Investment Environment (M&A trends and business opportunities)in the emerging European economies of Central and Eastern Europe. Presented at the NYU/Stern Business School Global Business Conference in February 2010.

1. 10th Global Business Conference:
“Diverse Opportunities & Innovation in Emerging Markets”
Diverse Opportunities & Innovation in Emerging Markets
Emerging Market Opportunities in Europe
Emerging Market Opportunities in Europe
Pete Chatziplis, CFA, ACCA, CF
NYU Stern School of Business
Kimmel Center, New York
February 19, 2010

2. Central & Eastern Europe Snapshot
180 million people, 17 countries
High projected GDP growth
Low public debt GDP per Capita across Europe
Low taxes; updated business
p
framework
Skilled workforce/some
bottlenecks
Low wages but rising
Negatively affected by the
economic crisis
Aging Infrastructure
National/cultural sensitivities >€10,000 non EU Source: IMF data
NYU Stern, 10th Global Business Conference: Emerging Market Opportunities in Europe, Pete Chatziplis, New York, February 19, 2010 1

3. Global M&A Activity
Global M&A plummeted in 2009 to $1.6 trillion total value:
– North America: signs of stabilization
–EEurope: staggering d
t i drop t pre-2004 l
to 2004 levels
l
– Asia: resilient; increase in importance
PE deals negatively affected; “credit crunch”
Decrease in mega-deals; emergence of middle market
Sectors: energy, financials, TMT, pharma, industrials
4,000 $3,700m 50%
$3,590m
45% Global M&A Deal Value
3,500 $440m12% $180 5%
$431 12% 40%
3,000 $410m11%
$2,460m
35% Rest of World
2,500
, $153 6% 30% Asia Pacific
Asia-Pacific
$1,400
$1,400m $396 16% $1,550 m 25% Europe
2,000
38% 39% NorthAmerica
1,500 $80 5% 20%
$1,076 $340 22%15%
1,000 44%
$440 28%
$1,450m $1,580 10%
500 39% 44% $839 5%
$700
34% 45%
0 0%
2006 2007 2008 2009 Source: Mergermarket, Deal Drivers North America, Europe 2006-09.
NYU Stern, 10th Global Business Conference: Emerging Market Opportunities in Europe, Pete Chatziplis, New York, February 19, 2010 2

4. Central & Eastern Europe M&A Activity
M&A deal value $40 bn in 2009 (recovered but below past levels)
– Approximately 10% of total European M&A value
– Middle
Middl market f
k t focus: 45% d l l
deals less th €100
than €100m
– Investors: France, US, Nordic, UK, Germany, Benelux, Italy, Greece
– Sectors: TMT 42%, Energy & Mining 33%, Consumer 9%, Financials
– Major PEs and multinationals active in the region
M&A Value in CEE & CIS M&A by sector in CEE & CIS
Source: Mergermarket, Monthly M&A Insider,
Source: Mergermarket, Monthly M&A Insider, December 2009 December 2009
NYU Stern, 10th Global Business Conference: Emerging Market Opportunities in Europe, Pete Chatziplis, New York, February 19, 2010 3

5. Top 2009 CEE M&A Deals
• Kyivstar GSM – VimpelCom € 9.7 bn TMT
• MangistauMunaiGaz - Mangistau Inv. BV € 2.6 bn Energy/Mining/Utls
• BTA Bank JSC - Government of Kazakhstan € 1.6 bn Financials
• Anheuser-Busch InBev (CE) - CVC Ptns Ltd € 1.5 bn Consumer
• MOL Oil and Gas - OJSC Surgutneftegaz € 1.4 bn Energy/Mining/Utls
• Intern’l Power Opatovice- J&T Finance AS € 0.9 bn Energy/Mining/Utls
• Refinery Company RT - TH KazMunaiGaz € 0.8 bn Energy/Mining/Utls
• Kompania Piwowarska - BMiller Plc € 0.8 bn Consumer
• Invitel Holdings -Mid Europa Partners
Mid € 0 7 bn TMT
0.7
• KazMunaiGaz PKI Finance -JSC KazMunaiGas Exploration € 0.6 bn Energy/Mining/Utls
Source: Mergermarket, Monthly M&A Insider, December 2009
NYU Stern, 10th Global Business Conference: Emerging Market Opportunities in Europe, Pete Chatziplis, New York, February 19, 2010 4

6. CEE PE Activity- Recovery in Confidence
CEE PE Confidence Index
Activity plummeted
in line with global
markets during 2ndH
2008 but since then
recovered
More cautious M&A
moves; capital Source: Central European Private Equity Confidence Survey, Deloitte, October 2009
poured in “too fast
too far” in the past
PE activity in CEE & CIS
Rationalization in
valuations
Value of deals (€ mn)
Economical
€
development and
modernization to
drive M&As and FDI
Source: Mergermarket, Monthly
NYU Stern, 10th Global Business Conference: Emerging Market Opportunities in Europe, Pete Chatziplis, New York, February 19, 2010 M&A Insider, December 2009 5

7. Top 2009 PE Investment in CEE
Est. Value
PE house Company
y Country
y Period Stake
(Euro mn)
EQT Partners AB HTL-Strefa S.A. Poland October 2009 210.4 100%
Anheuser-Busch InBev’s
CVC Capital Partners CEE-wide
CEE wide October 2009 1,500
1 500 n/a
CEE operations
September
Mid Europa Partners Invitel Holdings A/S Hungary 740.2 65%
2009 - pending
GED Iberian PE SC Total Eurobusiness SA Romania August 2009 6.0 60%
EQT Partners AB CableTel AD Bulgaria August 2009 n/a 100%
SGAM AI PE Konsalnet SA Poland July 2009 22.1 80%
Fabryka Lin i Drutu Drumet
Penta Investment Ltd Poland June 2009 26.5
26 5 n/a
Sp. z o.o.
Enterprise Investors Web Inn Poland June 2009 3.6 100%
Enterprise Investors R&C Union Poland May 2009 3.0 47.9%
Mid E
Europa P t
Partners UPC Sl
Slovenia
i Slovenia
Sl i May
M 2009 n/a
/ 100%
Source: Central European Private Equity Confidence Survey, Deloitte, October 2009
NYU Stern, 10th Global Business Conference: Emerging Market Opportunities in Europe, Pete Chatziplis, New York, February 19, 2010 6

8. CEE Market Expectations
Economic Climate Unavailability of debt
financing; slowdown in
new PE fund raising
Average transaction
size decreased;
middle size companies
gaining attention
Interest in distressed
New investments competition transactions
First round of large
privatizations
completed; national
sensitivities and
economies’ structure
to b dd
t be address i f t
in future
Source: Central European Private Equity Confidence Survey, Deloitte, October 2009
endeavors
NYU Stern, 10th Global Business Conference: Emerging Market Opportunities in Europe, Pete Chatziplis, New York, February 19, 2010 7

9. Market Opportunities
Energy (growth, efficiency, renewable)
Financials (lending)
Telecoms (new technologies)
Consumer (rise of middle class)
Outsourcing (good workforce, European time zone and
proximity)
Manufacturing (capacity diversification)
Logistics (central location)
Health (aging)
Leisure & Tourism (services upgrade)
Adjust to local circumstances but think global!
Adj t t l l i t b t thi k l b l!
NYU Stern, 10th Global Business Conference: Emerging Market Opportunities in Europe, Pete Chatziplis, New York, February 19, 2010 8