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Editor’s Note:
Everyone remembers the good old days before the 2008 financial crash that began in the United States and rippled across the world. Shoddy banking practices and simple greed were the main factors and a lot of people got hurt. Investors everywhere took a bath. Big time. Private equity essentially dried up for a while.
In the West things have returned to normal. But in Eastern European countries like Hungary the return of private equity has been a bit slower. And there are reasons.
But there is also hope.
As made clear in this issue by lawyers on the ground, investment has not returned to pre-2008 levels due to a variety of factors. Mainly, international banks, all of which made unprecedented levels of acquisition financing and refinancing available to private equity investors prior to 2008, have been much more cautious since the crisis. As a result, private equity firms have trouble leveraging their investments, decreasing the purchase price they are able to offer to sellers.
The crisis in Ukraine has also had a detrimental effect on the perception of the region. For Westerners, i.e., Americans, there is not much differentiation from Ukraine and the EU countries that border it. There is a huge difference between Ukraine and the countries to the west, of course, but fear is fear and in this case there is a perception that what Russia is up to could spill over. Whether that is realistic or not- probably not – the situation is what it is. And government regulations have not exactly helped the situation. In many ways, changes to the law have only made things more confusing.
For Hungary, which was once a main Eastern European target for foreign investment, a strong degree of confidence must be instilled.
If that can be done effectively, investors will likely follow. Not to be cliché, but if you build it they will come.
Sincerely,
Kevin Livingston
Editor-in-Chief
