                     in the region. In his view, private equity is a very powerful force
Any deal relies on some level of legal certainty and regulatory
                                                                     for change. This is because these funds invest in personnel,
consistency. Banks also need to know the financial health of the
                                                                     management techniques, and technology. They also provide
companies concerned.
                                                                     opportunities for local talent, improve the efficiencies of
The presentation moved on to the issue of investor protection.       businesses, and more generally connect companies to the
As Clegg admitted, fraud is the ‘elephant in the room’ and not       global community.
just for private equity funds but also for the banks and debt
providers. Investors in the region need to adopt a ‘what if?’
mindset, and for this reason there is a lot of co-investment
in	the	CEE	region.	Over	past	years	the	CEE	region	has	taken	
great strides in improving legislation. But mergermarket’s
report highlights that there is still concern among private equity
investors. Clearly, legislation depends on enforcement and a
proper functioning court system.




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page 18


Panel	discussion:
Focus on the Telecommunications sector


Boris Nemšić, CEO,	Telekom Austria Group
Dušan Mitič, Vice President, Telekom Slovenije
Nikolaus Bethlen, Partner, Mid Europa Partners
Robert Paterson, Partner, PricewaterhouseCoopers - (moderator)



Boris Nemšić, CEO of Telekom Austria, kicked the panel off in lively fashion by underlining that the telecom sector was not
responsible for the current market crisis – unlike the dot-com crash.



The panel described how the CEE’s market is now sizeable            Robert Paterson, Partner with PricewaterhouseCoopers and
– with 400m mobile phone subscribers in the region, and on          panel moderator, asked whether private equity funds would
average 100% penetration. Additionally, private equity plays        look at privatisations. Telekom Slovenia, he recalled, had seen
a much larger role than in previous years in both fixed and         three to four high level private equity bids. General consensus
mobile assets. At the same time the stocks of telecoms              was that the leverage game was no longer beating the synergy
businesses in the region are generally holding up above             game. Panellists described how many players are capitalising
the general trend and large telecoms companies are taking           on the synergies to be found in combining fixed, mobile and
measures to stay competitive.                                       broadband. Effectively it is a combination based on giving
                                                                    customers what they want.
There are, as panellists conceded, not many privatisation
opportunities left in region. Those remaining are in Slovenia,      Panellists were also muted on the likelihood of mega-mergers
Serbia, and Belarus. Boris Nemšić raised concerns regarding         in the sector. The tie-up of France Telecom and Telia had
the level of EU regulation in the telecoms sector pointing to the   failed they explained, and the problem with mega mergers is
attraction for his company of buying markets like Belarus that      they raise political issues. The panel conceded that the ideal
are not regulated by the EU.                                        structure of a leading telco was now based on three pillars.
                                                                    The first was a strong or dominant position in a developed
Also on the panel was Nikolaus Bethlen, a Partner with Mid
                                                                    western market. The second was to have businesses in a
Europa Partners, a fund with a long history of investments in
                                                                    development market within the CEE region. The third was to
the sector. Mid Europa currently holds seven telecom assets in
                                                                    have high growth investments in markets within Asia or Africa.
the region. Typically the fund has targeted markets with lower
penetration. They also favour where possible co-investing with      Agreement across the panel was that M&A deals would
strategic	players	such	as	Orange,	who	can	bring	their	technical	    continue to happen in the next 12 months, but at lower
and product expertise. This combination of a trade buyer’s          multiples than previously.
products, and Mid Europa’s expertise in management selection
and financing has proved vital in previous deals. Although
Nikolaus Bethlen conceded that the latter is ever harder to
find now.




                                                                    The panel take a moment to reflect on the discussion



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                                                                                                                           page 19


Case	study:
Strategic M&A in the Balkans for Mercator




Ziga Debeljak,	CEO,	Poslovni sistem Mercator


Next up was a case study from Mercator, a food retailer in the Balkans, by Ziga Debeljak, its CEO. Mercator is a business
with €2.6bn in sales, 85% of which come from its food retail operations. The rest comes from its franchises of Intersport
outlets in the region. According to Ziga Debeljak, Mercator has spent €1bn on capital expenditure in the past four years, and
has one million square metres of retail space.
Mercator	is	currently	based	in	five	markets:	Slovenia	(its	         Mercator’s M&A activity has consisted of two deals in 2005,
home territory), Croatia, Serbia, Bosnia & Herzegovina, and         three	in	2006	and	two	in	2007.	It	has	also	established	a	strategic	
Montenegro. At present it is preparing for entry into Macedonia     purchasing	alliance	with	Plodine	in	2006	which	then	expanded	
and Bulgaria. Its international strategy is also to enter Romania   to encompass Billa in 2008.
and Albania in the next two years.
                                                                    According to Ziga Debeljak, some of the key M&A challenges
Mercator has a 75% market share in Slovenia, and is listed          when buying assets are legal safety, legal status of real estate,
on	the	Ljubiana	exchange.	Its	strategy	is	to	become	the	leading	    political and antitrust issues. Also of significant consideration
retailer in South Eastern Europe (SEE). The SEE region as           are issues around business integration, in particular meshing
a whole, Ziga Debeljak admitted, is still unconsolidated but        corporate cultures.
consolidation is underway.

Mercator operates in mainly traditional retail formats but
modern formats are being rapidly introduced. It is increasingly
encountering international entrants both in terms of discount
as well as hypermarkets. Ziga Debeljak underlined the
importance of acting swiftly to seize leading market position
in the retail sector.




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page 20


Chair’s closing remarks



Heinz Sernetz, Member of the Executive Board, Raiffeisen Investment



Heinz Sernetz closed the day with his summary of key highlights. In particular, he mentioned the positive economic trends,
rising consumer spending, low indebtedness, low loans, and low mortgage usage.



