Genesis Capital secures €45m in fourth fund launch

The fund has a hard-cap of €80m. Genesis managing partner Jan Tauber told unquote" he believed the final close would be between €70-80m. He said the GP had originally wanted a hard-cap of €100m, but had readjusted after discussions with the European Investment Fund (EIF), in order to accommodate it as a cornerstone investors in the vehicle.

Fundraising for GPEF III began in February 2014; Tauber said he was very pleased with surpassing the €40m first close hurdle in 15 months, citing a CEE region seen by international investors as not particularly attractive.

Tauber said that while the Czech and Slovakian economies are among the fastest growing in the CEE region, the market remains under-served by international capital and still has space for investments, suggesting there was a chance the countries could outpace the eurozone in terms of average growth rate.

Though there is much talk of SMEs being the heart of economic growth, companies of that size in central and eastern Europe are not able to attract the excess liquidity currently available in financial markets, said Tauber.

He also noted the difficulty of raising a CEE-focused fund in the current economic climate, echoing previous statements made by investors in the region, and highlighted the importance of having a group of local interest when looking to back companies in the region.

Terms and lifespan are industry standard, and the vehicle is registered in Guernsey, with Ipes as fund administrators.

GPEF III will be the fourth fund managed by Genesis since the firm's inception in 1999, and follows the €40m GPEF II vehicle, which closed €20m shy of its target in July 2009. Genesis's first GPEF fund, a €30m vehicle launched in 2002, was fully realised last year and returned more than 2x money to investors.

Genesis's fund launch follows in the wake of two exits this year, with the GP selling its 60% stake in Czech photo bank Profimedia in January, and exiting videogames retailer JRC Czech in July.

Investors
Minimum commitment to the fund was €5m, while the maximum was set at €20m. LPs in GPEF III are all institutional investors, mainly Czech and Slovakian. The fund did not accept investments from high-net-worth individuals.

Though Tauber said there are slightly more local investors than in previous funds, all are owned by international parent companies, and the split between local and international investors was roughly 50-50.

GPEF III was able to tap local savings, which are shifting more towards investment back into the local economies, according to Tauber, with Czech bank Česká spořitelna continuing as an investor in GPEF III. The bank had backed Genesis's previous two funds as well.

Likewise, long-standing Genesis investor EIF has re-upped to Genesis's most recent fund. EIF will contribute as much as 20% of the fund's overall size, though its overall commitment is hard-capped at €15m.

The two are joined by Komerční banka's Investment Company's IKS KB, an investment fund for private individuals to gain private equity exposure. Tauber said he expected more contributions to come from the fund before the final close.

Other investors include Finland's eQ Private Equity, and insurance companies Kooperativa pojišťovna and Česká podnikatelská pojišťovna.

Though the European Bank for Reconstruction and Development was an investor in the GP's previous fund, the institution will not be backing GPES III as it has classified the Czech economy and government as too advanced for the EBRD's remit – making its last investment in the country in 2009.

Genesis's partners will contribute 2.4% to the fund through the partners' vehicle.

Investments
Like its predecessors, GPEF III will look to acquire majority stakes in Czech and Slovakian small and medium-sized companies, making two-to-three investments a year.

Equity tickets will typically be from €4-8m, with EV size likely to be between €8-16m.

The fund's terms allow for as much as 20% of its overall size to be committed to neighbouring countries Poland, Austria and Hungary.

GPEF III will provide growth capital, financing for acquisitions and funding for MBOs across all sectors, with the exceptions of real estate, armaments, gambling, adult entertainment, and tobacco and liquor production.

People
Jan Tauber is the managing partner of Genesis.

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