Western Balkans PE Fund gears up for debut vehicle first close

The Luxembourg-domiciled vehicle is aiming for a EUR 15m- EUR 20m first close by October, having already secured EUR 5m- EUR 8m in hard and soft commitments, he said. The second close could come by next spring, with final close expected by the end of 2023.

Its initial investors are from the Southeast Europe, but the firm is also targeting institutional investors and family offices from across Europe. The fund could see institutional investors especially involved in the second close, when it will be able to show a track record, Negre said. Still, the war in Ukraine has led to a general cooldown in fundraising and made some institutional investors more cautious, he said.

Western Balkans Private Equity Fund, which was launched last year, will target SMEs in Serbia, Croatia, North Macedonia, Bosnia-Hercegovina, Kosovo, Montenegro, and Albania, Negre said.

The sponsor aims to address a gap in the local market, with most private equity firms tending to invest tickets of a minimum of EUR 60m in the region until now, he said.

According to Negre, Western Balkans countries are at the same stage that the Czech Republic and Slovakia were 20 years ago, offering significant investment returns.

The firm was established by four investment professionals, who are French, Italian-Serbian and Belgian-Serbian, Negre said. Between them, the partners have advised on more than EUR 60bn of investment across over 100 deals and 15 exits. ESG is at the core of the sposnor’s investment strategy, he said, with the fund developing inclusive managerial strategies to foster representation of women at all levels.

Negre previously spent more than 30 years at the European Investment Bank and more recently has been founder and partner at several asset management, advisory and real estate development companies in the Balkans.

Investment criteria
Western Balkans Private Equity Fund will aim to invest in 12-15 companies over the next four years, with two to three deals planned for 2022, as reported by Unquote’s sister publication Mergermarket.

The sponsor can deploy equity tickets of EUR 3m- EUR 9m but could go as high as EUR 12m for an individual target, Negre said. The initial investments into companies will average around EUR 5m, with smaller follow-on bolt-on investments, he said.

Typically, target companies will have EBITDA of EUR 500,000- EUR 4m, Negre said. They will have stable cash flow generation and operate across the sectors such as fintech, industrial niches, IT and e-commerce, food and healthcare, digital infrastructure and agro-industrial sectors. A key factor for choosing targets will be the exit potential, most probably to strategic investors but also to private equity funds, he said.

The pandemic was a key factor in the partners decision to launch the fund, Negre said. Serbia championed the vaccine against Covid-19 and weathered the health crisis better than other countries, with little economic downturn and the highest GDP growth rates in Europe, according to him.

Serbia's GDP expanded by 7.4% in 2021, according to Serbia’s statistical office. The exception to last year’s economic recovery was the agriculture sector, where output declined by 5.4%, according to the office.

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• Topics
• Buyout
• CEE
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• Serbia