Austrian private equity market gathers momentum

So far this year, unquote" data has recorded four deals for Austria, more than half of the seven deals recorded for the whole of 2012, when only one deal was sealed before March. The combined value is relatively low however, standing at roughly €62.5m, compared with €296.24m for the seven deals last year.

Jürgen Marchart, managing director of the Austrian Private Equity and Venture Capital Organisation (AVCO), said, "We are aware of a number of due diligence processes happening in the country, so we can expect a boom to happen. However, my view is that it could happen any time either this year or next. It is also hard to predict whether it will be mainly in volume or also in value."

Austria is a well-placed private equity location, providing key access to the CEE region, which many banks and mezzanine providers – including Accession Mezzanine Capital, Syntaxis Capital and Gamma Capital Partners – are making use of.

Pan-European buyout houses such as Waterland have also expressed interest in entering the Austrian market, not least by opening a second German office in Munich. The investor commented at the time, "As an investor in the SME sector, we see attractive opportunities in southern Germany, Switzerland and Austria. These are the places where we want to act as a local partner, financing and supporting business growth."

There are only a handful of GPs domiciled in Austria and the number of funds raised by them since since 1997 is as low as 41 with a total value of €3.37bn, according to unquote" data. Marchart said: "It is evident that in the past few years foreign GPs invested more money into Austrian businesses than local GPs. However, investments are typically made by consortia including Austrian firms." He added: "Fundraising is difficult as banks, which used to make up 70% of LPs, were hit hard by the financial crisis. But we can observe that banks as institutional investors are coming back."

As with other European countries, the banking crisis has also hit Austria's business financing. However, with the country benefiting from being host to several debt lenders and its healthy SME market, Austria may be well placed to capitalise on the emergence of a new private equity market segment: growth capital and private debt. Marchart said, "Bank financing for businesses has become difficult to obtain but that could make it interesting for private equity investors. Companies looking for working capital may start to consider alternative lenders and private debt."

With respect to helping local businesses, Austria's business development bank (AWS) also launched two initiatives last summer as part of its Jungunternehmer-Offensive (an initiative backing young businesses): the €65m Gründerfonds fund and the €45m Business Angel Fund, which is also backed by the EIF. The Gründerfonds vehicle will invest €100,000-1m in Austrian start-up companies while the angel fund will match private investments with public money.

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