Author: Jarošová Gabriela, Pažitková Martina
Source: TREND, 23.10.2008, No.42, page.30, printed with Publisher’s Consent
If Henry Kravis, co-founder of the world’s second-largest private equity group, Kohlberg Kravis Roberts, knew a year ago that one of the worst economic crises in history would break out in the USA, he would have evaluated possible entrance on the stock exchange as the highest level of madness. But he didn’t foresee turbulence on the markets; therefore, last week at a conference of private equity companies in Dubai, he was one of the most pessimistic participants. While others, led by David Rubenstein of the Carlyle Group, talked positively about the decision of governments to fund the banking sector with cash injections, Mr Kravis warned that the banking sector must adjust to new conditions, not just assume that the approach of banks to issuing loans will be the same as it was before the crisis. Investors are pushing American and British private equity companies have already started to encounter the wariness of banks and their reluctance to borrow money over the last nine months, unlike local players in Central and Eastern Europe, where changing conditions were noticed only recently. Meanwhile, the activities of the private equity sector, mainly in regard to withdrawing publicly marketable companies from stock exchanges with a view to restructuring, have dropped significantly. According to Thomson Financial, the value of such trades in the world dropped to $85 billion in the first eight months of this year. In the first half of last year, it was $405 billion. Moreover, this year’s transactions are characterised by a larger share of internal sources in comparison to external sources, which investment companies used to gain from banks in the past. Due to a lack of secure and inexpensive loans, globally recognised private equity firms have begun to take an interest in more dangerous and expensive ways to finance their trades. “If we can improve the strategy and running of a company, we should consider further possibilities, including mezzanine financing,” Mr Kravis said, according to Reuters, in Dubai. What he had in mind was mainly unsecured loans with double-digit interest rates from special funds.
Apart from lower bank liquidity, some big players are currently troubled by pressure from their own investors. Worldwide private equity companies are creating huge funds in which public institutions, schools and pension funds invest. Although private equity companies operate with an investment timeframe that may exceed the period of crisis, some clients have started to panic and request refunds of invested resources. Some are also calling for a reduction in the charges they pay for administration of their finances.
It is the creation of funds in which virtually anyone may invest that differentiates private equity companies, such as Penta Investments or J&T Group, from regular companies. These companies mainly manage the resources of their owners. There are more common features in their businesses, so the question therefore is why they don’t meet more often in the region of Central and Eastern Europe, where Slovak private equity companies operate. Slovakia itself is not among the most interesting investment targets.
You can read the whole article here: http://www.etrend.sk/ekonomika/svetova-ekonomika/svetove-private-equity-na-slovensku/147013.html
HYPERLINK “http://www.etrend.sk/podnikanie/riadenie-a-kariera/nominacie-manazer-roka-2008-pavol-krupa/146332.html”
