Central European

January 2007

Financial Advisory Central European

Private Equity Confidence Survey Central European - Private Equity Confidence Survey

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Central European - Private Equity Confidence Survey

Introduction

Welcome to the latest Deloitte Central Europe Private Equity Confidence Survey.

In the past 6 months funds have cashed in on higher exit multiples. We now expect that to turn to more of a buying focus. This is confirmed by the findings of our survey as the focus on new investments is reaching its all time high. We are already seeing evidence of this with recent work Deloitte has done for and is currently discussing with private equity.

We expect interest in Central European private equity to continue to grow strongly and we are gearing up our Mergers & Acquisitions Transaction Services team to become the advisor of choice to private equity in Central Europe.

2006 was a great year for Private Equity in Central Europe. I hope you all had a good rest over Christmas and have an even more successful 2007!

Garret Byrne Partner M&A Transaction Services Leader Deloitte Central Europe

January 2007 Central European - Private Equity Confidence Survey

Overview

Results Key findings Economic climate n Buying at low multiples and selling higher is no longer enough – adding value is now a necessary element Short-term expectations by private equity professionals confirm medium and long-term forecasts for improving economic n Continuing optimism regarding economic performance activity in Central Europe. Countries of the reviewed region should outperform old EU member states. n Previous focus on new investments only strengthened

For this period, I expect the overall economic climate to: n Significant buying dominates investors’ activities

80 74% 80 69% 70% 69% 70 Taking public companies private 64% 70 60 56% 53% 53% 60 50 47% The Central European market is maturing - something which 44% 50 can be further seen in the increase in number of management 40 37% 36% 31% 40 30 26% 26% buyouts and the introduction of taking-public companies 30 private. 20 13% 13% 20 10% 10 4% 4% 0% 0% 0% 0% 10 BorsodChem (Hungarian-listed polymer producer) is currently 0 Mar. Sep. Mar. Sep. Mar. Sep. Mar. Oct. 0 being taken private by Permira. Press reports from November 2003 2003 2004 2004 2005 2005 2006 2006 2006 valued BorsodChem equity at EUR 847m and enterprise

value at 1,056m. In Poland, Oaktree Capital Management 80 80 launched a successful offer to increase its stake in Polmos 70 Improve Remain the same Decline 100 70 Lublin SA, the distillery company, and are now delisting it. The 60 60 80 deal valued equity of Polmos at EUR 47m. Deloitte supported 8050 70 both these transactions. Investors’ focus 50 40 40 60 6030 Debt finance After successful fundraising and many exits in 2006, the focus 30 50 20 is now40 on new investments. 20 40 10 The leverage available for private equity deals has advanced 10 30 0 rapidly in the last three years and offerings are now close to 20 0 20 For this period, I expect to spend the majority of my time those in more mature markets with keen competition for larger 10 focusing0 on: deals. 0

For this period, I expect the availability of debt finance to: 100 88% 80 80% 86% 77% 8080 74% 8070 69% 80 70 60 80 70 60 53% 70 60 50% 50 70 67% 67% 60 62% 60 60% 61% 50 5040 60 40 30% 31% 52% 50% 24% 30 50 47% 48% 40 22% 19% 40 50 46% 17% 12% 17% 42% 20 12% 40 40% 39% 30 8% 3020 40 38% 7% 4% 6% 7%7% 33% 33% 0% 30 20 2010 30 0 Mar. Sep. Mar. Sep. Mar. Sep. Mar. Oct. 0 20 10 10 20 2003 2003 2004 2004 2005 2005 2006 2006 10 11% 0 0 10 4% 0 0% 0% 0% 0% 0% 0% 0 Raising New Funds Portfolio Management New Investments 80 Mar. Sep. Mar. Sep. Mar. Sep. Mar. Oct. 80 80 2003 2003 2004 2004 2005 2005 2006 2006 70 70 70 80 60 60 60 70 Increase Remain the same Decrease 50 50 50 100 60 40 40 80 40 50 30 30 80 70 30 40 20 20 60 20 30 60 10 10 50 10 0 0 20 40 40 0 10 30 80 0 20 20 70 10 80 0 60 0 70 50 80 60 40 70 50 30 40 80 60 80 20 30 50 70 70 10 20 60 60 040 10 50 50 30 0 40 40 20 30 30 10 0 20 20 80 10 10 0 0 70 60 50 80 40 70 80 30 60 70 20 50 60 10 40 50 0 30 40 20 30 10 20 0 10 0

