Foreign markets focus of private equity

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NEW YORK -- Private equity expansion in traditional media will be focused on high-growth, high-risk developing markets rather than the U.S., senior executives said Wednesday.

"Media is what we do, and in the last two years we have not invested in newspapers or radio or cable in the United States," said Julie Richardson, managing director of Providence Equity Partners, which was a partner in the acquisition of MGM.

Speaking at the Dow Jones/Nielsen Media and Money conference, Richardson said emerging markets offered higher potential returns.

"One of the things we've found that worked really well is traditional media deals in emerging markets. We are seeing real opportunities in high risk economies but ones which also promise high growth," she said, pointing out Providence's recent investment in Turkish pay-TV platform Digiturk.

That investment was going "gangbusters" she said. Providence has also made substantial cable investments in European emerging markets.

Media and Entertainment Holdings chairman and CEO Herbert Granath said that the changing economic demographics in territories such as Eastern Europe made them very promising investment targets.

"The economics of these countries that are either part of the European Union or are going to be part of the EU are on the up," he said, pointing out that advertising spend and per capita income were attracting global investment.

Granath is vice chairman of Central European media venture CME, which owns commercial free-TV stations in the Czech Republic, Slovakia, Slovenia, Romania and the Ukraine.

Carlyle Group managing director James Attwood said that investment models could translate from country to country.

"It's not just about looking at developing markets, it's taking an understanding of the evolution of business models from one market to another."

Attwood said that in the aftermath of the credit crunch - which has left several hundred billion dollars of unsyndicated loans on the balance sheets of major investment banks - private equity deals would be on a more modest scale.

"We will probably see markets come back in the first or second quarter of 2008, but we will see smaller deals priced at lower values," he pointed out.

Attwood said that even when deals came back onto the market, the valuations would more likely be what they had been in 2003-2005 than in 2006/7.

"The last two years have really been unique. Credit costs have been low and [with] the banks saying don't worry about covenants, a lot of risk was mispriced and there was a lot of risk-taking that was untraditional in our market," he said.

"That said, media is still a wonderful arena for private equity to invest in," Attwood said.
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