Venture capital on the rise
International venture capital firms seem to be turning to Greece at last, as some recent acquisitions of Greek companies by such firms illustrate. Apax Partners and TPG bought out cellular network TIM Hellas for 1.6 billion euros, and last week BC Partners (which also tried to buy Q-Telecom but Apax and TPG outbid it for 350 million euros) announced the acquisition of the Hyatt Regency hotel and casino company for 480 million euros. The connection between these buyouts is Nikos Stathopoulos, who as an executive member of Apax took part in the TIM deal, while as a partner at BC Partners he participated in the Hyatt deal. Kathimerini asked him why, within a few months, international venture capital firms have invested 2.5 billion euros here when up to today they had not even placed a single euro. «For a number of reasons,» answered Stathopoulos, «Greece is now a more attractive destination for foreign investors. There is great availability of venture capital so such firms seek investment opportunities. Several times these opportunities are not restricted to the big markets of Western Europe, that is the traditional target, as well as Central Europe and even Greece.» Furthermore, «obvious moves are being made for the improvement of foreign capital influx into the country, such as the reduction of taxes,» he added. The measures promoted for making it easier for companies to list on the Athens bourse through lowering the percentage of shareholder approval required from 95 to 90 percent received a good response. Venture capital firms usually delist the companies they acquire and then try to rehabilitate them and resell them or relist them. In the early 1990s BC Partners, for instance, bought SEAT (Italy’s Yellow Pages) which it then resold to Telecom Italia, and three years ago it bought SEAT back. Another reason is that «the economy, despite its problems, is more stable compared to the past and Greece is harmonizing itself with the European Union,» according to Stathopoulos. «The big cash flow leads venture capital firms toward smaller markets, where they will likely face limited competition to acquire a healthy company,» the Athens University MBA graduate suggested. The last period’s three major deals are also connected, he added, by «the idea that venture capital becomes increasingly accepted by Greek entrepreneurs.» Foreign investors are the last resort for major Greek investors as domestic venture capital firms lack the know-how as well as the capital to realize a deal such as those of TIM Hellas or Hyatt. The completion of acquisitions is made through complex funding schemes, loan contracts and the like. (The Hyatt buyout is made through Deutsche Bank funding.) On the other hand, international investors are more demanding as they handle significant sums of major pension funds, universities and even governments. For more than six years Stathopoulos had been looking in vain to find investment opportunities in Greece for his British employer, while trying to explain in conferences and events that there is also a «third way» for venture capital, not only for small companies in search of funds but also for strong groups wishing to transfer their subsidiaries and concentrate on their main activity. He is now happy to see Greek companies themselves becoming venture capital targets. Profile of targets Stathopoulos says that BC Partners seeks companies such as Hyatt, which holds the lead in the casino market in Greece, «which have a dominant position in their market and important growth prospects.» What is more, «they possess notable operating profits, and exceptional management and staff.» As for the sectors attracting the interest of BC Partners, Stathopoulos refers to the portfolio of the British investment group that includes companies from a variety of domains. Along with Cinven it controls Spain’s Amadeus, which has a dominant position in airline and tourism booking system management. It also acquired General Healthcare Group in the UK and Italy’s cheese producer Galibani as well as some media companies. The firm’s total investments reach 35 billion euros, while the latest fund drawn from international markets in May 2005 came to 5.5 billion euros. It is one of the biggest fund firms investing exclusively in major enterprises in Europe and its aim is the acquisition of 15 to 20 European companies within the next three years. Stathopoulos suggests that BC Partners does not rule out the possibility of its participation in the privatization process of a public company, as long as it has the characteristics (financial position, earnings, management) that venture capital firms look for and the state concedes them through a transparent procedure. He further notes that with the agreement to acquire Hyatt the British firm is, in a sense, forming a partnership with the Greek State: First because the state controls 51 percent of the Parnitha casino, while the rest belongs to Hyatt and Hellenic Technodomiki; and second because the state sets the terms of the game regarding the casino permits, with the BC Partners representative expressing the hope that «these terms will remain clear and will not change.»
