Managing through Volatility

We are clearly in the midst of a global equity market correction triggered by fears of a credit-driven economic slowdown in the United States. This new environment characterized by uncertainty and fear will continue to cause volatility in the markets. While we believe this new environment will be present a unique set of risks, we remain optimistic as investors and equally sanguine about the opportunities for our portfolio companies globally.

Volatility creates opportunity, especially for those with a long-term focus and a deep understanding of sectoral/regional dynamics. Managing through volatility and economic headwinds requires a steady hand on the tiller with a close focus on revenue drivers and cost containment. Those who focus on driving value in their businesses will weather the uncertainties and will be uniquely positioned to benefit from competitive weaknesses and what will likely be a more favorable m&a environment.

As we enter the year, here are some thoughts for managing in a volatile environment:

Driving Value in Your Business

• Focus on the fundamentals: Driving performance is critical. Budgets and plans established in 2007 may not be reflective of the current more challenging economic environment. Management teams should develop “contingency” plans and revised budgets in case bookings/revenues are not tracking and aggressively take corrective measures. This is especially true for companies who do not have contracted backlogs or who are more reliant on consumer-related or discretionary spending.

• Monitor and, if needed, adjust costs: Expense structures must be aligned with any expected changes to revenue prospects. It may be necessary to defer non-strategic investments and initiatives to maintain profitability until economic conditions stabilize and improve.

• Build your team: Strong management teams and a board of directors remain essential for continued growth and execution. Completing open executive and board searches in a timely manner should remain a priority.

• Manage your capital structure: For public companies, stock buybacks may become highly accretive and value creating for existing shareholders. Companies should also monitor the price of their public debt with the view of buying back where possible.

• Be ready for opportunities: Whether you are considering new initiatives or raising financing, be ready for market changes. IPO windows around the world will be narrow or will even be closed in 2008. However, it is essential to be ready to access the financial markets as conditions improve.

Opportunities in a New Economic Environment

• Focus on cash: It is important to be fully financed (and maybe even over-financed) so you can capitalize on m&a opportunities.

• Prioritize and high-grade opportunities for growth: Evaluate the sensitivity of new potential investments, capital expenditures, geographic expansion, technology plans and major initiatives against the backdrop of an economic slowdown.

• Be ready to make well-priced strategic acquisitions: Private company valuations will decline (but not quickly) as risk premiums go up. Be ready for m&a opportunities by focusing on m&a strategy and keep ongoing dialogues with strategic acquisition candidates.

• Set proper expectations: For public companies, IR will be even more important as analysts and investors react in the context of broad indicators rather than specific performance. It is critical to provide the right context for expectations rather than disappoint with poor performance. Regular and thoughtful communication will allay fears and thereby reduce volatility to maximize stock price and provide optimal flexibility for m&a.

As long term growth investors, our commitment to our portfolio companies is to work closely in partnership with management to focus on growth, mitigate risks and leverage opportunities. We look forward to supporting your efforts in all the areas discussed above with our global team.