Additionally, Heinz Sernetz pointed to the fact that the region’s   Debt	finance	is	now	a	scarce	resource.	Looking	forward,	Heinz	
underdeveloped stock exchanges do not play such a major             Sernetz expects the M&A opportunities in the CEE region will
role and the smallish banking sector has significant potential      be	in	the	following	areas:	highly	leveraged	companies	that	
to catch up. This leads to a region that Mr Sernetz feels is less   need refinancing; real estate based businesses; restructuring;
vulnerable and less exposed than the rest of Europe and the         consolidation among second and third tier banks; and energy
US. Additionally, the region has strong local currencies which      businesses. The sales of regional assets and divisions of
are all generally appreciating against the Euro.                    struggling US and Western Europe businesses (like AIG)
                                                                    can also be expected to drive deal flow.
In the past two years, the M&A market has seen high
valuations, up to 90% leverage in some deals, significant           In conclusion, Heinz Sernetz, summarised the region as being
private equity involvement, competitive sale processes, and         less vulnerable than many others from economic difficulty –
international tenders.                                              and strongly positioned as the closest ‘growth region’ to
                                                                    Western Europe. He remains very positive and believes the
Until recently it has been a good sellers’ market, fuelled by
                                                                    day’s discussions have demonstrated that in 2009 it will
privatisation. Now and in the future, however, valuations will
                                                                    outperform other regions.
go down and the question is when will they bottom out?




          The magnificent setting of the Palais Ferstel                        The audience take note of the discussion




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                                                                                                                                             page 21


Penta	case	study:
Expansion in medical laboratories

Alpha Medical laboratories are an example of what was originally a local project, now transforming into a campaign to
build one of the strongest CEE market players.



Healthcare is one of the key private equity priorities for Penta; it            Financial indicators:
includes pharmacies, health centres and poly-functional clinics,
                                                                                   R
                                                                                •	 	 evenues	in	excess	of	EUR	20	million,	a	strong	dynamics	of	
health insurance funds and a paramedical service. Penta prefers
                                                                                   growth	against	2006	(74%)
investments with a potential for international expansion.
                                                                                   E
                                                                                •	 	 BIDTA	margin	grew	from	9.7%	(2006)	to	18.6%	(2007)
“Medical laboratories are a highly fragmented field; there hospital
 laboratories, in-patient laboratories and out-patient laboratories             Penta hands-on:
 catering to general practitioners. Alpha Medical aspires to build a
                                                                                •	 1	Partner
 network of laboratories comprising large, fully equipped facilities, as
                                                                                •	 1	Investment	Director
 well as smaller low-cost satellite laboratories with the capacity to satisfy
                                                                                •	 2	junior	investment	professionals
 the needs of general practitioners and hospitals. The model will fully
 benefit from economies of scale”, said Eduard Maták, Investment
                                                                                Role:
 Director, Penta.
                                                                                •	 strategic	support	and	facilitation	of	international	expansion
History of the Alpha Medical network:                                           •	 financial	backing

   1
•	 	 997	–	PharmSwiss	launched	a	start-up	project	in	the	field	of	
                                                                                Expansion and exit:
   laboratory clinical diagnostics services
   2
•	 	 000	–	Alpha	Medical	is	born	as	a	brand,	and	the	business	                  Alpha Medical seeks to replicate the business model that
   ventures into pathology, molecular biology and genetics                      worked well in Slovakia also in other countries. The company
   2
•	 	 006	–	Alpha	Medical	gets	the	highest	certification	for	clinical	           has already opened its first green field lab facility in the Ukraine;
   laboratory	practice	–	EN	ISO	15	189.	Penta	becomes	a	100%	                   acquisitions in Poland, Bulgaria and Romania are in progress.
   shareholder of the company
                                                                                “Alpha has the potential to play a pivotal role in the process of
•	 2007	–	expansion	to	new	markets
                                                                                 consolidation in the medical laboratory field in the region and the
                                                                                 demand for laboratory services has been rapidly growing. Our team has
Profile of Alpha Medical:
                                                                                 done a good job mapping out the business opportunities. The market in
   A
•	 	 lpha	Medical’s	USP	is	that	it	provides	all	types	of	IVD	clinical	           the target countries, measured in revenues, represents around EUR 1
   testing services. Alpha is the only laboratory in Slovakia that               billion. That is also why we are not planning an exit from this venture.
   meets the stringent EU criteria for laboratory                                The most likely partner will be one of the big global market players,”
•	 over	400	staff                                                                concludes Eduard Maták.
   1
•	 	 9	laboratories	in	Slovakia,	branches	in	Poland,	Romania,	
   Bulgaria and the Ukraine
   C
•	 	 aters	to	more	than	1,000	general	practitioners	and	10	
   hospitals; tests more than 7,000 patients and performs
   45,000 tests on a daily basis




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page 22


Case	study:
Future	trends	in	CEE	M&A:
Summary and headline statistics
“GDP growth rates of between 5% and 10% across the region have fostered a vibrant M&A market as local and overseas
businesses have sought to respond to change and take advantage of fast-growing markets”.



Central and Eastern Europe’s economies have undergone a                opportunities for investment. The mega-deals are well
transformation in the past few years as preparation for and            publicised, but less well known is the fact that the country’s
accession to the European Union have stabilised the new                mid-market is now becoming an active area for M&A. Below
and prospective member states, while rising commodity prices           the big league, companies are consolidating fragmented
have filled the coffers of countries such as Russia. GDP growth        industries to tap into Russia’s vast internal market as wealth
rates of between 5% and 10% across the region have fostered            starts trickling down and creating new middle classes
a vibrant M&A market as local and overseas businesses have             with increasing disposable incomes. They are also looking
sought to respond to change and take advantage of fast-                beyond Russia’s borders to gain access to new markets and
growing markets.                                                       technologies and diversify risk.

