Greece: Early Days

Private equity came late to Greece. It began in the early 1990s on the initiative of a few investment banks and Global Finance, the first independent private equity firm to raise a fund in 1991. It invests in developing companies with a solid performance record and strong brand names. Private equity proved successful due to the fact that in the first half of the 1990s interest rates were double-digit. “Until 1996/97 private equity was the only alternative because loans were very expensive, but everything changed after 1997,” says Dionissis Alissandratos, managing director of Vectis Capital.

Following the stock exchange boom in 1998/99 an increasing number of institutions began to invest in private equity. However, as George Koukouzelis of NBG Venture Capital points out, the existing private equity firms found they couldn’t compete with the attractions of a buoyant stock market. The Greek stock market’s subsequent downturn in 2001 enhanced the allure of PE, particularly for the banks that could no longer rely on M&A and IPO fee income. Instead, as elsewhere, they have begun to look at private equity fund management as an attractive and reliable source of income.

Currently, a few players dominate the Greek private equity market. They are, NBG Venture Capital SA, Global Finance SA and Commercial Capital, each with over EURO100 million under management. “All major banks have private equity subsidiaries now, while there are few standalone firms like us,” says Alissandratos. Compared to only a few years ago, new entities are making their way. “But so far there is no serious competition as the market is well segmented. The number of firms is still low compared to the potential size of the market, so each tends to specialise in a specific niche,” says Alissandratos.

Although growing, private equity- funded investments in Greece are low vis-a-vis the EU, in both relative and absolute terms. As a percentage of GDP, local private equity investment in 2001 was 0.079 per cent compared to the European average of 0.253 per cent, according to NBGI Private Equity research. Investments have been centred mostly on later stage projects although the amount invested in seed and start-ups has been steadily growing.

“The investment pattern has changed a lot in recent years,” says Alissandratos, “Until recently there were few firms investing in early stages while there were no buyout firms.” According to the European Venture Capital & Private Equity Association in 2001 a total of EURO103.8 million was invested in private equity deals, almost half the amount invested in 2000. Some 57.8 per cent was expansion stage while 29.4 per cent and 9.7 per cent were invested in start-ups and replacement capital, respectively. Buyouts represented 2.3 per cent of the total amount and seed investments were 0.9 per cent.

In 2000 start-ups were 4.7 per cent of the total investment while there was no seed investment. In 2001 investments were considerably lower in number than in the previous year 49 against 78. While the number of investments in expansion dropped to 27 from 47 in 2000, that of start-ups rose slightly to 17 from 16. There was also an increase in average start up funding raised – some EURO0.573 million per investment in 2000 compared to some EURO1.8 million per investment in 2001.

Most private equity investments are in the consumer-related sector (EURO40.2 million or 38.8 per cent of the total amount invested in 2001), followed by telecommunications (EURO28.2 million, or 27.2 per cent) and health (EURO7.1 million, or 6.8 per cent) and computer sectors (EURO6.6 million, or 6.4 per cent). In recent years there has been an increase of investment in high tech. In 2001 it was 15.4 per cent of the total compared to 2.0 per cent in 1999. “In any case nobody specialises by sector because the market is still too small,” says Alissandratos.

The adverse market conditions in 2001 had an impact on fund raising as well. The total amount of funds raised by PE firms was EURO51 million compared to EURO305 million in 2000. Banks raised 86.7 per cent, while the rest was raised by pension funds. This differs from the previous year, when the majority of funds were raised by banks (43.5 per cent), fund-of-funds (29.5 per cent), private individuals (15.6 per cent), corporate investors (7.2 per cent) and insurance companies (4.1 per cent). Funds raised domestically represented 76.5 per cent of the total amount, compared to 66.1 per cent in 2000.


Greece has never been an attractive market for investors. According to recent research by the Organisation for Economic Cooperation and Development (OECD), over the period 1992-2001 only 0.2 per cent of global foreign investments headed to Greece. The country does not have a perfect record when it comes to compliance with European standards of transparency and disclosure, and it lags behind other OECD countries in regulatory reforms. But a pro-reform consensus has been emerging.

“Several times we disappointed foreign investors because we failed to deliver what we promised,” says Alissandratos. “We should make a point of improving our credibility by, for instance, meeting deadlines.”

Bureaucracy is a major impediment to business in Greece. “The procedures for the incorporation of a new enterprise in Greece are the most daunting, time-consuming and expensive in the European Union,” says Pavlos Stellakis, chief executive of NBGI Private Equity in London. George Koukouzelis recommends that foreign investors find local partners to get things moving faster.

The government is aware that lack of transparency and accountability, a too relaxed business style and so much red tape hinders Greek companies from competing with international peers on equal terms and can put off foreign investors. As a result it has been creating an institutional framework for modernising the business environment, reducing regulatory uncertainties and improving transparency. For instance, International Accounting Standards are due to be implemented on January 1, 2003, with the aim of restoring confidence in the market and attracting foreign investors.

Efforts in the next couple of years will be directed towards establishing a business-friendly administrative environment. One of the goals is to rationalise and simplify the licensing procedures and improve infrastructures in order to attract new investments. Infrastructure projects include the new airport at Athens and the motorway link from that airport into Athens and the motorway link between Athens and Thessaloniki, Greece’s second city.