80 70 60 50 40 30 20 10 0 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0

Central European - Private Equity Confidence Survey

100 80 80 70 60 60 80 50 80 70 70 40 40 60 30 60 Size of transactions Investments50 efficiency 20 20 50 40 40 10 0 30 Expectations regarding the size of transactions are more 30 0 For20 this period, I expect the efficiency of my financial balanced as the year saw several big deals in 2006 - as was 20 80 investments10 to: stated80 in our summer survey. 10 70 0 70 0 60 80 80 77% Entries:60 69% 50 � BorsodChem70 Rt. EUR 1,065m 70 68% 67% 50 63% 61% 40 � Radiokomunikace,60 a.s. EUR 1,190m 60 57% 40 53% 30 50 100 30 50 41% 80 20 Exits: 40 40 20 33% 33% � 8031% 30% 28% 31% 70 10 Karneval30 EUR 323m 10 30 � 80 23% 60 0 Kablo Elektro EUR 112m 80 0 20 2060 16% 70 50 70 10 10 7% 6% 4% 40 For60 this period, I expect the average size of transactions to: 40 2% 0% 0% 0% 0 60 0 50 30 50 Mar. Sep. Mar. Sep. Mar. Sep. Mar. Oct. 20 2003 2003 2004 2004 2005 2005 2006 2006 20 40 100 40 80 10 80 0 30 72% 70 30 Improve Remain the same Decline 0 80 70 68% 80 20 6057% 20 60 56% 56% 70 10 52% 53% 60 50 50% 10 50 44% 60 0 40% 38% 40% 40 37% 36% 0Investors’80 activities 80 40 40 50 30 28% 70 30 70 21% 40 20 20 Due60 to success in raising new funds in 2006 and as new funds60 20 30 11% 11% 12% 10 8% enter50 Central Europe, the region should experience strong 10 7% 50 0 20 3% 0% 0% activity40 in private equity. Expectations are clearly indicating 1000 0 40 80a focus10 on buying new investments. Mar. Sep. Mar. Sep. Mar. Sep. Mar. Oct. 30 30 0 80 2003 2003 2004 2004 2005 2005 2006 2006 70 20 20 60 10 10 80 80 60 For this period, I expect to: Increase Remain the same Decrease 50 0 0 70 70 40 80 40 60 60 80% 80 70 30 50 50 68% Market20 activity 70 67% 60 20 62% 80 40 40 60 54% 50 10 52% 70 30 30 50% 0 50 40 0 42% 44% 60 20 20 38% For this period, I expect the overall market activity to: 40 32% 32% 50 10 10 30 26% 30 25% 22% 23%23% 40 0 0 20 20 13% 13% 10 10% 11% 30 80 74% 80 10 6% 7% 20 80 0 0% 70 70 0 62% Mar. Sep. Mar. Sep. Mar. Sep. Mar. Oct. 10 70 60 56% 56% 80 53% 56% 52% 60 2003 2003 2004 2004 2005 2005 2006 2006 0 60 7050 48% 47% 47% 44% 44% 44% 50 50 38% 6040 40 40 31% Buy more Buy and sell equally Sell more 5030 26% 30 30 80 40 20 16% 20 20 70 30 10 6% 10 10 60 20 0% 0% 0% 0% 0% 0% 0 0 0 50 10 Mar. Sep. Mar. Sep. Mar. Sep. Mar. Oct. 2003 2003 2004 2004 2005 2005 2006 2006 40 0 80 30 Increase Remain the same Decrease 70 20 80 60 10 70 0 80 50 60 70 40 50 60 30 50 40 20 40 30 10 30 20 0 20 10 10 0 0

80 70 60 50 40 30 20 10 0 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 80 0 80 0 70 70 80 60 80 60 70 50 70 50 60 40 100 60 40 80 50 50 30 80 70 30 40 40 20 60 20 30 60 30 10 50 10 20 20 0 40 0 40 10 10 30 0 0 20 20 10 0 0 100 80 Central100 European - Private Equity Confidence Survey 80 70 80

