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Q.: How is the volatility in the global financial markets and the European sovereign debt crisis impacting private equity investments strategy at large?
Mr. Bernstein: It will have a significant impact in many ways. In spite of a gloomy macro environment GA is still seeing attractive opportunities to invest in growth businesses. This is in stark contrast with the traditional buyout market where debt availability has decreased and the cost of debt has increased which reduces potential returns. Many IPO plans have been shelved so that exits for private equity investments are more difficult.

Fund raising will also be more challenging at a critical time when many firms are looking to raise more capital. GA has an evergreen/permanent capital model which is proving to be less cyclical than the traditional fund structure.
Q.: How would you characterize PE deal activity in Europe versus other global markets for the year ahead?
Mr. Bernstein: The larger buyout market will have a tough next 12 months. For smaller buyouts and growth deals there will, however, continue to be opportunities. Whilst the industry is shifting a lot of focus to emerging markets, Europe has an established mature private equity and growth equity industry which creates a large volume of private equity investment opportunities compared with India, China and Brazil. Also, perhaps surprisingly, prices are often lower in Europe because in those emerging investment markets there are many funds chasing fewer investment opportunities.
Q.: What are your thoughts on the European financial markets and the impact of the sovereign debt crisis on investment climate? Are certain regions in continental Europe more attractive than others?
Mr. Bernstein: Europe has so far shown itself to have many structural challenges in tackling the issues it faces. Political leadership is required to promote growth and entrepreneurialism by supporting research in universities and backing not just start-ups but larger European growth companies. The job and value creation in the larger growth companies tends is faster than in early stage companies. We are still seeing growth opportunities across Europe though Germany, the Nordics, Central and Eastern Europe in particularly are relatively strong, and Turkey and Russia are emerging from a private equity investment point of view.
Q.: In terms of private equity deals, how is Europe different today given the sluggish growth rate?
Mr. Bernstein: As growth investors, GA's focus is on great growth companies. There are many global companies which are headquartered in Europe and are tapping global growth markets. Most of our recent investments have been backing European entrepreneurs who have built global companies. Privalia, for example, is a fashion e-commerce business headquartered in Spain but with growth in Brazil and Mexico as well as in Europe. Kaspersky (security software) is global and Studio Moderna (multi-channel marketing company) is growing across 21 countries.
Q.: Which sectors are exciting growth prospects for GA?
Mr. Bernstein: We are most active in financial services and in business and technology services. We are also seeing opportunities in healthcare and in energy and resources segments.
Q.: How do you indentify an exceptional growth company?
Mr. Bernstein: We start with a macro view of key global trends, drive that into growth trends in our target industries and sectors and then proactively identify and contact companies which we think are interesting. Most of our deals are proprietary - identified and contacted directly by our team members as opposed to being shown to us by investment bank or other intermediaries. We often back entrepreneurs who wish to bring on board a partner to help with global growth.
Q.: Can you expand on what you look for in an "entrepreneur"?
Mr. Bernstein: We are looking for market leading businesses with great management teams and strategic growth as well as revenue and profit growth. We are looking for teams with a vision for their business and industry, a track record of success and perhaps most importantly a strong culture and high set of ethical standards. Markit and Citco are examples of outstanding financial information/services businesses which are global market leaders built by entrepreneurial management teams.
Q.: Could you elaborate on how the General Atlantic leverages its global network to source investment targets?
Mr. Bernstein: Many companies choose GA as an investor because we are a single global partnership with a 30 year history of growth investing. Many of our investments are in minority positions. We are not a traditional buyout firm since we are not structured as a traditional fund. We invest in minorities as well as control positions, invest sometimes in public companies as well as private ones. Importantly, we invest for longer term compared to typical private equity firms. Additionally, almost all of our deals are sourced internally although we do get occasional great ideas from banks and intermediaries.
Q.: Looking ahead, where are valuations headed in an increasingly competitive deal source environment?
Mr. Bernstein: Valuations in the private market tend to lag falls in the public market. Private market expectations have therefore not adjusted yet to the falls we have seen in public markets over the past few weeks. We are also seeing a polarization of company values where the best companies can still be sold for high prices and lower quality companies will not sell or raise capital at all.
Q.: What is the most difficult part of negotiating a transaction in Russia such as GA's investment in Kaspersky Lab?
Mr. Bernstein: The "overnight" 3 hour flight to Moscow and sitting in traffic for hours! There are some differences in how business in Russia is conducted.

There are a handful of very high quality technology companies in Russia such as Kaspersky which are global businesses backed by great R&D teams. We identified Kaspersky after identifying the macro theme that information security is increasingly important to everyone - from the largest companies down to all individuals who shop or bank online. We then looked at several companies in the security software area before deciding on an investment in Kaspersky which has leading technology developed by a deep 850-person research team.
Q.: How would you characterize the relationship between the GA and the management team of its portfolio companies?
Mr. Bernstein: GA partners with management teams to bring our experience of backing and building global growth companies. We have a resources group which help with IT, HR, finance and operations and we are actively involved strategically at board level and with M&A.
Q.: How important is having a Board for privately held companies in driving growth and creating sustainable value?
Mr. Bernstein: Boards and effective governance at the board are key for driving growth and creating sustainable value in all companies. We pay a lot of attention to getting the right mix of people and skillsets on a board, and to forming a team which sets direction and culture.
Q.: What is your preferred exit strategy?
Mr. Bernstein: My preferred exit is any exit that achieves our target returns! We exit in many different ways including IPO, strategic sale and sometimes sale to another private equity firm. We like to see our companies building sustainable market positions such that they continue to achieve success even after we exit.
Q.: Given GA's impressive track record, what is the secret to its performance?
Mr. Bernstein: GA has a great team and partnership culture. We are a single global partnership which is different from the way traditional private equity firms are set up and the whole firm is oriented towards building great long term businesses.
Q.: In closing, required, what book are you currently reading?
Mr. Bernstein: I am reading Conservation by Bergerhoff Mulder and Coppolillo. In my free time I have become involved in wilderness conservation. Whilst GA is a long term investor it is interesting to consider how some issues require thinking about the next 100 years rather than the shorter periods driven by many financial markets.

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