Peter Hammermann, Co-Head of Barclays Private Equity Europe and Managing Director of the firm's German operations, speaks to PILOTpartners' Michael Gebauer on factoring in currency risk, the appetite for financing in Mittelstand businesses, why private equity investor returns in Germany are beating those of the US, and whether retail in Germany is still a safe bet.

Given Euro currency volatility in the face of failing continental economies, what added risk is there for private equity?
The risks of failing continental currencies should not be overstated. It has to be assumed that the major European governments will undertake every effort to support the European currencies. Any currency issues will have to be seen in both a worldwide context and as individual situations that each portfolio company undertakes subject to their exposure. However, this is something that has been done for many years.

Research has just been published showing that investor returns in German PE deals are higher than those in the US. What is the secret of this success?
The German private equity environment is certainly helped by its favourable economic environment. Germany also has the technology and an innovation and efficiency oriented way of doing business. In many cases, there are also excellent add-on opportunities. I don't think it's a secret. It seems to be the result of hard and detailed work.

Is it still true that Mittelstand businesses prefer to grow by taking on debt rather than new equity? What steps does Barclays Private Equity take to counter this historic position?
We are in an environment in which Mittelstand businesses investigate all sorts of financing options, which is more flexible and open minded than in the past. In many cases, BPE has demonstrated our strong relationships with medium size businesses and how beneficial a relationship between a portfolio business and Barclays Private Equity can be in terms of supporting growth and expansion. In this context we undertake every effort to advertise our successful track record.

With the threats to Eurozone stability all too clear and with the markets looking to the German economy for the lead in economic recovery, what role will German PE be taking to realise exponential growth? Indeed, is PE looking to businesses in Germany to deliver growth or will it be looking to invest in say Central & Eastern Europe by preference?
Subject to the offer of private equity deals in Germany the focus of German PE will certainly lie on the German market. The growth of business opportunities in Germany seems to be very strong. For various reasons I do not anticipate very strong private equity activity in Central and Eastern Europe.

Retail has often been seen as the bell-weather for success and failure in modern economies. Will it be the same in Germany and other mainstream European economies in 2011 and beyond?
Currently, we assume retail to be a strong and well-developed sector in Germany and other European countries. This will continue to be so in the foreseeable future, however, similar expectations apply also to other industries.

What are the opportunities for German private equity investors in the retail sector and which sub sectors are going to be most attractive?
At first glance it probably has to be assumed that value retail and fashion might be the most attractive segments in Germany. The development of e-commerce will be an important element in all of this.