Poland's MCI gearing up for €400m maiden closed-ended fund

The GP is gearing up for the launch of the vehicle with a target of around €400m, partner Maciej Kowalski told Unquote. It is working with a London-based placement agent to prepare the fundraise and expects to collect commitments throughout 2020.

The vehicle will keep to MCI's strategy of backing buyouts of technology businesses in the CEE region valued in the €50-250m bracket, providing equity tickets of €25-75m for majority stakes. It will target profitable companies with EBITDA of at least €3m.

MCI is aiming for an investment period of around three to five years.

The target of the fund and its technology buyout focus would make it the largest domestic vehicle of its kind raised in the past 10 years, according to Unquote Data. While local players including Mid Europa Partners, Abris and Enterprise Investors have raised larger vehicles, they tend to focus on more traditional businesses, or purchase digital-economy-focused assets occasionally as part of a broader remit.

MCI's focus on the digital space is articulated around three pillars: pure digital economy businesses (software, IT, e-commerce, fintech, etc); businesses operating in the wider ecosystem facilitated by the digital economy, such as logistics and telecoms companies; and digital transformation, where businesses need capital and support to shift towards more efficient models.

The latter will become an increasingly important element of the fund's strategy as time goes on given the lower level of digitalisation in CEE compared with western Europe, as well as the shrinking ability to preserve margins through low costs given rising wages in the region, Kowalski pointed out.

Model shift
MCI was founded in 1999 and initially focused on venture and growth investments in the CEE tech space, before shifting to a digital buyout focus in 2008 – it still has some legacy venture and growth vehicles and investments, which are now in value-realisation mode. It listed on the Warsaw Stock Exchange in 2001 and is currently investing from an evergreen structure with around €560m currently under management. Notable deals include Dotpay (2015, now exited at a 40% IRR), Wirtualna Polska (2014, now exited at a 60% IRR), Netrisk (2017, still in the portfolio) and Polish data centre ATM (2016).

Overall, MCI has made 13 buyouts since 2008 and has realised seven of these, for an overall IRR of 59% as of the end of 2018.

The rationale behind the move to a closed-ended model (which is expected to become the sole focus over time) would be to stabilise the investment timeframe and avoid the pressure of needing to generate regular yield for shareholders, Kowalski said.

Kowalski stated the firm is aware of the need to educate potential LPs around MCI's strategy and track record, as well as the wider CEE region, to ensure a successful fundraise.

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