80 8080 70 60 60 70 70 60 50 60 60 50 New60 investments competition 40 40 40 50 5040 Forensic Due Diligence 30 40 The prevailing focus on market leaders as targets confirms 30 40 20 20 20 30 a30 trend of bigger funds and deals in Central Europe. Given this, 20 In response to increased business risks, many companies 10 we expect more tender-driven transactions. 0 20 20 10 consider safeguarding their future interests by conducting 0 0 10 10 0 a type of due diligence over and above that which solely addresses the potential business partner’s or target’s 0 For0 this period, I expect the highest competition for new financial condition prior to an investment, namely, Forensic investment opportunities in: Due Diligence. FDD includes an assessment of the risks 80 80 80 80 80 attached to the country and sector of investment. Many 70 70 70 70 70 80 companies often neglect to check important issues such as 60 60 69% 60 60 70 65% a target company’s political and/or criminal affiliations and 60 60% 61% 50 50 50 56% public reputation and thus fail to address their potential 50 50 60 53% 40 40 40 50 44% exposure to them as investors. 40 40 30 30 40% 39% 40% 30 40 35% 30 30 20 20 31% 20 Forensic Due Diligence takes a thorough look at the 30 20 20 10 10 10 background, track record, and reputation of the investment 20 10 10 0 0 0 target and related individuals and now forms a vital part of 10 7% 0% 0% 0% 0% 0% the due diligence process for investors entering new 0 0 0 markets. 80 March September March September March October 2003 2004 2005 2005 2006 2006 70 80 80 To discuss this area please contact Alexander Nagy 60Start ups Middle size growing Co. Market leaders 70 70 in our Prague office (tel. +420 246 042 187, 80 80 50 60 60 email: [email protected]). 70 70 40 50 50 60 60 30 Transaction entry multiples 40 40 50 50 20 30 30 40 40 The 10growing economy still supports positive expectations 20 20 30 regarding0 transaction entry multiples. Investment opportunities 30 10 10 20 20 0 0 10 For this period, I expect multiples on transactions to: Carve-outs do not seem to attract private equity investors and 10 0 remain the domain of strategic investors. 0

80 During the next 6 months I expect the following exit 70 strategies to be most dominant: 59% 58% 61% 60 53% 80 0% 50 41% 70 39% 40% 20% 40 34% 60 30 50 20 8% 40 10 7% 0% 0% 30 0 March September March October 20 2004 2004 2006 2006 10 Increase Remain the same Decrease 80% 0

Family and private companies Secondary buy-outs

Subsidiaries of groups

Central European - Private Equity Confidence Survey

Significant Exits

Company Seller Buyer Date Value Stake Description Dominet SA Merrill Lynch Global Private Fortis NV October 06 not available 100% Netherland based financial services Equity company, has agreed to acquire polish bank holding company. Merrill Lynch held 49.9% stake and 50.1% is owned by Mr and Ms Cacek. Bank has 806 employees. CCS Ceska spolecnost Advent International Corp. FleetCor Inc. October 06 not available 100% FleetCor acquired CCS in cash and pro platebni karty, a.s. shares deal as Advent exited its investment from October 2005. Kablo Elektro, a.s. J&T Finance Groups, a.s. nkt cables group September EUR 112m 100% Denmark industrial holding company GmbH 06 acquired through its subsidiary manufacturer of power cables from Slovakia based financial services group. Dom Finansowy QS Innova Capital Sygma Bank Polska August 06 not available 100% Financial broker based in Gdansk (Poland) was acquired in August 2006. In 2005 it provided credit worth of EUR 168.6m. Crnogorska Komercijalna DEG / Netherlands OTP Bank Rt. August 06 EUR 105m 100% Listed Hungarian commercial bank Banka development finance acquired Montenegro based bank. company Sellers were Dutch financial organization and German government finance and consulting corporation focusing on transition countries. Slovalco, a.s. European Bank for Hydro Aluminium, August 06 EUR 22m 35% Norwegian aluminium producer Reconstruction and a.s. exercised its option to increase its stake Development (EBRD) in Slovakian company. EBRD and Hydro entered the company in 1991 by purchasing stakes of 10% each. Svoboda Press, a.s. Argus Capital Partners Euro-Druckservice August 06 not available 100% Svoboda Press is Czech based AG publishing house with turnover of EUR 64.5m and 400 employees. Karneval Media, s.r.o. Mid Europa Partners / Baring Liberty Global Inc August 06 EUR 323m 100% US based cable company acquired Private Equity Partners / EMP (UPC) second largest Czech cable operator Europe with intention to merge it with its own subsidiary (market leading UPC). Proceeds from transaction represent 7.7 times Mid Europa original investment and 4.4 times follow up investment. Metropolis Media Innova Capital / Capital Europlakat June 06 EUR 43m 100% Private equity funds exited their International International investment in Slovenia based media Werbegesellschaft group. Metropolis is top 2 provider of mbH outdoor advertising in republics of former Yugoslavia such as Slovenia, Croatia, Serbia and Montenegro. Sanitas Inc. Mayfield Fund Teesland June 06 not available 100% US based fund exited provider of rental services to warehousing and sold it to international warehousing services provider. Motoractive / Domenia Romanian American GE Capital Bank Ltd. May 06 EUR 140m 100% US bank acquired 100% stake from Credit / Estima Finance Enterprise Fund (RAEF) / private equity and other institutional DEG / EBRD investors (e.g. World Bank vehicle). Acquired companies carry business in consumer finance industry (leasing, mortgages and consumer finance respectively). Emax SA BBI Capital SA ComputerLand SA May 06 EUR 44m 36% Polish IT solutions provider acquired 65% of voting rights with its stake offering EUR 37 per share. Deal values entire share capital at EUR 101m.