Privatisation processes are continuing in many countries,              For some, venturing further eastwards to Russia and Central
offering a wealth of opportunities to buyers, but the region is        Asia is a natural step because the high growth and shifting
now home to a deep and increasingly sophisticated private              frontiers promise higher returns in the form of new markets
sector M&A market, covering a broad spectrum of sectors.               and nascent consumer cultures. Yet the fact remains that
Even those that were historically considered tough, such as            many investors are still wary about Russia and its neighbouring
heavy engineering and healthcare, are now actively being               states. While they may have become comfortable with the idea
targeted by investors.                                                 of buying in the new European Union member states, many
                                                                       buyers view the political situations and the legal and regulatory
Our	markets	have	been	helped	by	the	fact	that,	while	the	
                                                                       frameworks as being too unstable to warrant serious attention
“credit crunch” has squeezed many parts of the world, CEE and
                                                                       – for now.
Russia have felt less of an impact. It is still possible to obtain
debt financing for good deals – even if it does take a little longer   This polarisation of views will diminish over time, of course. Yet
than usual – and local banks, which have historically been more        we believe the wider region already holds an enormous amount
conservative than their Western European or US counterparts,           of opportunity for those armed with the right knowledge. We
are still very much in the lending business.                           hope this report will add to your understanding of the issues
                                                                       affecting the different markets both today and in the future,
As the M&A landscape develops, we are seeing increasing
                                                                       and help you to unlock the untapped potential that Central and
interest in the region among international private equity
                                                                       Eastern Europe, Russia and Central Asia could hold for your
funds as well as larger fundraisings from local players. With
                                                                       business. It continues to be an exciting time across Central
global firms such as TPG and pan-European funds including
                                                                       and Eastern Europe.
Bridgepoint opening offices in CEE and Russia, as well
as other firms gathering resources to invest in the region,
competition is building in some parts of the market for deals.
Local	and	international	players	are	competing	particularly	in	the	
€100m-plus deal bracket – an area where deals are few and far
between in many CEE countries.

Russia’s sheer size, its power to accumulate wealth
through exploitation of hydrocarbons and its rapid economic
transformation mean that it is likely to offer more €100m-plus




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                                                                                                                          page 23


Future	trends	in	CEE	M&A:
Summary and headline statistics



Trend 1                                                            Trend 5
The rising middle class will drive healthcare deals                Competition between private equity firms will intensify

•	 	 isposable	incomes	are	on	the	increase
   D                                                                  I
                                                                   •	 	nvestors	are	looking	to	CEE’s	fast-growing	economies	for	
•	 Private	equity	is	targeting	investments	in	clinics                 deal flow
•	 Private	hospitals	are	becoming	an	active	area	for	investment    •	 Local	firms	are	raising	larger	funds
                                                                      P
                                                                   •	 	 rivate	equity	frontier	is	shifting	to	East	and	South
199 - the number of healthcare deals completed in CEE
during 2007                                                        $406m - the amount private equity firms in the region raised
$1.9bn - the amount invested in healthcare deals in CEE            during 2003
during 2007                                                        $14.6bn - the amount private equity firms in the region raised
                                                                   during 2007
Trend 2
Diversifying real estate opportunities                             Trend 6
                                                                   Central Asia and the Caucasus will see increasing
   M
•	 	 ove	to	urban	centres	away	from	the	capitals
                                                                   foreign investment
   I
•	 	nvestors	shifting	their	gaze	further	East
•	 	 ome	maturity	developing	in	certain	markets
   S                                                                  H
                                                                   •	 	 igh	commodity	prices	are	generating	wealth
                                                                   •	 Infrastructure	and	logistics	offer	great	opportunities
6 - Polish towns with a population of more than a million people
                                                                   •	 Asian	investors	are	flooding	to	the	region
5.5% - expected yield in 2008 from residential apartment rentals
                                                                   9.4% - Georgia’s GDP growth in 2007
Trend 3                                                            $25bn - the estimated amount needed for investment in
Increasing consumerism in Russia will drive M&A                    Kazakh infrastructure

   M
•	 	 id-market	deals	are	gaining	momentum
                                                                   Trend 7
•	 Fragmented	industries	are	consolidating	fast
                                                                   The need for growth capital will drive IPOs
•	 A	new	wave	of	smaller	strategic	buyers	is	targeting	Russia
                                                                      C
                                                                   •	 	 ompanies	cannot	afford	to	delay	IPOs	if	they	are	to	take	
71% - the percentage of deals below $100m in 2007
                                                                      advantage of fast growing markets
$30bn	-	Russia’s	largest	deal	in	2007:	the	RUSAL-SUAL-
                                                                      W
                                                                   •	 	 arsaw	is	becoming	a	regional	stock	exchange
Glencore tie-up
                                                                   25 - the number of foreign companies listed on the Warsaw
Trend 4                                                            Stock Exchange
Consolidation in the electricity sector will continue apace        $60.5bn - the amount raised by companies in CEE and Russia
•	 	 nergy	firms	seeking	vertical	integration
   E                                                               through	IPOs	in	2007
•	 Investment	need	is	driving	sales
•	 Energy	security	and	renewables	demand	new	technologies          Trend 8
                                                                   Commercial due diligence is becoming an essential part
813% - the increase in 2007 Russian deal value in electricity      of M&A
over	2006	figures
$42bn - the amount of investment needed in CEE’s generation           B
                                                                   •	 	 uyers	need	to	come	to	CEE	with	finely	tuned	strategies	to	
capacity                                                              ensure M&A success
                                                                      I
                                                                   •	 	nvestors	need	to	find	and	test	new	angles	to	win	deals	in	
                                                                      an increasingly competitive market
                                                                      S
                                                                   •	 	 ellers	are	looking	to	maximise	value	through	vendor	
                                                                      due diligence




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page 24


Case	study:
Main features of the Austrian
financial markets stability laws
On 27 October 2008 Austria, like most other European countries, enacted financial markets stability laws (the Stability
Package) in order to prevent potentially detrimental consequences on Austrian banks and insurance companies resulting
from the international financial crisis and to enhance the level of trust in the Austrian financial markets


The effects and mechanics of the Stability Package are highly       Market rate compensation and market interest rates must be
relevant to anyone doing business in Austria, most notably to       charged for all of the measures under the Interbank Market Act.
those doing business with Austrian banks. As this article will      Collateral can be agreed upon. Nobody has a legal right to the
explain, the Stability Package may also lead to a substantial       measures under the Interbank Market Act, however, the state
increase in the Austrian state’s equity and debt stakes in banks    guaranteed interbank clearing entity must provide its services
and insurance companies. If this is in fact the case, the M&A       equally to all banks and insurance companies. The Interbank
community may very well see a wave of major privatisations in       Market Act will be no longer in force as of 31 December 2009.
Austria in the years to come following the financial crisis.
                                                                    Recapitalisation of Austrian Banks and Insurance
This article provides an introduction to the Stability Package.     Companies

