Fundraising and exits reveal rising confidence in CEE

This week saw KKR take its first steps into the CEE region with a €1bn purchase of Serbian pay TV provider SBB/Telemach. The deal was sweet for Mid Europa Partners, which saw its holding period of seven-plus years rewarded with a blended 3x multiple.

The size makes the deal one of the largest in CEE ever and the seventh largest in Europe this year, according to unquote" data.

The news comes a month after CEE investor 3TS Capital Partners announced a €103m close for its latest fund, well on its way to its €120m target. There are also whisperings of a sizable exit of a Polish vehicle leasing business on the cards.

Confidence is officially at its highest level for two years, according to the Deloitte CEE Private Equity Confidence Survey, released today. More than two fifths of respondents expect an improvement in economic conditions in the region, up from just a 10th in the previous survey. This is likely down to a perceived stabilisation of the eurozone. As regards private equity, there is a clear shift in focus from defensive portfolio management to fresh deal doing, with 60% of respondents expecting to focus more on that over the coming six months, nearly a doubling of the previous survey.

While this is all good news, the story in CEE remains polarised, much like in western Europe. For example, at first glance, 3TS's fund news is testament to a successful fundraising backdrop in the region: the vehicle dwarfs its €40m predecessor raised in 2007. But dig a bit deeper and it becomes clear that, while indeed an achievement for the GP, the CEE region remains a tough sell. 3TS actually began fundraising in 2010 for a growth capital/small-buyout fund as a follow-on to its 2005 3i-backed vehicle. 3i's strategy shift in 2009 saw 3TS rejig the investor base of that fund before embarking on the trail for a new one. After a couple of years speaking to investors, LPs suggested the GP focus solely on its technology focus. Once Cisco was able to re-up, the GP began raising for its latest vehicle, which took a total of 18 months to raise.

The last bit of fund news from the region came from Enterprise Investors, which in May closed on €314m for its latest vehicle. While the sum is respectable, it is indeed less than half the size of the predecessor vehicle. This surprised many, given the GP's longstanding reputation for investing in the region. And that announcement followed the news of Abris Capital Partners' closing of its second vehicle on €450m in April – despite being a relative newcomer with no exits under its belt.

Next year should see a number of announcements of closes (there are around half a dozen GPs with PPMs out right now, according to LPs) as well as fund launches, as investment periods expire from vehicles raised in the 2007/2008 heyday. Mid Europa's exit this week should go a way to luring LPs back – next week marks the sixth anniversary of the final close of its last fund on €1.5bn. The latest vehicle, Mid Europa Fund IV, has a €1bn target and €1.25bn hard-cap, according to an EBRD filing.

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• Topics
• CEE
• KKR
• Mid Europa Partners
• Enterprise Investors
• Abris Capital Partners
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