Central European - Private Equity Confidence Survey

Fund raising

Company Fund Value Status Time Description Krokus Private Equity Nova Polonia Natexis II EUR 52m first closing November New fund with target of EUR 75m is being raised by 06 Krokus. Investors include Natexis Private Equity and EBRD. Fund will target Polish mid market firms in manufacturing, services, transportation, construction and other sectors. NBGI Private Equity new fund EUR 600m raising November Greek private equity firm is raising new fund for buy- 06 outs in Southeast Europe. Innova Capital Innova/4 LP EUR 225m closed November Launched in October 2005 with original target of EUR 06 175m, fund was closed in November with hard cap. Istithmar acquisition budget EUR 7bl. available October 06 Investment agency of government of Dubai is looking for acquisitions in Europe and North America, especially in media and manufacturing. Argus Capital Partners new fund EUR 213m raising September First closing was held at December 2005 at EUR 164m. 06 Final closing of this second fund of Argus is expected later this year (original target was set at EUR 200m). ALPHA Associates ALPHA CEE II EUR 109m first closing August 06 Second and final closing of the fund with target size of EUR 300m is expected by the end of the year. Intended countries of interest are new member states and second round accession countries. Vienna Capital partners funds available EUR 500m available July 06 Vienna Capital Partners announced that it has EUR 500m ready for investments in Hungary and Poland. Palamon Capital Partners Palamon European Equity EUR 670m final closing July 06 Funds with original target size between EUR 600m and II EUR 650m is intended for mid market investments in Europe. Focus of the fund will be on EUR 10-80m investments in services sector.

Central European - Private Equity Confidence Survey

Major investments

Company PE House Period Value Stake Description Radiokomunikace, a.s. Mid Europa Partners, November 2006 EUR 1,190m 100% A consortium of international investors acquired Lehman Brothers Private dominant market player in Czech telecommunications Equity, Al Bateen market. The deal included 39.23% shares of T-Mobile, Investment Company market leader in mobile telecommunications services. BorsodChem rt. Permira November 06 EUR 1,056m 100% Private equity funds are taking private publicly listed hungarian chemical company. Offer is open until December 15, 2006. Aero Vodochody, a.s. Penta October 06 EUR 103m 100% Czech based military and civilian aircraft manufacturer was acquired by Oakfield (Penta’s portfolio company). KCW Ultimo Advent International October 06 not available 100% Ultimo is polish debt purchase and debt collection Corp. company with approximately EUR 12m in sales and 400 employees in 2006. Polmos Lublin SA Oaktree Capital October 06 EUR 47m 100% Taking private offer of Oaktree is worth EUR 13.3 per Management LLC share with premium of 1% over closing share price on October 4, 2006. Polmos is a distillery company. Standard Profil Bancroft September 06 EUR 71m 100% Bancroft Fund II backed management buy-out of tier- one rubber profile manufacturer for Turkish and European car makers. Skarbiec Asset Enterprise Investors (EI) September 06 EUR 39m 100% EI acquired asset management company through its Management Holding SA Polish Enterprise Fund V from BRE Bank SA. SC Macon SA Enterprise Investors September 06 EUR 35m not Romanian building materials producer was acquired by available Polish Enterprise Fund V. Stakes of management and employees were purchased. Tatra, a.s. KBC Investco NV September 06 EUR 62m 81% Investment vehicle formed by Alan R. Adams (private investor) and KBC private equity subsidiary acquired heavy duty truck manufacturer from Terex Corp. for USD 79.8m. Komex DBG Eastern Europe / 3TS August 06 not available majority Target acquired by Hungarian and Polish private equity Capital Partners funds operates chain of 50 retail stores, offering children clothing. InterCom Argus Capital Partners August 06 not available not Argus Capital acquired through its portfolio company available Palace Cinemas 9 multiplexes from Hungarian media company adding 56 screens. BAN Amber Trust II July 06 not available 49% Finnish-American buy-out firm acquired stake from sole owner Mr Teilans who keeps control over the company. BAN is a Latvian non-life insurer. Sokolka Ratos AB June 06 not available not Swedish private equity house acquired Polish window available and door manufacturer through its portfolio company INWIDO AB. Heidelberger Calcium Mid Europa Partners June 06 not available 100% Private equity fund backed management buyout of Croatian based calcium aluminate cement business. Deal includes acquisition of 92.4% stake in Istra Cement. Amis KBC Investco NV / Iris June 06 not available 100% Funds backed management buy-out from sole owner Capital Mr A. Zeleznik. Company is Slovenia based telecom company. ZPA Smart Energy Kilcullen Partner May 005 not available 100% Czech based provider of electrotechnical products and services was acquired from eight individuals.