Overview                                                            The Financial Market Stability Act authorizes the Minister of
                                                                    Finance to recapitalise banks, as defined in Sec. 1 para. 1 of the
The	four	main	pillars	of	the	Stability	Package	are	as	follows:	
                                                                    Austrian Banking Act, and domestic insurance companies, as
   t
•	 	 he	Interbank	Market	Act,	which	aims	to	strengthen	the	         defined in the Austrian Insurance Supervision Act, by various
   Austrian interbank money market through state guarantees         means up to an aggregated maximum amount of EUR 15 billion.
   for interbank lending;                                           Recapitalisation	measures	include	the	following:
   t
•	 	 he	Financial	Market	Stability	Act,	which	enables	the	
                                                                       a
                                                                    •	 	 ssuming	liability	by	the	state	for	(i)	obligations	of	banks	or	
   recapitalisation of Austrian banks and insurance
                                                                       insurance companies, and (ii) obligations vis-à-vis banks or
   companies through state funds by various means;
                                                                       insurance companies;
   a
•	 	 mendments	to	the	Banking	Act	that	empower	the	Austrian	
                                                                       p
                                                                    •	 	 roviding	state	loans	or	own	funds	to	banks	or	insurance	
   Financial Markets Authority with rather broad authorisation
                                                                       companies; and
   to impose additional own funds require-ments with regard
                                                                       a
                                                                    •	 	 cquiring	shareholdings	or	convertible	bonds	of	banks	or	
   to banks; and
                                                                       insurance companies through the state, either in connection
   a
•	 	 mendments	to	the	Banking	Act	that	strengthen	deposit	
                                                                       with capital increases or from existing shareholders.
   protection in Austria, including changes to the refinancing
   of the deposit protection scheme.                                In order to facilitate the refinancing of both banks, as defined
                                                                    in Sec. 1 para. 1 of the Austrian Banking Act, and domestic
Strengthening of the Interbank Money Market
                                                                    insurance companies, as defined in the Austrian Insurance
In order to facilitate the refinancing of both banks, as defined    Supervision Act, the Austrian legislature has arranged for two
in Sec. 1 para. 1 of the Austrian Banking Act, and domestic         levers of a maximum total amount of EUR 75 billion.
insurance companies, as defined in the Austrian Insurance
                                                                    Any such recapitalisation measure must be agreed upon with
Supervision Act, the Austrian legislature has arranged for two
                                                                    the respective bank or insurance company, and market rate
levers of a maximum total amount of EUR 75 billion.
                                                                    consideration and interest rates must also be stipulated.
   T
•	 	 he	first	lever	stimulates	the	interbank	money	market	          Similar to the Interbank Market Act, no bank or insurance
   through a state guaranteed interbank clearing entity, which      company has a legal right to recapitalisation measures. Further,
   acts as an intermediary for interbank lending and thus, in       the Minister of Finance may impose conditions and obligations
   effect, utilizes the credit rating of the Republic of Austria.   for recapitalisation measures (please see below for details on
   T
•	 	 he	second	lever	targets	the	bond	market	and	enables	direct	    this issue).
   state guarantees for the bond issues of individual banks
                                                                    In the event of a risk of default of a bank or insurance company,
   (although not of insurance companies). These guarantees for
                                                                    nationalisation can be decreed as an action of last resort.
   bond issues, however, may be subject to certain conditions
                                                                    Upon such a nationalisation decree entering into force, any
   and obligations imposed by the Minister of Finance (please
                                                                    securities representing ownership rights in the respective bank
   see below for further details on this point).




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                                                                                                                             page 25


Main features of the Austrian
financial markets stability laws



or insurance company become void. Shareholders are, however,           J
                                                                    •	 	 obs	will	generally	be	maintained	and	measures	that	could	
entitled to receive appropriate compensation which is subject to       result in a significant reduction of jobs will be reported by the
review and appeal in court.                                            respective bank or insurance company.

Any shareholdings acquired under the Financial Market Stability        I
                                                                    •	 	n	order	to	avoid	potential	competition	distortions,	suitable	
Act will be privatised once stabilisation in the financial market      conditions to counter such competition distortions will be
has been achieved. A decision on such a privatisation would            imposed on the business conduct of the respective bank or
have to take the situation of the capital markets into account         insurance company.
and would, thus, be subject to discretion with regard to the
                                                                    Such conditions and obligations generally require the mutual
exact timing of such an action.
                                                                    consent of the Minister of Finance and the respective bank or
Conditions and Requirements for Guarantees of Bond Issues           insurance company as well as other parties concerned (e.g.,
or Recapitalisation Measures                                        shareholders, management, employees and other relevant
                                                                    stakeholders).
As we briefly mentioned above, both guarantees of bond
issues, under the Interbank Market Act, and recapitalisation        If a mutual agreement cannot be reached, the measures under
measures, under the Financial Market Stability Act, may be          the Interbank Market Act and the Financial Market Stability Act
subjected to conditions and obligations set out by the Minister     would not be granted by the state. In this event, the Minister
of Finance. A respective regulation by the Minister of Finance,     of Finance could order the compulsory nationalisation of the
which further details the conditions and obligations set forth      bank or insurance company as a last resort in order to avoid its
by	the	Stability	Package,	was	published	on	30	October	2008.	        collapse. This would also then allow for the imposition of the
According to this regulation, the following principles must be      desired conditions and obligations of the Minister of Finance by
agreed upon with a bank or insurance company that utilizes          way of his or her ownership rights. The respective banks and
guarantees	of	bond	issues	or	recapitalisation	measures:             insurance companies will, thus, be under a factual pressure to
                                                                    accept these conditions and obligations in order to receive state
   T
•	 	 he	business	policy	will	be	aligned	with	the	principle	of	
                                                                    rescue measures and to prevent the dispossession of their
   sustainability. This may ne-cessitate businesses with
                                                                    shareholders.
   particular risks being reduced or given up.
                                                                    In contrast to Germany, for example, where the state has made
   T
•	 	 he	funds	received	will	also	be	used	for	the	granting	of	
                                                                    an effort to gain a significant influence over the banking sector
   loans or entering into capital investments at usual market
                                                                    by way of bank rescue legislation, the conditions and obligations
   conditions for the benefit of the economy, in particular small
                                                                    that were imposed by Austria’s Minister of Finance generally
   and medium-sized companies, and households.
                                                                    appear reasonable from a business perspective. The Austrian
   T
•	 	 he	remuneration	systems	will	be	examined	with	regard	to	       approach is widely appreciated and has led to a comparatively
   their incentive impact and appropriateness in order to ensure,   broad acceptance of the Stability Package in the Austrian
   within the possibilities provided by private law, that they do   banking sector.
   not induce the entering into of inappropriate risks and that
                                                                    Changes to the Austrian Deposit Protection Scheme
   they are oriented towards long-term and sustainable aims,
   and are transparent. This may also involve changes to the        Austria now features unlimited deposit protection for natural
   remuneration system and, under certain circumstances, a          persons (as of 2010, the pro-tection will be capped at an amount
   demand of repayment of remuneration that has already             of EUR 100,000 per depositor). Deposit protection to the benefit
   been given.                                                      of corporations remains capped at the lower amount of EUR
                                                                    20,000 per depositor (EUR 50,000 for companies with unlimited
   I
•	 	f	recapitalisation	measures	are	granted,	dividends	can	only	
                                                                    liability, and certain small and medium entities) or 90% of the
   be distributed in an appropriate volume, taking into account
                                                                    deposited amount. Deposit protection for securities services
   the earnings situation of the respective bank or insurance
                                                                    remains capped at EUR 20,000 per depositor, both for natural
   company (except to the extent that such dividends are
                                                                    persons and corporations and, in addition, for corporations, a
   contractually owed).
                                                                    further cap of 90% of the deposited amount applies.




