Hungarian Venture Capital and Private Equity Association

Development of the Hungarian Venture Capital and Private Equity Market January-October 2007 Preliminary data
November, 2007

Overview
Methodology electronic data gathering and archiving Analysis structure Raised capital VC/PE investment activity Exit Market approach

24 active funds surveyed, 15 responded 63% coverage HVCA plans to participate in the new data collection and data processing of EVCA

Hungarian Venture Capital and Private Equity Association

Fundraising
2007 The surveyed funds reported EUR 2.8 billion raised funds regionally in 2007
Amount of raised funds doubled Size of new funds increased Fund managers with CEE regional experience raised new funds Funds with regional focus dominate Main investment strategy: large buy-outs Capital increase for SMEs forecasted due to the JEREMIE program

Hungarian Venture Capital and Private Equity Association

VC/PE Investment Activity 2001-2007

2001 Number of Transactions Number of Investee Companies Total Invested (EUR m) Avg. Investment Volume (EUR m) 28 27 71 2.5 2002 29 28 127 4.4 2003 32 25 117 3.7 2004 41 35 108 2.6 2005 26** 26 131 5.0 2006 39 39 534 13.7 2007* 12 12 365.7 30.5

* Data of first 10 months. Data on one transaction was not disclosed, the deal is not included in the above statistics. ** The surveyed funds reported 30 investments. Data on four transactions were not disclosed, these deals are not included in the above statistics.

Investment activity of state-owned funds was below previous years Investment activity decreased, 1-2 large buy-out transactions annually play significant role in the volume of transactions The low and middle sector of the market still undersupplied Stable number of large structured transactions Due to the buy-out domination the average investment volume has increased
Hungarian Venture Capital and Private Equity Association
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VC/PE Investment Activity

2007
Transaction Size No. of Transactions % of total Approx. Value (EUR million) % of total

Less than EUR 1.0 m EUR 1.0 m - EUR 2.5 m EUR 2.5 m - EUR 5.0 m EUR 5.0 m - EUR 15.0 m EUR 15.0 + m Total

7 0 1 3 1 12

58% 0% 8.5% 25% 8.5% 100%

3.0 0.0 4.2 31.5 327,0 365.7

1% 0% 1% 9% 89% 100%

Number of smaller transactions below previous years Relative gap in the deals between EUR 1.0 5.0 million 25% of transactions occurred in the EUR 5.0 15.0 million segment One transaction represents 90% of investment value

Hungarian Venture Capital and Private Equity Association

VC/PE Investment Activity

No. of Transactions 2001 2007
Transaction Size Less than EUR 1.0 m EUR 1.0 m - EUR 2.5 m EUR 2.5 m - EUR 5.0 m EUR 5.0 m - EUR 15.0 m EUR 15.0 + m Total No. of Investments 2001 17 5 3 3 0 28 2002 14 7 2 3 3 29 2003 19 9 0 1 3 32 2004 22 11 1 5 2 41 2005 18 4 1 2 1 26* 2006 32 3 2 1 1 39 2007 7 0 1 3 1 12

* The surveyed funds reported 30 investments. Data on four transactions were not disclosed; these deals are not included in the above statistics.

Fall in number of transactions in the smaller segment due to decreasing activity of state-owned investors Domination of one large buy-out in the EUR 15.0 + m segment

Hungarian Venture Capital and Private Equity Association

VC/PE Investment Activity

Volume of Transactions, 2002 2007 (EUR million)
Volume of Transaction
Less than EUR 1.0 m EUR 1.0 m - EUR 2.5 m EUR 2.5 m - EUR 5.0 m EUR 5.0 m - EUR 15.0 m EUR 15 + m Total Volume (EUR m) Avg. Investment Volume (EUR m)

2002
6 9 7 35 70 127 4.4

2003
4 15 0 13 85 117 3.7

2004 2005
9 17 3 37 42 108 2.6 5 5.4 2.6 18 100+ 131 5.0

2006
8.9 4.6 8.8 11.7 500.0 543.0 13.7

2007
3.0 0 4.2 31.5 327 365.7 30.5

The average investment volume increased, due to the decreased number of transactions and the increased volume of large buy-out

Hungarian Venture Capital and Private Equity Association

VC/PE Investment Activity

Investment Stages, 2002 2007
Number of transactions
45 40 35 30 25 20 15 10 5 0 3 2002 4 2003 Buyout 1 2004 1 2005 3 2006 12 14 19 27 19 9 6 13 16
500 400 300 506 600 4 23 1 27
Volume of transactions

20

200

3 7 2 2007
100 0

4 39 84 2002

4 32 82 2003 Buyout

7 78 23 2004

1 30 100 2005 2006

338

2007

Expansion

Early stage

Expansion

Early stage

Expansion capital is dominant in terms of number of transactions State-owned investors financed mainly companies in expansive phase Ratio of structured transactions remained stable: two buy-out represented 90% of the volume Number of early stage transactions is expected to increase based on JEREMIE program
Hungarian Venture Capital and Private Equity Association
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VC/PE Investment Activity

Sector Distribution, 2007 (%)
Number of Transactions
8% 17% 25%

8% 17% 8% 17%

Industrial products & services Medical & Healthcare Services (other) Other

Manufacturing Computer: Software Communications

Sector distribution of transactions: multi-coloured

Hungarian Venture Capital and Private Equity Association

Sector Distribution
by Number of Transactions, 2002-2007 (%)
100% Agriculture 80% 60% 40% 20% 0% 2002 2003 2004 2005 2006 2007 Chemicals and materials Others Transportation Consumer related Computer related Services Industry & Manufacturing Medical / Health related Communications

Hungarian Venture Capital and Private Equity Association

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Number of Exits
2007
Exit Type Trade Sale Sale to another PE firm Sale to management / buy back PO Write-off Total Number 4 1 9 2 0 16

There was no relevant change in exit activity, while the volume of exits increased significantly Buy-back from state-owned investors was dominant in number Trade sale dominated large exits Public markets provided exit opportunities only in case of already listed companies

Hungarian Venture Capital and Private Equity Association

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Conclusions
Volume of regional (CEE) fundraising increased significantly Fundraising was led by regional players Trend of large, structured investments continued Buy-outs remained the dominant investment method Decreasing activity of state-owned investors effected a fall in number of early stage investments JEREMIE program for early stage investments is in preparation Due to trade sales the volume of exits increased significantly

Hungarian Venture Capital and Private Equity Association

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Further information
Hungarian Venture Capital and Private Equity Association
Dr. Judit Karsai Chairperson Statistical Committee
Phone: +(36) 30 9333-331 E-mail: kar@econ.core.hu

Natlia Gmbs Executive Secretary

Phone: +(36) 1 475-0924 E-mail: hvca@hvca.hu

Hungarian Venture Capital and Private Equity Association

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