Baird Private Equity's Paul Carbone Provides Private Equity Outlook for 2009

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Paul Carbone, Director of Baird Private Equity, shares his outlook for the buyout, growth equity and venture capital markets in 2009, citing Baird Private Equity's strong fundamental approach and global resources as keys to the group's long-term success.

Across the buyout industry and around the world, limitations on available credit have had a dramatic effect on the global economy and the pace of new investing. Carbone expects that economic difficulty and the malaise in the deal business will continue well into 2009. However, these issues will have different effects and implications on different geographies and sectors in the alternative asset market.

The number of buyout deals valued at $250 million or less will continue to drop in 2009, but not as significantly as in the large cap market. The large cap market will be down for a number of years. Importantly, the private equity model is not broken and the business is not dead as some would like others to believe. Over the next 24 months, Carbone expects Baird Private Equity to see very attractive investment opportunities as valuations adjust to the environment. Carbone believes that those institutional investors who have the liquidity and a stable portfolio like Baird Private Equity (BPE) will have a once in a generation opportunity to invest.

In the venture and growth equity markets, despite the current state of the credit and equity markets, Carbone believes that 2009 will be a good year for investing. Baird Private Equity is seeing a very healthy flow of opportunities and valuations have and will continue to come down. Syndicate capital in the near term is not as readily available so Baird Private Equity has to be careful about funding our companies through the difficult environment. Regardless, 2009 should provide unique opportunities to invest in quality companies at attractive prices, and venture and growth equity firms with capital on hand will be in a good position to act.

In terms of fundraising, Baird Private Equity believes that LP appetite for funds will be down meaningfully in 2009, which is likely to be healthy for the business. However, Baird Private Equity believes that the buyout, growth equity, and venture capital funds focused on investing in smaller, high potential companies will continue to generate attractive relative returns. As a result, capital will continue to be available to the better funds at this end of the market. Carbone believes that Baird Private Equity will see a number of marginal players unable to raise new money and exit the market both in the buyout and venture side of the business. He expects that those funds who have and continue to focus on operational value add, modest leverage and business building will be the winners in today's market.

Baird Private Equity is generally optimistic about its longer term prospects, as it is seeing good opportunities, better lender discipline and more advantageous valuations. The team believes that maintaining its strong fundamental approach with an unwavering focus on its portfolio will be the key to success in 2009 and beyond.

As Baird Private Equity looks at investing in its various markets around the world, the team continues to see the many advantages of investing in China and is bullish about its investing activities there. Though far from immune to the world economic issues, China continues to have many of the right elements for profitable and productive investing especially given Baird Private Equity's long-standing and proven approach. Baird Private Equity will continue to focus on investing in industries it knows well with a long-term perspective and only in the lower end of the market. Baird Private Equity brings differentiated talent, expertise and resources to help its companies grow their revenue and profits and uses modest leverage to achieve returns. Finally, Baird Private Equity uses its global platform to help its companies access new markets and leverage the geographies best suited to manufacture their products.

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Angela Taylor

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