CEE fund closes make headlines as dealflow slows

Private equity and venture activity has been rather sedate across the CEE region in the past month, with Unquote recording only a handful of deals making it to the finish line in October. Arx Equity Partners notably acquired a majority stake in TES Vsetín, a €60m-turnover Czech engineering company, from Advent International. Livonia also stood out with a couple of transactions, most recently wholly acquiring Estonian glass processing company Klaasimeister.

Instead, it was fund interim closes that animated the market, showing that despite a limited number of vehicles reaching final close so far this year, the pipeline remains busy for CEE players on the fundraising trail.

INVL Asset Management held a second interim close on €148m for its debut closed-ended private equity fund, INVL Baltic Sea Growth Fund. The vehicle was launched in June last year and held a first close on €106m in February. It is targeting €200m and has a €300m hard-cap. Half of the investments are expected to be leveraged buyouts, with the remainder made up of buy-and-build strategies and growth equity transactions. The European Investment Fund (EIF) acted as the fund's anchor investor with a €30m commitment, while INVL's management team will make a pooled commitment of €20m to the strategy.

Still in October, BaltCap Management held a first close for BaltCap Private Equity Fund III (BPEF III) on €126m, against a €200m target. BaltCap registered the fund in March 2019 and has already surpassed the volume of BPEF II, which held a final close on €92m in 2014. The fund will build a portfolio of eight to 10 platform investments in companies in the Nordic and Baltic regions with enterprise values of €10-50m. Once again, EIF backed the vehicle, investing partially through the Baltic Innovation Fund 2 initiative.

Lower down the size range, Genesis Capital held a €31m first close for Genesis Growth Equity Fund I, against a €40m target. The vehicle focuses on smaller and mid-size high-growth-potential companies primarily in the Czech and Slovak markets.

Final countdown
In line with other geographies within Europe, it is unlikely that the CEE region will match its 2018 fundraising performance, at least in volume terms. So far, Unquote Data has only recorded five final closes for CEE-focused vehicles in 2019, against 11 for the whole of last year. The 2019 cohort includes the likes of Innova Capital closing its sixth fund on €271m in September, some way short of the group's stated cap of €325m, but well ahead of the minimum target of €150m. Horizon Capital also closed Emerging Europe Growth Fund III in January on its hard-cap of €200m. Meanwhile, Japan Bank for International Cooperation partnered with Talinn-based PE firm BaltCap to launch VC firm NordicNinja with a €100m fund earlier this year.

The size of these funds, compared to the more numerous but usually smaller vehicles closed throughout 2018, goes some way towards explaining why the headline figure of €674m collected across final closes so far this year is already nearing the €798m aggregate commitments secured in 2018.

Good pipeline
In another positive sign that puts the 2019 final close figures into perspective, the pipeline of CEE funds on the road remains healthy. Seven funds have held first closes so far this year (including the October examples mentioned above), adding to the 10 vehicles that did so last year that remain open to prospective LPs. This tallies up to around €2.6bn in aggregate commitments being sought by 17 funds.

Whether all these managers can make it across the finish line in the next 12-18 months, thus boosting fundraising figures for the CEE region after a quiet 2019, remains to be seen. A couple of large funds in that group could act as good bellwethers for the buyout space: Mid Europa is seeking €800m for its Mid Europa V vehicle, having held a first close on €500m in December 2018, while CEE Equity Partners held a first close on its China-CEE Fund II on $800m in February 2018 and remains on the road hoping for a final close on its target of $1bn. But a decent proportion of the CEE managers currently on the trail are active in the venture space, and their progress should offer a good indication of LP appetite.

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• Topics
• CEE
• Fundraising
• Venture