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Main features of the Austrian
financial markets stability laws



The refinancing of the Austrian deposit protection scheme                Generally, the liability of the deposit protection institutions is
is quite complex. Several deposit protection institutions                capped at a maximum amount of EUR 50,000 per depositor.
exist. Each Austrian bank is a member of one of the deposit              The state covers all losses in excess of this EUR 50,000
protection institutions and funds it through contributions in the        threshold as well as those losses that cannot be covered by
event of default of another member bank. To the extent that a            the deposit protection institutions through the contributions of
particular deposit protection institution cannot cover the losses        their member banks alone. The chart below depicts a high-level
from the default of one of its member banks, the remaining               overview of this refinancing mechanism.
deposit protection institutions step in.




         Deposit protection
         institutions of the
                                         1       Deposit protection institution of
                                                 the respective insolvent bank
                                                 • Capacity to pay limited to contributions
         Austrian banks                            of member banks
         • Several deposit                       • Annual contribution limited to 1.5% of RWA       Recourse limited
           protection institutions                 (less for recurring contributions); in certain    to EUR 20,000
         • Membership concept                      cases plus trading book own funds                  per depositor
           (i.e., every Austrian bank
           is member of one deposit


                                                              2
           protection institution)
         • Deposit protection
                                                                       “Overflow“ to remaining deposit
           insitutions are funded                                      protection institutions                                Recourse limited
           through contributions                                       • To the extent that contributions of member        to annual contribution
           of their respective                                           banks of deposit protection institution of the       of member banks
           member banks                                                  in-solvent bank are not sufficient to pay up          in recourse year
                                                                         to EUR 50,000 per depositor



         • Coverage of deposit
           protection payments
           by deposit protection
                                                                                    3         State guarantee for loans taken or
                                                                                              bonds issued by deposit protection
                                                                                              institution of the insolvent bank
           institutions only up to
                                                                                              • To the extent that contributions of member
           a maximum amount
                                                                                                banks of deposit protection institution of the
           of EUR 50,000
                                                                                                in-solvent bank are not sufficient to pay up
           per depositor
                                                                                                to EUR 50,000 per depositor




         Republic of Austria             1       Republic of Austria makes funds
                                                 available to deposit protection
                                                 institution of the respective
         • Coverage of deposits
           in excess of EUR 50,000
                                                 insolvent bank
           per depositor                         • No recourse against deposit
                                                   protection institutions




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                                                                                                                               page 27


Main features of the Austrian
financial markets stability laws



Overview of Measures under the Stability Package as of 5                 T
                                                                      •	 	 he	first	of	the	five	largest	Austrian	banks	to	cooperate	with	
November 2008                                                            the government with regard to the Stability Package was
                                                                         Erste	Group,	Austria’s	second	largest	bank.	On	30	October	
According to the information available in the public domain as of
                                                                         2008, Erste Group announced that the Republic of Austria
5 November 2008, three Austrian banks have utilized measures
                                                                         would provide EUR 2.7 billion worth of participation capital
under or related to the Stability Package.
                                                                         (a type of subordinated debt which qualifies as tier 1 capital
   P
•	 	 rior	to	the	Stability	Package	entering	into	force,	Constantia	      under the Austrian Banking Act) to Erste Group. The interest
   Privatbank, an Austrian private bank, was rescued through             rate on the participation capital is 8% fixed and maturity is a
   a takeover by a consortium consisting of the five largest             minimum of five years. With this step, Erste Group further
   Austrian banks. According to media reports, the consortium            strengthened its capital basis and its core capital ratio is
   only paid a symbolic purchase price to the former owner and           now in excess of 10%. In return, Erste Group has made a
   the obligations of Constantia Privatbank were guaranteed by           commitment	to	provide	a	total	of	EUR	6	billion	in	credit	to	
   both the state and the Austrian National Bank.                        Austrian corporate and retail customers over the next three
•	 	mmediately	following	the	enactment	of	the	Stability	
   I                                                                     years and to review its payment policies with regard to ethics
   Package, Kommunalkredit, an Austrian public finance                   and sustainability. Independent of the participation capital,
   specialist bank, was sold to the Republic of Austria by its           the management board and several top managers have
   former owners, the Austrian bank Volksbank AG and the                 waived their bonuses for 2008. Erste Bank has declared that
   Belgium bank Dexia, for a purchase price of EUR 2. Both               it will pay a dividend, irrespective of the participation capital
   Volksbank AG and Dexia will provide participation capital (a          transaction. Erste Group’s initiative was widely appreciated
   type of subordinated debt which qualifies as tier 1 capital           by investors and capital markets.
   under the Austrian Banking Act) to Kommunalkredit in a                I
                                                                      •	 	n	the	meantime,	most	major	Austrian	banks	have	announced	
   total amount of approximately EUR 400 million. The interest           that they are considering following Erste Group’s lead.
   rate on the participation capital is 8% fixed and maturity is a
   minimum of five years.




