1. TRENDS
TRENDS, RESULTS AND EXPECTATIONS
OF PRIVATE EQUITY MARKET DEVELOPMENT
IN RUSSIA
What are the major trends and results of Russian private eq-
uity market in 2010? What are the expectations of market de-
velopment in 2011? Managers of private equity firms share their
thoughts with readers of Private Equity Russia & CIS Journal
Benjamin Wilkening
Partner, Mint Capital
First of all, the Russian PE market in Russia has not yet fully recovered from the financial crisis, and I expect deal volumes to remain sub-
stantially below peak levels of 2007/08. A number of players tried to raise first time funds before the crisis. Those who were lucky in their
timing to raise/close new funds before the storm hit, are now in the enviable position to have dry powder in a down cycle. For the remaining,
it will be difficult for the foreseeable future to raise a first-time fund. Established PE players with a track record have a better chance of raising
funds into the recovery.
PRIVATE EQUITY RUSSIA&CIS JOURNAL (PERCIS) #4 December 2010 | January 2011
Strangely enough, the crisis has not had the effect of bringing a lot of cheap deals onto the market. At least not of good quality. Many
of the weak companies simply died, whereas the ones most interesting for PE have probably come out of the crisis strengthened: a better
balance sheet, lower cost base and better managed margins and – most important – a much stronger position vis-à-vis competition. The
owners of these companies know they can still ask a good price for their business. So, in summary, I expect 2011 to be a year of still few, but
higher quality deals – and one can hope at reasonable valuations.
Number and Aggregate Value of Buyouts Globally by Year Aggregate Deal Value by Region Q1 2008 - Q4 2010
3500 700
3000 600 45
Aggregate Deal Value $bn
40
2500 500
Aggregate Deal Value ($bn)
Numbetr of Deals
35
2000 400 30
25
1500 300
20
1000 200 15
10
500 100
5
0 0 0
2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010
No. of Deals Aggregate Deal Value ($bn)
N.America Europe Asia & ROW
Source: Preqin Source: Preqin
Giedrius Pukas
Managing Partner, Quadro Capital Partners
If we are talking about Russia and CIS 2010 – it was still a very idle year, except for the players that have raised fresh funds before the
crisis and were taking advantage (the ones who had guts) of the discounted market opportunities. 2011 should be much more active and
Russia should return to international player’s monitors by the end of the year. Having said this, Russia’s PE markets remain very small and
fragmented and I do not expect any fierce competition any time soon.
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2. Maxim Nefyodov
Managing Director, ICON Private Equity
2010 was not the best year for private equity in Russia, however pessimistic scenarios didn’t come to life either. On the contrary, dynam-
ics of investments into Russian non-financial sector moved upwards compared to 2009 as the result of both general recession exit and seri-
ous state efforts to counter negative effects of the downturn. Such efforts are planned to decrease economy dependence on raw materials
exports by stimulating innovative sectors development – something that will offer significant challenges and opportunities for private
equity community.
In my view we’ll see robust private equity activity in three key areas in 2011:
• Mining and oil&gas due to current high hydrocarbons prices that approach pre-crisis peak levels;
• Innovative import substitution businesses which can be the basis of ‘new Russian economy’;
• Agriculture sector which becomes a prominent investment recipient worldwide due to unprecedented agflation and scarcity of fertile
land.
Demand for private equity capital should also be on the rise in 2011. Many companies overstretched themselves aiming for a large IPO
that never happened and are currently in need not only of financial injection but restructuring and expansion expertise offered by private
equity funds.
Number and Aggregate Value of Deals by Global Number of PE-Backed Exits by Type and Aggregate Exit
Industry, 2010 Value: Q1 2006 - Q4 2010
30% 300 80
25%
70
Aggregate Exit Value ($bn)
20% 250
60
15%
200
No. of Exits
10% 50
5% 150 40
0%
30
100
Healthcare
Information Technology
Food & Agriculture
Energy
Industrials
Materials
Business Services
Telecoms & Media
Consumer
Other
20
50
10
0 0
Q1 2006
Q2 2006
Q3 2006
Q4 2006
Q1 2007
Q2 2007
Q3 2007
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
No. of Deals (%) Aggregate Deal Value (%) IPO Restructuring Sale to GP Trade Sale Aggregate Exit Value $bn
Source: Preqin Source: Preqin
PRIVATE EQUITY RUSSIA&CIS JOURNAL (PERCIS) #4 December 2010 | January 2011
Nickolay Zubtsov
Vice President, New Russia Growth
Russian private equity market saw limited activity in 2010, both in terms of fund-raising and new transactions. No new funds were raised
on the market (excluding those with the participation of the state capital) and few transactions were closed, however funds with dry powder
made some remarkable investments closer to the end of the year. The main reason for this lack of activity was market uncertainty in the
beginning of the year, but the closer was the end of the year, the more optimistic the market players became.
As concerns 2011, we are generally positive. We expect market to be more active and more deals to be closed as new funds come to the
market, but nevertheless market uncertainty still remaining and future economic shocks and market downturns are still possible.
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EQUITY
RUSSIA & CIS
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