BaltCap closes third fund on €177m hard-cap

Baltic Private Equity Fund III (BPEF III) held the final close on its hard-cap, exceeding its official target size of €150m.

The fund held a first close on €126m in October 2019 and is larger than its predecessor, which held a final close on €92m in 2014. The vehicle was used to invest in eight companies in Estonia and Lithuania, according to Unquote Data.

BPEF III will target companies in the Nordic and Baltic countries.

Managing partner Martin Kodar told Unquote that fundraising had been challenged by the coronavirus pandemic. "Initially, it was very difficult, as LPs were having a very hard time going through their processes while having to work from home. Many had no clue how decision making would work, especially if it involved new managers, new proposals or anything that needed more consideration, so we naturally had to give them more time. Everything resumed in the summer, and by autumn, LPs were ready to consider us."

The GP committed €5m of its own capital to the vehicle, the largest amount it has committed to any of its own funds.

BPEF III will be deployed over a five-year period and is already one-third deployed.

Investors
Kodar told Unquote that there were 35 LPs in the fund, including 15 wealthy individuals that make up 5% of the capital. The majority of commitments came from Baltic, Nordic and western European investors, including the European Investment Fund, the European Bank for Reconstruction & Development, the Nordic Environment Finance Corporation, LHV pension funds, SEB pension funds from Estonia, Latvia and Lithuania, eQ Asset Management, and family offices.

The GP said that most of the LPs were "in a way" existing investors, who had either invested in the previous fund or had acquired stakes in the fund via secondary transactions.

Investments
BPEF III will acquire majority stakes in up to 10 companies in the Baltic and Nordic regions, and, like its previous fund, will pursue a buy-and-build strategy. It targets companies with enterprise values of €10-100m.

The fund has already made three platform investments, including ticketing service provider Baltic Ticket Holdings in February 2021, Estonian online cosmetics retailer Tradehouse in December 2020, and Lithuanian online tools and equipment retailer Verkter in November 2020. The vehicle is around one third deployed.

Kodar said the strategy will be the same as for the previous fund: "What the new fund allows us to do more is invest in somewhat larger platforms that can be scaled a bit quicker. Around 10 years ago, we invested in companies where the scale-up part took a much longer time, but with the previous fund, it took less time. As a result, we've also reduced the holding period a bit."

Founded in 1995, BaltCap has raised three private equity funds with aggregate capital of €650m. It has invested in around 100 companies.

People
BaltCap Management – Martin Kodar (managing partner).

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