Central European - Private Equity Confidence Survey

Private Equity Regional Contacts

Garret Byrne M&A Transaction Services Leader +420 246 042 339 [email protected]

Krzysztof Moczulski Tax M&A Regional Service Line Leader +48 22 511 0504 [email protected] lain Child Regional Managing Partner, Financial Advisory +421 2 582 49 112 [email protected]

Martin Iltis Debt Advisory +420 246 042 784 [email protected]

Industry contacts

Mike Jennings Financial Services Industry +420 246 042 576 [email protected]

Vladimir Vanek Energy & Resources +420 246 042 361 [email protected]

Dariusz Nachyla Technology, Media & Telecommunications +48 22 511 0631 [email protected]

10 Central European - Private Equity Confidence Survey

Contacts

Adriatics (Bosnia-Herzegovina, Croatia, Slovenia) Francois Swanepoel M&A Transaction Services Leader +385 1 2351 920 [email protected] Gerald Lambert Tax M&A Transaction Services Leader +385 1 2351 944 [email protected] Vladimir Milosevic Financial Advisory Leader +385 1 2351 934 [email protected]

Balkans (Albania, Bulgaria, Kosovo, Moldova, Romania) James Walker M&A Transaction Services Leader, Bulgaria +359 2 980 8500 [email protected] Hein van Dam M&A Transaction Services Leader, Romania +40 21 222 1661 [email protected] Rodica Segarceanu Tax M&A Transaction Services Leader +40 21 222 1661 [email protected] James Walker Financial Advisory Leader +359 2 980 8500 [email protected]

Baltics (Estonia, Latvia, Lithuania) Gavin Hill M&A Transaction Services Leader +48 225 110 786 [email protected] Janis Zelmenis Tax M&A Transaction Services Leader +371 7210 097 [email protected] Linas Galvele Financial Advisory Leader +370 5255 3022 [email protected]

Czech Republic Garret Byrne M&A Transaction Services Leader +420 246 042 339 [email protected] Jaroslav Škvrna Tax M&A Transaction Services Leader +420 246 042 636 [email protected] Iain Child Financial Advisory Leader +420 246 042 362 [email protected]

Hungary Andras Fulop M&A Transaction Services Leader +36 1 428 6937 [email protected] Petr Oszko Tax M&A Transaction Services Leader +36 1 428 6768 [email protected] Bela Seres Financial Advisory Leader +36 1 428 6936 [email protected]

Poland Gavin Hill M&A Transaction Services Leader +48 225 110 786 [email protected] Krzysztof Moczulski Tax M&A Transaction Services Leader +48 22 511 0504 [email protected] Wojciech Roman Financial Advisory Leader +48 22 511 0871 [email protected]

Serbia, Montenegro, Macedonia Dragan Lazarevic M&A Transaction Services Leader +381 11 361 3045 [email protected] Srdjan Petrovic Tax M&A Transaction Services Leader + 381 11 361 2524 [email protected] Vladimir Poznanic Financial Advisory Leader +381 11 3613457 [email protected]

Slovakia Garret Byrne M&A Transaction Services Leader +420 246 042 339 [email protected] Steve Gawronski Tax M&A Transaction Services Leader +421 2 582 49 167 [email protected] Iain Child Financial Advisory Leader +421 2 582 491 112 [email protected]

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