Private equity firms are taking another look at Greece, attracted by the cheap price tags on companies that can offer lucrative opportunities for those brave enough to take the risk.

Even before the 2009 debt crisis that almost pushed Greece out of the euro, its private equity market was small by European and U.S. standards but now both domestic and international private equity investors are assessing whether the time is right to jump in.

"We should have started raising a new fund two years ago. But then Greece's position in the euro zone was uncertain," said Theodore Kiakidis, a partner with Greek private equity firm Global Finance since 1993. "We think now is the time to look at this actively."

A number of foreign private equity groups have already taken the plunge in Greece and others are sniffing for deals in Spain, another debt crisis casualty. Their aim is to invest in cheap or underperforming businesses to sell them later at a profit.

BC Partners and TPG Capital are among those vying for a 33 percent stake in Greek gambling monopoly OPAP , one of the privatizations underway in the country.

Rhone Capital in January offered to buy a 39 percent stake in S&B Industrial Minerals SA , a group with a market value of about 290 million euros ($379.39 million) and sales in over 70 countries.

Oaktree Capital Group LLC and Fortress Investment Group LLC are among those with people on the ground in Greece scouting for deals.

CHALLENGING TIMES

The risks are high for these firms because the economic backdrop is challenging. Private equity's pre-crisis deals in Greece have in general also disappointed.

The Greek economy is expected to shrink for a sixth consecutive year by 4.5 percent, bringing total gross domestic product contraction in 2008-2013 to about 25 percent.

But there are some positives. The country's central bank expects the economy to turn the corner in 2014. The Athens stock exchange is up 42 percent in the last six months.

And company valuations are low because many have big debts and are struggling to make money. In this situation, private equity has a better chance of investing successfully in cash-strapped businesses.

"There are liquidity needs that a private equity fund could cover, there are now willing sellers, there are banks that have to lighten their balance sheets. Crucially, there is light in the end of the tunnel for the economy," Kiakidis said.

Global Finance in January completed the sale of a 56.5 percent stake in irrigation equipment maker Eurodrip SA for about 68 million euros to U.S. private equity group Paine & Partners LLC, making a return of more than 1.5 times.

The deal was attractive to Paine partly because Athens-based Eurodrip was a global company that derived 93 percent of its revenues outside Greece. Another attraction was that banks consented to the buyer assuming the company's debt, negating the need for new financing, Kiakidis said.

Marfin Investment Group , a publicly-listed holding company whose original investors suffered heavy losses, is currently talking to investors about the possibility of issuing new equity or a convertible bond to raise up to 410 million euros to capitalize on new opportunities, mainly though bolt-on acquisitions by its portfolio companies.

"We believe people could easily double their money between two to three years' time, an over 30 percent internal rate of return," its deputy chief executive George Koulouris said. "Such is the disconnect between where asset values are and where they should be," he said. "We see in our own portfolio that the worst quarters are behind us."

NO DISTRESSED DEALS YET

Despite this optimism, no one has yet done a deal in Greece that aims to take control of a company by buying its debt.

"While the environment is improving, private equity is still not comfortable with investing in Greek companies that are directly exposed to the Greek economy," said Fotis Hasiotis, head of European financial sponsors at Lazard.

Few Greek companies up for sale fit the global profile of a Eurodrip or an S&B that would make private equity more comfortable about investing. And banks have been reluctant to book losses by facilitating major debt restructurings.

But one option for international private equity firms to find a way into Greece's corporate sector would be to provide much-needed cash at affordable rates, which is scarce in Greece for even the healthiest of companies.

"I believe the greatest opportunities for alternative fund managers in Greece are primarily in direct lending at the top end of the capital structure to quality high-yield large corporate borrowers, and providing growth capital to healthy fast-growing mid-caps," said Kostas Vassiliou, head of global corporate clients and debt capital markets at Greece's Eurobank.

($1 = 0.7644 euros)

(Reporting by Greg Roumeliotis in Athens. Editing by Jane Merriman)