Contact

For further information on this topic, please contact horst.ebhardt@wolftheiss.com, christian.oehner@wolftheiss.com
or your existing contact at Wolf Theiss.




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page 28


Historical data



Top 10 deals Q1-Q3 2008
Announced      Status   Target Company            Target Dominant      Target     Bidder Company    Bidder Dominant   Seller Company    Seller Dominant        Deal
Date                                              Sector               Dominant                     Country                             Country               Value
                                                                       Country                                                                              EUR (m)
17/04/2008        C     KM	Invest	ZAO	(50%	       Financial Services   Russia     Interros          Russia            Onexim	Group      Russia                4,641
                        stake)                                                    Company
29/02/2008        C     TGK-10 (Territorial       Energy, Mining &     Russia     Fortum	Oyj        Finland           Unified Energy    Russia                2,283
                        Generating Company        Utilities                                                           Systems of
                        No 10)                                                                                        Russia
02/09/2008        C     INA Industrija Nafte dd   Energy, Mining &     Croatia    MOL	Hungarian	    Hungary                                                   1,969
                        (31% stake)               Utilities                       Oil	and	Gas	
                                                                                  Public	Ltd	
                                                                                  Company
18/06/2008        P     Zentiva NV (75.12%        Pharma, Medical & Czech         Sanofi-Aventis    France                                                    1,905
                        stake)                    Biotech           Republic      SA
15/05/2008        P     Volzhskaya	TGK	OAO	     Energy, Mining &       Russia     Berezville        Russia            Unified Energy    Russia                1,886
                        (TGK-7	OAO)	(77%	stake) Utilities                         Investments	Ltd                     Systems of
                                                                                                                      Russia
11/02/2008        C     TGK-8 (Territorial        Energy, Mining &     Russia     OAO	Lukoil        Russia            Financial Group   Russia                1,508
                        Generation Company        Utilities                                                           IFD Capital
                        No 8)
16/06/2008        C     Polymetal	(68.03%	stake) Energy, Mining &      Russia     Inure Enterprises Russia            Aniketa         Russia                  1,306
                                                 Utilities                        Ltd;	PPF	Group	                     Investments	Ltd
                                                                                  NV; Quotan
                                                                                  International	Ltd
20/03/2008        P     Lebedyansky	JSC           Consumer             Russia     Bidco for         USA                                                       1,288
                                                                                  Lebedyansky
17/02/2008        C     NK	Alliance	OAO           Energy, Mining &     Russia     West Siberian     Bermuda           Bazhaev family Russia                   1,026
                                                  Utilities                       Resources	Ltd                       (private investor)
07/04/2008        P     JGC TGK-4 (The Fourth     Energy, Mining &     Russia     Onexim	Group      Russia            Unified Energy    Russia                1,019
                        Territorial Generating    Utilities                                                           Systems of
                        Company)                                                                                      Russia
C = Completed; P = Pending                                                                                                                       Source:	mergermarket




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                                                                                                                                                          page 29


Historical data




Top 10 private equity deals Q1-Q3 2008
Announced      Status   Target Company            Target Dominant      Target     Bidder Company       Bidder Description      Seller Company      Deal Type      Deal
Date                                              Sector               Dominant                                                                                  Value
                                                                       Country                                                                                 EUR (m)
13/06/2008        C     Euromedic International   Pharma, Medical &    Hungary    Ares	Life	           Hungary based           Warburg Pincus      SBO            800
                        NV                        Biotech                         Sciences; Merrill    venture capital firm;   LLC
                                                                                  Lynch	Global	        UK based private
                                                                                  Private Equity;      equity firm; US
                                                                                  Montagu Private      based private equity
                                                                                  Equity	LLP           division of Merrill
                                                                                                       Lynch
08/04/2008        P     SIA	International	Ltd	    Business Services    Russia     TPG	LLP              US based private                            IBI            509
                        (50% stake)                                                                    equity firm
11/03/2008        C     Czech Coal Group (80%     Energy, Mining &     Czech      Czech Coal           Czech republic                              MBO            459
                        stake)                    Utilities            Republic   Group	(MBO	          based management
                                                                                  vehicle)             vehicle
22/05/2008        C     Russian Alcohol           Consumer             Russia     Central European     US and Poland           Industrial          IBI            381
                                                                                  Distribution         based importer          Investors Group
                                                                                  Corporation;         of beverages; US        (Promyshlennoye
                                                                                  Goldman Sachs;       based investment        Investory)
                                                                                  Lion	Capital	LLP     bank; UK based
                                                                                                       private equity firm
24/06/2008        C     Delta Bank (49% stake)    Financial Services   Ukraine    Icon Private         Russia based private    Nikolai	Lagun       IBI            225
                                                                                  Equity               equity firm
10/01/2008        C     Transcontainer	OAO	       Transportation       Russia     European             Russia based private OJSC	Russian	          IBI            217
                        (15% stake)                                               Bank for             investment bank; UK Railways
                                                                                  Reconstruction       based investment
                                                                                  and                  fund managed by
                                                                                  Development;         GLG	Partners	LP;	UK	
                                                                                  GLG	Emerging	        based investment
                                                                                  Markets Special      institution; US based
                                                                                  Situations Fund;     private investment
                                                                                  Moore Capital        management firm
                                                                                  Management
                                                                                  LLC;	Troika	
                                                                                  Dialog Group
28/04/2008        P     National	Logistic	        Transportation       Russia     Itella Corporation   Finnish provider of     Citigroup Venture   Exit           200
                        Company (90% stake)                                                            mail delivery and       Capital Equity
                                                                                                       logistics services      Partners	Ltd;	
                                                                                                                               RosEvroGroup
25/07/2008        C     Mail.ru (14.55% stake)    TMT                  Russia     Digital Sky          Russia based            Tiger Global   Exit                191
                                                                                  Technologies         investment fund         Management	LLC
                                                                                                       interested in media
                                                                                                       sector
09/04/2008        C     Nezavisimost Group        Consumer             Russia     A1	Group	Ltd;	       Russia based                                IBI            177
                        (49.95% stake)                                            Alfa Capital         investment
                                                                                  Partners             company; Russian
                                                                                                       private equity firm
30/09/2008        P     Kofola-Hoop SA (43.01% Consumer                Poland     Polish Enterprise    Poland based private                        IBI            146
                        stake)                                                    Fund	VI	LLP          equity fund
C = Completed; P = Pending                                                                                                                         Source:	mergermarket




