Ernst & Young - 2007 to become record year for direct investments funds

/Ernst & Young, London, Moscow, August 4, 08/ - Notwithstanding credit crisis, enlargement value (EV) of private companies` business with direct investments funds share (DIF) in capital exceed the same indicator for public companies. Such data are in the global report of Ernst & Young "In what way direct investments funds create value? After financial crisis" within the frames of which 100 hugest deals research on exits of DIF in 2007 were conducted. By results of 2007 the rate of enlargement value of 100 hugest companies` business with DIF share by the funds` arrival made 24%, exceeded twice the rate of enlargement value of public companies. It considers all deals, in which relation analysis is conduct, excluding their bigness (including hugest deals). In all main sectors of economy, companies with funds` share exceeded public companies by EBITDA growth from investments conducting moment to capital out. In 2007 EBITDA index for companies with direct investments funds share increased by 33% faster than the same index for public companies. "As well as the previous years, 2007 out let statistic showed that companies with DIF share have more opportunities for creating value than public companies" - Saymon Perri said, the manager of direct investments funds activity department of Ernst & Young" - "Our research contradicts the myth that cheap borrowings and expenditures decrease is the main reasons of DIF success". Strong model 2007 more than half of business enlargement value, fixed by the DIF out let moment from business was explained by successful funds strategy. Saymon Perri commented: "Business-model of direct investments funds has the main aim - enlargement value of business. It can be reached both by means of definite development plan and improvement of all company's activity indicators and consistent following of out let strategy in established period". DIF out lets in 2007 showed that financial investors managed to increase strategic, managing and operational efficiency of portfolio companies. Organic growth with geographic expansion, sales growth and new products advance contributed to it. Purchasing projects and restructuring became the other growth factors. "Today the stake of direct investments funds on Russian merger market is relatively small - about 5% from total deals value for 2007. Mostly they are capital entering deals. During two last years we observe considerable growth of funds` quantity, which invest in Russian enterprisers" - Evgeniy Trusov said, the partner of Ernst & Young, the head of corporate financing group in CIS. - "What comes to funds` out lets from companies` capitals, the number of such deals is restricted yet, however majority of them were successful in terms of creation value. It is explained both by funds` activity and Russian market potential". Credit crisis Saymon Perri noted: "Notwithstanding difficult situation on the market, DIF continue to surpass public companies by key indicators, what proves DIF ability to cope with problems of growth recession and take the profit position, when crisis is gone. Best DIF proved that they might provide higher profit, value and earnings on investments. However, funds will likely to confront with increasing of investment cycle and slower growth of business value till the correction moment on the market". "In this situation direct investments funds should improve managing of portfolio companies - in particular, managing of problem investments, considering close attention on the side of mass media, trade unions and state organizations. Entering will be more difficult both by terms and portfolio companies` evaluation". "All stages of business cycle should be passed. As far as entering amounts are decreasing in 2008 and in next years volumes of investment in DIF and funds` yield are expected to decrease. However, when the market overcomes crisis, DIF will have more companies in its portfolio, from capital of which successful out let might be made". About Ernst & Young Ernst & Young Company is a global leader in audit, tax and law, providing transaction and advisory services. The staff of the company is 130,000 worldwide, united by common values and also devotion to quality of providing service. We create prospects; discover potential of our colleagues, clients and society in whole. The full version of it is available at the website at www.ey.com We constantly widen our services and resources according to the clients needs in different regions of CIS. In 15 offices of our company (in Moscow, Sant Petersburg, Novosibirsk, South Sahalinsk, Tolyaty, Ekaterinburg, Almaty, Astana, Atyrau, Baku, Kiev, Donetsk, Tashkent, Tbilisi and Minsk) work more than 3,700 specialists. Contact persona: Natalya Kozlenkova Tel.: + 7 727 258 59 60 e-mail: Natalya.Kozlenkova@kz.ey.com [2008-08-05]