GP Profile: Genesis Capital

"When we first launched, we only invested in the Czech Republic and Slovakia," Genesis Capital managing partner Ondřej Vičar tells Unquote, "but with our latest funds we have extended our scope to neighbouring countries with the aim of bolstering the growth of the entire region. We have made several deals in Poland and Hungary, and plan to expand to Austria as well. With our 57 investments since inception, including 39 platform deals and 18 add-ons, we are the most active local player in this region."

Genesis Capital was established in 1999 by founder and chair Jan Tauber to boost investments across central and eastern Europe, and support the development of local companies with high-growth potential. The firm is headquartered in Prague and employs a staff of 20 professionals led by Vičar, alongside partners Radan Hanzl, Pavel Kvicala and Martin Vilis.

Genesis recently launched a new private equity fund, Genesis Private Equity Fund IV (GPEF IV), with a €150m target. The vehicle is registered in Guernsey, with Apex Group as fund administrator.

"Given the good results achieved by our third fund, we are very optimistic to reach a very high re-up rate with this new vehicle," Vičar says. "We plan to build a wide and diversified base of LPs, which will be mainly composed of insurance companies, funds-of-funds, international financial institutions, asset managers, banks and family offices.

"Our previous fund was raised from Czech investors for around 50% of the total volume and from international LPs for the other half;  we expect a similar split for our fourth fund. Our international investors mostly come from the rest of Europe, but we also have one investor from the US and intend to approach more global LPs in the coming months to strengthen our international base."

The firm plans to hold a first close for its new vehicle at the beginning of 2021. The GP told Unquote that the fund has a rich pipeline ahead, having already identified several promising opportunities across the CEE region. Vičar says: "We are already pursuing some rather large deals, which would be too big for GPEF III but will be perfect for our new vehicle."

Pipeline
GPEF IV will focus on investments in small and medium-sized companies with high growth potential, based across the Czech Republic, Slovakia, Poland, Hungary and Austria. It plans to build a portfolio of around 12 businesses. The fund's terms will allow for as much as 30% of its overall size to be committed outside of the Czech Republic and Slovakia.

The vehicle will invest in established companies, focusing on situations where founders are considered suitable successors or are looking for capital to grow their businesses, expand internationally or invest in innovation. It will also target carve-outs of multinational groups that are looking to divest their non-core business units.

GPEF IV will deploy capital across a wide range of industries, with a focus on sectors where Genesis has had a strong historical track record, such as B2B services, manufacturing, IT services, specialised retail and consumer services. It will invest in companies generating EBITDA of at least €2m, with EV in the €10-40m range. It will acquire majority and minority stakes of at least 30% via buyouts and growth capital transactions by deploying equity tickets of €5-20m.

The fund will be larger than its predecessor, GPEF III, which closed on €82m in 2016. The vehicle is currently around 80% deployed and plans to make one more investment in the B2B sector and one add-on by the end of the year, before closing its investment period, the GP told Unquote.

The fund's portfolio includes Czech contact centre operator Conectart, acquired in May 2020; Warsaw-listed translation agency Summa Linguae Technologies, backed in February 2020; Hungary-based indoor family entertainment provider Eleven Entertainment Group, bought in September 2019; and Prague-headquartered software company CN Group, acquired in March 2019, among others.

LPs in the fund include local and international institutions and investment firms such as the European Investment Fund (EIF), which committed around 20% of the total capital; Amundi Czech Republic (member of international group Amundi); Kooperativa Pojišťovna and Česká Podnikatelská Pojišťovna (both members of Vienna Insurance Group); financial group RSJ; Finland's EQ Private Equity; and Czech family office SPM Capital. In addition, Genesis's partners contributed 2.4% to the fund.

"Despite concerns over the Covid-19 pandemic, the CEE region has managed the crisis quite well so far. The outbreak has been contained and the local economy has not been badly affected," Vičar says. "The majority of GPEF III's portfolio has not been hit by the crisis. Our companies have not suffered any significant impact so far; some have even increased their value in the last quarter thanks to their outstanding performance, and the overall outlook is very good. However, we know that the global recession that might be triggered by the pandemic will have repercussions on our region as well. This is why we intend to be very cautious going forward in the selection of our investment opportunities. We also consider as a priority to make sure that our portfolio companies are not overleveraged and remain solid in the coming months."

Growth fund
Genesis is also managing its first generation of growth funds. Genesis Growth Equity Fund I (GGEF I) held a first close on €31m against a €40m target in October 2019. The fund focuses on investing in smaller companies primarily based in the Czech Republic and Slovakia, generating revenues of up to €15m and EBITDA of up to €2m. It writes equity tickets in the €1-4m range.

"We have raised around €35m and expect to hit our target by the end of the year," said Vičar. "We have already selected some promising companies and are finalising negotiations for the fund's first deals." GGEF I will make its first investment in the coming weeks – buying a technology company based in the Czech Republic – and its second deal over the summer, investing in a healthcare business.

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