A recent achievement is the dramatic reduction in time and cost of setting up a new business seven to ten days less and 30 per cent cheaper. The government is also trying to support and facilitate access to capital markets by, in particular, setting up Taneo, a fund-of-funds to invest in technology-related funds.


Macroeconomic reforms and EMU membership have established a basis for continued strong growth, and provide a good opportunity for Greece to push forward with deeper supply-side changes. Low interest rates should encourage continuing investment and support financial and equity restructuring efforts. Capital markets are being developed.

Many significant reforms that are underway are accelerating structural adjustment, while creating a new economy that is more flexible and competitive in regional and global markets. These range from fiscal reforms to the introduction of measures that will pave the way for private pensions. In particular, according to the OECD, the strength of Greek entrepreneurship clearly demonstrated by the thriving informal SME sector of the post-war years is likely to remain the driving force behind the modern (post 1990) Greek economy.

Another factor that provides the ideal background for PE is education. The standard is relatively high and skilled workers are cheaper than in many other European countries. “There are a lot of well-educated Greeks who work abroad and are prepared to come back if the opportunities are right,” says Koukouzelis. “We expect that PE in Greece will tap into a large pool of Greek scientists and entrepreneurs living abroad, who would be happy to move back to Greece if they knew there was the capital available to start a company,” adds Stellakis.

Currently Greece’s strength is its exposure to the wider Balkan market, which overcomes the intrinsic weakness represented by the size of the domestic market. “As opportunities for growth in the Greek market are limited, companies with the potential to expand abroad are all interesting,” says Dimizas.

“The Balkan area, with the exception of Slovenia, has been slow in adapting to the new economy,” says George Koukouzelis, “Greece has the potential for playing a significant role in a region with more than 60 million people.”

The government is encouraging companies to expand in the region as a way to overcome the size of the local market. “We envisage a scenario where companies keep their headquarters in Greece, but expand in the Balkans. We believe this should be attractive for foreign companies too,” says Gerasimos Magdalinos of the Hellenic Centre for Investment, the government’s development agency. Such a route has been recently followed by privatisation advisers of Olympic Airways, who a regional role in the Balkans for the distressed state-owned airline.

“We have been active in the Balkan area since 1994,” says Alissandratos. “All major Greek companies have managed to establish a presence in Romania and Bulgaria.” Opportunities are seen in IT integration, telecoms, supermarket chains and food retailing, and the lack of stability in the region does not seem to concern Greek PE houses. “The situation is now particularly good in Bulgaria, Romania and Serbia,” says Koukouzelis. Several Greek companies also do business in Turkey. “There are a lot of opportunities there too,” he says.

With regard to investment opportunities it is more the case of picking good deals one by one rather than focussing on particular sectors. According to Global Finance there are good consolidation opportunities in almost every sector. The Greek market is still fragmented and dominated by family-run businesses. In order to improve efficiency several companies are currently going through a process of corporate restructuring and rationalisation by disposing non-core activities and spinning out new companies.

Traditional sectors probably offer the best opportunities. “Food is one of the strongest sectors, but we are also investing in high tech and telecommunications,” says Koukouzelis. “As a rule we look at Greek companies with good prospects of becoming global.” Alissandratos believes good investment opportunities should arise from outsourcing and service providing targeted in particular at large organisations. “Generally speaking, in the current market all sectors that allow an exit through a trade sale are good,” says Dimizas.

All major multinationals have been present in the Greek market since 1985 Coca-Cola Hellenic is the biggest company by assets with EURO1.1 billion in 2000 and this has created a pool of managerial talent. There are also good banks and an advisory infrastructure. All this can be conducive to big buyouts. “The possibility of having a management team and developing a company can now materialise,” says Alissandratos. “Banks will compete to give money to PE houses to finance buyouts. The conditions are there and things have started rolling. However, things need to be built up. We believe that the first big deal will be critical to set up a benchmark.”

Future activity

A number of factors should foster PE activity over the coming years. The macroeconomic picture is due to remain positive, with strong GDP growth and relatively subdued inflation. The government’s commitment to build infrastructure ahead of the Olympic Games in 2004 using the third EU Support Framework is expected to radically improve and expand the transport network.

Ongoing privatisation and deregulation in the telecoms and energy sectors are expected to bring more competition and therefore more consolidation and so foster M&A activity. “Sectors such as retailing, banking and telecoms have more players than the domestic market can support,” says Dimizas. Pavlos Stellakis points out that the prolonged correction of the Athens stock exchange since 1999 has rendered the prospects of raising capital through public equity quite unattractive and has resulted in much more realistic business valuations.

Several successful listed Greek companies with a strong international scope, such as Germanos, Goody’s, and Chipita, have been funded with PE, but this has not gained widespread recognition in the country for PE as an asset class.

“PE is still in its infancy in Greece,” says Alissandratos. “The real PE activity starts now because of the rising number of start-ups and the increasing opportunities for large buyouts.” Some significant deals in the next couple of years are likely to create more awareness and put PE on a firmer basis in the Greek market.