Western Europe and North America
Western Europe saw slow growth in 2010, with sovereign debt issues creating market volatility. Promising assets have often been scarce and highly priced. Germany shows strong signs of recovery, but there are fewer opportunities to invest at a price where we can add significant value.
Market conditions are somewhat better in North America, led by a slight increase in consumer and business spending. High unemployment, budget problems at federal, state and local levels, and falling house prices continue to hold down US growth.
Despite challenging conditions that persisted throughout the year, we maintained our pace of investment and our focus on primary transactions. Our portfolio companies are performing in line with expectations around the current economic cycle, and we continue to apply significant effort to transform these businesses, work closely with our management teams and advisors.
Central and Eastern Europe
Growth is returning to Central and Eastern Europe, led by the stronger economies of Poland and Turkey.
Our portfolio companies are coming to terms with the changed economic landscape, and the diligent work of the past two years will serve them well as domestic demand recovers. The involvement of operating partners with local and international experience is building Advent’s reputation as a firm that can navigate operational issues and help companies expand into new markets. In March 2011 we acquired ISIDA, our first investment in Ukraine.
Latin America
Latin America is second only to emerging Asia in leading the way to global economic recovery. Though private equity in the region is still in the development stage, the environment is improving, especially for experienced players with long tenure and deep connections in the region.
We have maintained our commitment to Argentina through difficult times, expanding the local team in 2010, and adding to our team elsewhere for entry into the markets of Colombia, Chile and Peru. We have also maintained our pricing discipline in Brazil, closing a major follow-on investment there last year. In addition, strong institutional investor support for our activities enabled us to raise one of the largest funds to date in the region, LAPEF V, providing $1.65bn of new capital to invest across Latin America.
Asia Pacific
The highest economic growth rates have been in Asia Pacific, led by China and India. The Indian economy has been driven by the health and business services sectors as income rises and consumer demand increases. Our global experience in these sectors is helping our local team to identify interesting opportunities from our fully functional Mumbai office. In contrast, deal flow in Japan has been insufficient to maintain a dedicated fund and office in that market. As a result we took the difficult decision to close JPEF and the Tokyo office and shift strategic focus to the Greater Asia region.
Operating highlights
We opened new offices in New York, which has already proved a useful platform for building important relationships, and Istanbul, one of Europe’s largest and highest growth markets. We hired an additional 25 investment professionals, taking our total number worldwide to over 160. Many of our new hires support our senior team who are increasingly called upon to share their experience, knowledge and sector expertise globally. In 2010, we brought 23 new operating partners into our program, acting as independent advisors to assist us with larger and increasingly complex deals.
With economic recovery ranging from fragile to strong and slow to fast, the challenge for portfolio companies over the next 12 months will be to demonstrate consistent top and bottom line growth. We have expanded our Advent Portfolio Support Group of senior managers with analytical, strategic and project management skills to help them achieve these results. Lastly, we continue to build the Advent operations team and channel our efforts on our own operational improvements to be best in class in the industry.