Restructuring deals to bolster Hungarian economy

Private equity is expected to help streamline corporate structures in the face of a worsening economic climate.

According to a new study from the Hungarian office of private equity firm Advent International, the region will see an increased number of investment opportunities arise from company takeovers, MBOs and outsourcing deals.

Advent examined all the private equity investments completed in the region over the last two years and found that prior to the first half of 2000, the majority of VC money went into expansion and equity capital for high-growth industries, but that this year buyouts were back.

“The study shows how important the role of private equity is in balancing equity markets,” said Zoltan Toth, CEO of Advent International. “In an economic downturn, one way to increase shareholder value is to increase efficiency within a company – to sell off non-core activities. This is happening across Europe and the US.”

While exact figures for 2001 are not yet available, Toth said the number of investments made this year would be significantly less than 2000, which saw $100m of investments in 47 transactions. The report cited a number of reasons for the drop including changes in the way companies are evaluated in the case of takeovers or investments, and the limited number of available targets in Hungary.

But despite the drop, Toth said things were on the up. “We are seeing an increased number of leads where large companies are looking to restructure, and while private equity will not be the driving force in the economy, the industry is growing in importance and we expect will be the conduit of change for a number of industries,” he said.