CEIP eyes industrials and services targets with EUR 70m vehicle, aims for year-end fund close

Katka Krosnar
11 May 2023

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Central European Industry Partners (CEIP), a Czech operational private equity firm, is scouting for industrial manufacturing and related services businesses via its CZK 1.6bn (EUR 70m) second fund, managing partner Ondrej Benacek told Unquote.

Central Europe Industry Partners II (CEIP II) was launched in December 2022 and has already raised CZK 1.1bn (EUR 50m) from institutional investors, Benacek said. Its investors largely come from the Czech Republic, Slovakia and the US. It plans to raise a further CZK 400m (EUR 17.1m) from Czech qualified retail investors through Conseq Investment Management by the year-end, he said. It plans to close the fund to investors by year-end, he added.

The fund plans to make eight further acquisitions over the course of its investment period and aims to acquire one more target before the end of this year, Benacek said.

The fund is currently looking at several targets in the Czech Republic and Slovakia, and is also interested in acquisitions in Germany and Poland, he said. At least 20% of the investments made by CEIP II will be outside the Czech Republic, he added.

CEIP‘s industry focus is on industrial manufacturing companies and related services. Its subsectors of focus include aerospace and defence, cleantech, composites, energy manufacturing, engineering, industrial automation, machine vision, power equipment maintenance, repair and operations (MRO), production of medical devices, and water and waste management.

The fund aims to invest at least 25% of the fund into industrial automation and robotics and related business, such as automated 3D printing, Benacek said.

It is also actively searching for weapons manufacturers, he said, adding that there is an urgent need to equip underinvested democratic armies, he said.

The fund can invest CZK 100m-CZK 250m (EUR 4.3m-EUR 10.7m) into any one company. For larger targets, CEIP could co-invest with their LPs or other European investors, Benacek said, adding that it is often approached by DACH-based funds to co-invest as a local partner with operating team on the ground.

It is targeting companies with at least CZK 40m (EUR 1.7m) EBITDA if they are standalone investments, which is larger than CEIP I, Benacek said. Target companies should have CZK 20m (EUR 850,000) EBITDA if buy-and-build or CZK 10m (EUR 430,000) if a bolt-on deal, he said.

CEIP ideally prefers to acquire majority stakes in targets with the initial owners retaining a minority stake and further participating in the growth of the company, Benacek said. But it could also acquire minority stakes in some cases, he said.

CEIP's value proposition is buying solid businesses with tangible assets for reasonable valuations, he said. The firm prides itself on having its own proprietary pipeline to source deals, Benacek said. It works with external financial advisers such as PwC, Deloitte and VGD for due diligence, he said.

Portfolio development
CEIP II has already made two investments. Its first investment was AMiT, a Czech company which develops and manufactures electronics for trains and trams, as well as control systems and electronics for industrial, transport and building automation. AMiT's EBITDA has grown significantly from 120m CZK (EUR 5.1m) in 2021 to CZK 162m (EUR 6.9m) in 2022 and the company is looking for further consolidation, Benacek said.

In March, it invested in Czech automotive and medical cable manufacturer Kosyka, as announced. Kosyka posted 2022 sales of CZK 290m (EUR 12.2m) and will also act as a platform for a buy and build strategy.

The CZK 680m (EUR 29m) CEIP I has five platform companies and three add-ons in its portfolio. These include ROKA Industry, a manufacturer of welded steel and stainless-steel structures; ELCOM, a leading provider of proprietary highly complex products and services in test and measurement, machine vision, industrial automation and smart grid systems for sustainable energy; BMH, a provider of robotic trenchless inspection and repair of utility water, sewage and gas pipelines; and JIHLAVAN, a leader in the development, production and service of aircraft hydraulic devices, electromechanical drives, wheels and brakes. The fund's most recent investment was into thermoforming solutions company VYVA Plast.

CEIP has placed strong emphasis on ESG from the beginning of its first fund and has a dedicated ESG officer, Benacek noted.

Within its portfolio, CEIP has invested heavily into trying to make a real environmental impact, Benacek noted. For example, Jihlavan has cut its consumption of technical gasoline by 98% through a combination of capex and process changes, he said. Additionally, all companies with their own real estate either have or will have solar powerplants providing energy for its consumption, as well charging company cars.

CEIP has 13 employees, including a team of four fully dedicated operating partners/directors whose aim is operational and strategic intervention and operational improvement in the portfolio, Benacek said, adding that it is currently hiring investment analysts. The four members of its in-house operating team each have between 10 and 30 years of CEO or C-1 level experience in its sectors of focus, Benacek noted.