We must tackle prejudices

Q: With regard to recent developments in the German private equity market, what is your view of the state of the industry and what do you expect for the coming months?

A: What we have seen over the past 18 months until this summer were exaggerations of the market and we expect the situation to return to similar conditions to those found about two years ago. Large transactions of more than EUR1bn will encounter difficulties in the near term to find appropriate financing. However, the mid-cap segment of EUR100m-1bn, where we are positioned, remains active and funding continues to be available, but is more expensive.

Q: In the last issue, we interviewed BVK chairman Rolf Christof Dienst, who expects that financing will become available again at the beginning of 2008. Do you agree?

A: I don't expect the market to return to normal that quickly. At present, we estimate that the market will need six to nine months to normalise.

Q: Where do you anticipate that opportunities will be found in the coming months?

A: The mid-market segment certainly continues to offer a wide range of opportunities including growth capital and infrastructure investments. Germany continues to be an attractive area for private equity. The structural crisis in the finance markets does not hamper developments in the mid-market so much. It is important to remember that the German private equity market has a lot of catching up to do, especially in this mid-cap bracket and in the infrastructure sector. We remain positive that Germany will eventually close the gap to other private equity markets such as France and the UK.

Q: Where do you see Germany's strengths and weaknesses as a private equity market?

A: At 3i we see ourselves as a private equity investor for the Mittelstand and we perceive the German market with its strong Mittelstand entrepreneurship as very interesting. A large number of businesses are currently facing the need for growth investments, which can be provided in terms of either a minority or majority stake, for example for expanding their presence internationally, to increase their production capacities, or implement more complex administrative structures. For this, they require - apart from financing - knowhow, as well as international contacts.

Another challenge many companies face is the issue of professional succession, which can be resolved in partnership with investors. Private equity houses in Germany certainly have to promote the understanding of our industry, because many Mittelstand companies are not sufficiently aware of the financing options we can offer.

Q: It is often said that private equity has not enough lobbying power in Germany, and the current Government appears determined to regulate what is still often considered to be 'the locust swarm'. While MoRaKG will likely not affect the industry at large, how do you perceive the current climate and perception of private equity?

A: Doubtlessly, the industry has a lot of work to do to educate about the positive sides of private equity. We must tackle the prejudices and preconceptions which afflict the industry. A shift in perception can only come about by educating the public about how private equity actively encourages growth and the competitive capability of the German industry.

This is in part also a generational matter: the new management generation is increasingly aware of the full range of modern financing methods that benefit businesses. The industry could facilitate this change by stronger communication not on an abstract level, but by publishing case studies documenting the success stories of German private equity.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• DACH