Avallon planning to raise €107m for second fund

Karin Wasteson
22 January 2013

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Avallon MBO Fund II, which is planning to raise €107m for investing in Eastern European SMEs, has hit a first close after securing a cornerstone investment from the European Bank for Reconstruction and Development (EBRD).

The new fund has a current size of nearly €60m, and is expected to reach its target in 2013. It is registered in the Netherlands and has a hard-cap of €120m.

Investments
The Polish fund will target small and medium-sized management buyouts and buy-ins predominantly in Poland, but also in certain other countries of central and south-eastern Europe. Up to a third of the fund may be invested in EU member states outside Poland.

It will primarily pursue the purchase of shares in the case of a sale by current owners or investments in private companies managed by their founders.

The fund will invest primarily in companies with a turnover of between €15-60m. Investments will be made in a variety of industries, including consumer goods and manufacturing companies.

Investments will be within the range of €5-10m equity per transaction with values averaging €7-8m, but the vehicle will be able to achieve much larger transactions through a co-investment agreement with investors in the fund and financial partners.

Avallon established its management buyout activity in Poland in 2001 and has participated in nearly 100 transactions together with managers. The GP operates from Lodz, Poland.

Investors
Investors in the fund are international financial institutions including the EBRD and funds managed by Swiss fund-of-funds Akina Partners.

EBRD committed €27m to the vehicle, becoming a cornerstone investor in the fund; it had already invested €12m in Avallon MBO Fund I in 2007. The MBO Fund I was launched with €50m and is invested in seven companies. Investors in that vehicle include financial institutions in Scandinavia and Switzerland.

Since the beginning of its operations in Poland, EBRD has invested more than €6bn in 311 projects in the country. The bank sees further development of the Polish private equity market as one of its current priorities.

Avallon has also invested more than €4m of its own capital in the new fund. Individual Avallon managers will be able to invest in the fund together with the management company.

People
Tomasz Stamirowski is a managing partner at Avallon. Anne Fossemall is director for equity funds at EBRD.