Recent loan market woes did and will have an impact on leveraged buyouts and there is already pressure on prices, so valuation levels are affected, as well, Hans Bethge, Chairman of M&A International (MAI) told Portfolio.hu in an interview, citing the outcome of a recent MAI survey. He believes, however, that this phenomenon will be felt mostly at larger transactions, and smaller takeovers will be hardly affected. Portfolio.hu will hold its
4th CEE Corporate Finance and Private Equity Conference in Budapest on 6 November.
Portfolio.hu: What is M&A International about? What is the main purpose and activity of MAI? Hans Bethge: The target of MAI is to generate and realize cross border transactions around the globe to the benefit of our international clients. To work closely together on basis of defined professional and ethical standards.
P.: What is M&A International exact contribution to the M&A deals that it manages? What do your advisors manage in those deals? Hans Bethge: We monitor the whole transaction from defining a strategy , analyzing and make an appraisal of the company for sale or a target, writing the book, approaching international buyers locally by our partners on the ground, coordinating the data room and due diligence, moderation of negotiations until closing.
P.: How has the network of M&A International been developing in recent years? Hans Bethge: We have been increasing by number of members (now 42) but mostly by overall performance with double digit growth rates to a value of USD 17.5 bn and 290 deals in 2006. We see an attractive development from the running business in 2007 as well.
P.: How have leveraged buyout transactions been affected by recent developments in the financial markets both globally and in the CEE region? Hans Bethge: Yes we see this as a global development. Due to a recent research among our member 75% see the PE market affected. Although this is mainly focused on the big tickets with high leverage, our focus is on the mid market with lesser relevance. Strategic investments are not touched. There is only little difference in the CEE region.
P.: How will the possible liquidation of assets affect valuation levels? Hans Bethge: We see already pressure on prices.
P.: How do you see the private and corporate transactions in the mid-size M&A segment in the CEE region? Hans Bethge: Still great chances in consolidated industries. Players have reached a stable position that makes them attractive for foreign buyers and on the other side some of them are extremely healthy so they are well prepared to go shopping abroad.
P.: What is the typical financing structure in the mid-size market? Hans Bethge: This depends of the kind of deal we are going to finance. Typically a strategic buyer will not need financing of a mid size deal at all. In case of PEs we see still mostly traditional structures consisting of a little more equity today, mezzanine and long term loan. Sophisticated financing tools are rare.
P.: How do you see the role of corporate finance companies? How can they provide added value to the buyer and the seller side in this strong buying sentiment? Hans Bethge: There is always a lack of understanding foreign markets, regulations, competition or just culture. MAI is well positioned to cover those deficits and especially offers cultural bridging.
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