Nuclear winter

01 October 2008

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It is hard to write anything about the market without being potentially disproven by new developments tomorrow - or even in just a few hours

Mainstream and specialist media (as well as their readers) wait with bated breath for the next sensational development. Governments are taking unprecedented actions while banks fight for survival in an increasingly surreal meltdown.

There is fear in the US and UK that the markets are now entering what has been described as a nuclear winter - liquidity has slowed to a trickle, portfolio companies are struggling to service their debt and even LPs themselves are affected: AIG, WaMu - the list goes on. Nobody truly knows where things are heading; few predicted the downfall of giants Kaupthing, Fortis, Bradford & Bingley, Lehman Brothers or Natixis. In Germany, IKB and HRE are just the most prominent examples of troubled financial institutions. It is anyone's guess how many toxic assets slumber on balance sheets, with widespread suspicion, though often misguided, threatening the reputation even of solidly-financed banks.

Compared to the global backdrop however, the DACH region is so far less affected. There is a steady trickle of small-cap deals done by local players who have their eyes firmly on the lower middle market, with firms like AUCTUS (pages 46-47), DZ Equity Partner (pages 45 and 46), HANNOVER Finanz (page 44) and NORD Holding (page 45) showing there is life in the midst of the market freeze. Other firms are shifting focus to distressed companies and should expect rich pickings. Venture capitalists, who in the DACH region are a mere handful of hard-bitten survivors of the tech bubble, are hoping that venture will receive more allocations now that the current market has shed doubts on the business model of large buyouts.

The current situation certainly provides ample topics for discussion at the Deutsche unquote" Private Equity Congress on 30 October in Munich and I look forward to seeing you there. For more information visit www.deutschepecongress.com.

Yours sincerely,

Mareen Goebel

Editor, Deutsche unquote"

Tel: +44 20 7004 7462

mareen.goebel@incisivemedia.com.