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page 30


Historical data




Top 10 Intra CEE deals Q1-Q3 2008
Announced      Status   Target Company             Target Dominant      Target      Bidder Company    Bidder Dominant   Seller Company    Seller Dominant        Deal
Date                                               Sector               Dominant                      Country                             Country               Value
                                                                        Country                                                                               EUR (m)
17/04/2008        C     KM	Invest	ZAO	(50%	        Financial Services   Russia      Interros          Russia            Onexim	Group      Russia                4,641
                        stake)                                                      Company
02/09/2008        C     INA Industrija Nafte dd    Energy, Mining &     Croatia     MOL	Hungarian	    Hungary                                                   1,969
                        (31% stake)                Utilities                        Oil	and	Gas	
                                                                                    Public	Ltd	
                                                                                    Company
15/05/2008        P     Volzhskaya	TGK	OAO	     Energy, Mining &        Russia      Berezville        Russia            Unified Energy    Russia                1,886
                        (TGK-7	OAO)	(77%	stake) Utilities                           Investments	Ltd                     Systems of
                                                                                                                        Russia
11/02/2008        C     TGK-8 (Territorial         Energy, Mining &     Russia      OAO	Lukoil        Russia            Financial Group   Russia                1,508
                        Generation Company         Utilities                                                            IFD Capital
                        No 8)
16/06/2008        C     Polymetal	(68.03%	stake) Energy, Mining &       Russia      Inure Enterprises Russia            Aniketa         Russia                  1,306
                                                 Utilities                          Ltd;	PPF	Group	                     Investments	Ltd
                                                                                    NV; Quotan
                                                                                    International	Ltd
07/04/2008        P     JGC TGK-4 (The Fourth      Energy, Mining &     Russia      Onexim	Group      Russia            Unified Energy    Russia                1,019
                        Territorial Generating     Utilities                                                            Systems of
                        Company)                                                                                        Russia
14/03/2008        P     TGK-2 (The Second          Energy, Mining &     Russia      Kores Invest      Russia            Unified Energy    Russia                  902
                        Territorial Generating     Utilities                                                            Systems of
                        Company)                                                                                        Russia
18/01/2008        C     Vakaru Skirstomieji Tinklai Energy, Mining &    Lithuania   LEO	LT            Lithuania         NDX Energija      Lithuania               842
                        (97.1% stake)               Utilities
14/03/2008        P     Territorial Generating     Energy, Mining &     Russia      Integrated        Russia            Unified Energy    Russia                  746
                        Company	No	6	(80.14%	      Utilities                        Energy Systems                      Systems of
                        stake)                                                                                          Russia
18/01/2008        C     Lietuvos	Energija	AB	      Energy, Mining &     Lithuania   LEO	LT            Lithuania         Government of     Lithuania               706
                        (96.4%	stake)              Utilities                                                            Lithuania
C = Completed; P = Pending                                                                                                                         Source:	mergermarket




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                                                                                                                                                          page 31


Historical data




Top 10 Inbound deals (non CEE bidder) Q1-Q3 2008
Announced      Status   Target Company             Target Dominant      Target     Bidder Company      Bidder Dominant   Seller Company     Seller Dominant        Deal
Date                                               Sector               Dominant                       Country                              Country               Value
                                                                        Country                                                                                 EUR (m)
29/02/2008        C     TGK-10 (Territorial        Energy, Mining &     Russia     Fortum	Oyj          Finland           Unified Energy     Russia                2,283
                        Generating Company         Utilities                                                             Systems of
                        No 10)                                                                                           Russia
18/06/2008        P     Zentiva NV (75.12%         Pharma, Medical & Czech         Sanofi-Aventis      France                                                     1,905
                        stake)                     Biotech           Republic      SA
20/03/2008        P     Lebedyansky	JSC            Consumer             Russia     Bidco for           USA                                                        1,288
                                                                                   Lebedyansky
17/02/2008        C     NK	Alliance	OAO            Energy, Mining &     Russia     West Siberian       Bermuda           Bazhaev family Russia                    1,026
                                                   Utilities                       Resources	Ltd                         (private investor)
10/03/2008        C     MOL	Hungarian	Oil	and	     Energy, Mining &     Hungary    Oman	Oil	           Oman                                                         831
                        Gas	Public	Ltd	Company	    Utilities                       Company	SAOC
                        (8% stake)
13/06/2008        C     Euromedic International    Pharma, Medical & Hungary       Ares	Life	          USA               Warburg Pincus     USA                     800
                        NV                         Biotech                         Sciences; Merrill                     LLC
                                                                                   Lynch	Global	
                                                                                   Private Equity;
                                                                                   Montagu Private
                                                                                   Equity	LLP
29/02/2008        C     AvtoVaz (25% stake)        Industrials          Russia     Renault SA          France            Russian            Russia                  768
                                                                                                                         Technologies
                                                                                                                         State
                                                                                                                         Corporation
                                                                                                                         (Rostechnologii)
31/07/2008        C     Nova Television Bulgaria   TMT                  Bulgaria   Modern Times        Sweden            Antenna Group      Greece                  620
                                                                                   Group MTG AB                          (Greece)
11/02/2008        C     OTP	Garancia	Insurance	    Financial Services   Hungary    Groupama SA         France            OTP	Bank	plc       Hungary                 612
                        Ltd
04/02/2008        C     Pravex-Bank Joint Stock    Financial Services   Ukraine    Intesa Sanpaolo     Italy                                                        516
                        Commercial Bank                                            SpA
C = Completed; P = Pending                                                                                                                           Source:	mergermarket




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                   page 32


                    Historical data



                   CEE M&A Trends                                                                                        CEE private equity buyout trends



                  250                                                               40,000                                                     30                                                                5,000


                                                                                    35,000
                                                                                                                                               25
                  200                                                                                                                                                                                            4,000

