Question

1. What characteristics of the European business landscape have made Europe an attractive market for buyouts?

2. What are some of the difficulties European buyout firms face when investing across European nations?

3. Why has the private equity market in Germany been challenging, even though Germany is Europe’s largest economy?

4. Why are developing nations seeking to attract private equity investment?

Answer 1

1) Due to high competition among private equity players for investment in USA, China and India which are making prices for deals very high, the scenario in Europe is different. In Europe considerably better value can be derived for the price that is to be paid and hence Europe is a better market for private equity.

2) The European firms face the difficulty that different nations have different degree of economic strength and also the economies of different nations are growing at a different pace inspite of the monetary union. So it is difficult for firms to estimate the future growth rate and price a deal fairly.

3) Even though Germany is the biggest economy, the growth rate has moderated and because of weak economies in other places such as Greece, Portugal etc., there is a greater competition among private equity players for investment in Germany. Hence the German market has become very challenging for private equity.

4) Developing nations have a huge growth potential and requires large investment for infrastructure creation. Thus they want private equity investors to come in and partner the local government in investing in infrastructure creation and setting up industries to fuel economic growth.