The sleeping giant stirs

01 April 2008

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For years, Germany has been viewed as the sleeping giant - at least in terms of potential for private equity investments. Many GPs see vast potential, but the country has so far not quite lived up to these expectations. Then came the credit crunch, and with it fears that the giant might be put soundly back to sleep with nobody able to forecast when it would so much as stir again

Contrary to certain media voices that saw the end for private equity in Germany, the industry continued to do small and mid-cap deals in a slow-but-steady fashion. As fewer vendors put companies up for sale, deal flow has slowed, but it has not dried up. And while the US and UK prepare for recession, the country is bucking the trend with continued increase in consumer confidence that is beginning to enliven the previously sluggish domestic consumption. Germany's economic backbone of export-oriented industries continues to expand, and it looks like Germany will remain a growth story rather than become the target of many funds looking for distressed assets.

Due to the macroeconomic uncertainty, however, IPOs are being postponed, as is the case of specialist chemicals concern Evonik Industries. Evonik had planned to list in 2008, but has now changed its strategy and put a 25% stake up for sale, with four private equity players bidding. The value of the stake is reported to be in the area of EUR2bn, which could be the biggest transaction in the near future.

Advent International's new global EUR6.6bn fund targets the medium and larger segments, ensuring that Advent is well-prepared to take advantage of any opportunity arising in the segment, and this is only one of many successful fundraising stories, as the European Fundraising Review 2008 reveals (see cover). For the moment, the mid-market, Germany's sweetspot, represents an attractive target, and both interest and money are certainly there. While far from waking up, the sleeping giant is stirring.

Yours sincerely,

Mareen Goebel

Editor, Deutsche unquote"

Tel: +44 20 7004 7462

mareen.goebel@incisivemedia.com.