                                                                                    30,000




                                                                                                                                                                                                                         Value of deals (EURm)
                                                                                             Value of deals (EURm)
                                                                                                                                               20




                                                                                                                     Volume of deals
Volume of deals




                  150                                                                                                                                                                                            3,000
                                                                                    25,000
                                                                                                                                               15
                                                                                    20,000
                  100                                                                                                                                                                                            2,000
                                                                                                                                               10
                                                                                    15,000

                   50                                                                                                                                                                                            1,000
                                                                                                                                                5
                                                                                    10,000


                       0                                                            5,000                                                       0                                                                0
                                     Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3                                                                   Q1 Q2 Q3 Q4 Q1 Q2 Q3             Q4 Q1 Q2 Q3 Q4   Q1 Q2 Q3
                                     05 05 05 05 06 06 06 06 07 07 07 07 08 08 08                                                                   05 05 05 05 06 06 06             06 07 07 07 07   08 08 08

                                       Volume of deals                                                                                                  Volume of deals

                                       Value of deals (EURm)                                                                                            Value of deals (EURm)




                    Buyer breakdown of CEE M&A: Volume                                                                   Buyer breakdown of CEE M&A: Value


                                     300                                                                                                       40,000


                                                                                                                                               35,000
                                     250

                                                                                                                                               30,000
                                                                                                                       Value of deals (EURm)




                                     200
                   Volume of deals




                                                                                                                                               25,000


                                     150                                                                                                       20,000


                                                                                                                                               15,000
                                     100

                                                                                                                                               10,000

                                     50
                                                                                                                                                5,000


                                      0                                                                                                             0
                                           Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3                                                                 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
                                           05 05 05 05 06 06 06 06 07 07 07 07 08 08 08                                                                 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08

                                            CEE bidder: volume of deals                                                                                    CEE bidder: value of deals (EURm)

                                            Non CEE bidder: volume of deals                                                                                Non CEE bidder: value of deals (EURm)




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     Historical data



    CEE private equity exit trends



                  18                                                           3,000

                  16
                                                                               2,500
                  14




                                                                                       Value of deals (EURm)
                  12                                                           2,000
Volume of deals




                  10
                                                                               1,500
                   8

                   6                                                           1,000

                   4
                                                                               500
                   2

                   0                                                           0
                       Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
                       05 05 05 05 06 06 06 06 07 07 07 07 08 08 08

                            Volume of deals

                            Value of deals (EURm)




     Sector split of CEE M&A Q1-Q3 2008: Value                                                                 Sector split of CEE M&A Q1-Q3 2008: Volume


                                        2%
                              2%             1%                                                                                           2%
                                   2%                                                                                              2%2%
                            2%                            Energy, Mining & Utilities                                          3%                             Consumer
                                                                                                                                                 19%
                       4%                                                                                                5%
                                                          Financial Services                                                                                 Industrials and Chemicals
                  6%                                      Consumer                                                  6%                                       Energy, Mining & Utilities
                                                    39%   TMT                                                                                                TMT
7%                                                        Pharma, Medical & Biotech                                                                          Financial Services
                                                                                                               8%

                                                          Industrials                                                                                        Business Services
                                                                                                                                                       15%
                                                          Transportation                                                                                     Construction

        13%                                               Business Services                                     10%                                          Transportation

                                                          Construction                                                                                       Pharma, Medical & Biotech

                                                          Real Estate                                                                          15%           Leisure
                                                                                                                               13%
                                             21%
                                                          Other                                                                                              Agriculture

                                                                                                                                                             Real Estate

                                                                                                                                                             Defense




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Historical data



Geographic split of non CEE bidder activity: Value                                    Geographic split of non CEE bidder activity: Volume


                                                                                                               2%
                             1%                                                                      2%          1%
                       4%                                                                                 2%
                                              20%                  France                           3%                              Nordic
                 5%                                                                                                   17%
                                                                   USA                                                              UK & Ireland
            6%                                                                                 8%
                                                                   Nordic                                                           Germanic

                                                                   UK & Ireland                                                     Benelux
    7%
                                                                   SEE                   10%
                                                                                                                                    USA
                                                                                                                            17%
                                                                   Benelux                                                          SEE
                                                          19%
       9%                                                          Bermuda                                                          France

                                                                   Germanic                11%                                      Europe (other)

                                                                   Middle East                                                      Asia
                 12%
                                                                   Other                                              14%           Middle East
                                        17%                                                              13%
                                                                                                                                    Bermuda

                                                                                                                                    Other




Deal size split of CEE M&A Q1-Q3 2008: Value



                        4%
                  4%                                            Value not disclosed

         9%                                                     <EUR15m

                                                    36%         EUR15m - EUR100m

                                                                EUR101m - EUR250m

                                                                EUR251m - EUR500m

                                                                >EUR500m

 25%




                                  22%




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                                                                                                                 Slaughter	&	May	LLP
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or	contact	your	local	office:

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                                                                                                                                        page 37




Raiffeisen Investment is the M&A and financial advisory unit of the         advising on M&A transactions in the region. Raiffeisen Investments’s
Raiffeisen Banking Group, Austria’s biggest banking group. From it’s        industry teams are in daily contact with the major players and
headquarters in Vienna it manages a strong network of subsidiaries          decision makers in their sectors. Recently Raiffeisen Investment
with offices in Vienna, Moscow, Warsaw, Kiev, Belgrade, Bucharest,          has been involved in a number of high-profile transactions including
Budapest, Istanbul, Podgorica, Prague, Sarajevo, Sofia and Zagreb.          the	 acquisition	 of	 Ljubljana	 Stock	 Exchange	 by	 the	 Vienna	 Stock	
The team consists of around 120 professionals with a range of               Exchange the acquisition of two breweries in Belarus by Heineken
background experiences in Austria, CEE and the European financial           and the secondary sale of the largest Bulgarian fixed line and mobile
centres	London	and	Frankfurt..	Since	it’s	foundation	in	the	early	1990s	    operator to AIG.
Raiffeisen Investment has successfully advised on more than 500
transactions in the fields of M&A, privatisation and related financial
advisory services ranging from €10 m to €3 bn. The value added of
the local teams in CSEE/CIS countries plays a crucial role in efficiently




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