EM PE Review – Volume VIII, Issue 3



European Bank Deleveraging: Opportunities and Challenges for EM PE Investors

Guest Commentary: Investment Strategies for Russia: XENON Capital Partners’ Experience

Inside Perspectives: An Interview with Piero Minardi of Gávea Investimentos


The old adage, “in chaos, there lies opportunity,” is as true today as it ever was. This edition of the EM PE Review takes a closer look at how investors are finding and executing on investment opportunities in the emerging markets in light of trying investment conditions. We also explore how today’s difficult environment is actually presenting EM PE investors with unprecedented opportunities— particularly with regard to one of the greatest sources of global uncertainty today: the European sovereign debt crisis.

Enhanced regulatory capital requirements are compelling European banks to deleverage their balance sheets in a process that will have profound effects on emerging market countries, where European banks hold over US$4 trillion in claims. In our spotlight article, European Bank Deleveraging: Opportunities and Challenges for EM PE Investors, we explore the impact of European bank deleveraging on the emerging markets, with a view toward identifying the opportunities this process may present to private equity investors—including via the provision of growth and expansion capital to SMEs, the ability to purchase banks’ and European corporates’ non-core assets, and the growing availability of credit opportunities.

Russia is one market that is certainly pegged as difficult to operate in by a number of global investors, yet it has been home to some sizable recent transactions. In this issue, Chief Strategist of XENON Capital Partners, Stanislav Song, shares his perspective on how to navigate this market based on lessons the firm learned through structuring, marketing and investing in Enel OGK-5, in the country’s largest private equity transaction in the utilities sector to date. While investment activity has also significantly picked up in Brazil, Piero Minardi, a Partner at Gávea Investimentos, dismisses the charge that the country is becoming overheated, pointing to a low private equity to GDP penetration ratio as well as the prevalence of unexplored opportunities outside of Brazil’s largest cities.

Finally, success in this industry means not only sourcing and closing on the right investment opportunities; it means creating value from investment to exit. In our latest Impact Case Study, we detail the ways in which India’s Blue River Capital helped KPR Mill become one of the top five Indian textile firms by sales and profits, while implementing best practices, improving worker conditions and embracing environmental stewardship. Please stay tuned for our soon-to-be-released second edition of EMPEA’s Impact of Private Equity in Emerging Markets: Case Studies Compendium, where we will feature many more successful private equity investments across the emerging markets, highlighting the ability of committed investors to generate returns while also benefiting the local community, workforce and environment. As always, we welcome any comments you may have.