BaltCap holds €81.5m second close

BaltCap, a private equity and venture capital investor in the Baltic countries, has held a €81.5 million second close on its second fund.

The firm, which is targeting €100 million for the vehicle, has now received commitments of €85 million, according to a statement.

The new investors in the second close include Estonian, Latvian and Lithuanian pension funds of SEB Wealth Management and a fund of funds managed by eQ Private Equity and J-Investicijos Family Office. SEB pension funds committed €16.36 million, of which €5.7 million came from Estonia, €5.06 million from Latvia and €5.6 million from Lithuania.

BaltCap’s latest fund, BPEF II, will make equity investments in companies based in the Baltic region. It will have a particular focus on buy-and-build opportunities. BPEF II will aim to acquire controlling ownership stakes, typically investing between €5 million and €10 million per transaction.

BaltCap’s second fund has already completed its first investment by acquiring a 75 percent stake in Ecoservice, a waste management company in Lithuania.

“BPEF II has been well received in the market, both among institutional investors and potential investment targets. We are very pleased to welcome on-board BPEF II five additional institutional investors,” said Peeter Saks, managing partner of BaltCap, adding that the Baltic markets “offer excellent opportunities for private equity to develop fast growing and internationally competitive companies”.

The Baltic Innovation Fund – an joint investment initiative created by Estonia, Latvia, Lithuania and the European Investment Fund (EIF) – will also invest in BaltCap’s second fund. “We are very pleased with the interest and the level of participation of private investors in BPEF II,” said Hubert Cottogni, EIF deputy director and head of mandate management. “With the cornerstone investment from the Baltic Innovation Fund, BaltCap has now raised a significantly sized fund, which will benefit the whole region.”

Collecting capital for Central and Eastern Europe has been far from easy lately. While the amount of capital raised has slightly improved, the number of funds being raised is declining, according to data from PEI’s Research and Analytics division. In 2013, only three funds were raised in the region, totalling $1.2 billion. In 2012, five funds raised $430 million, while in 2011 GPs amassed $820 million across five funds. That’s a fraction of the combined $4 billion collected by 12 funds in 2008.

The region is suffering from a lack of investor appetite, a number of GPs and LPs told PEI in recent interviews. “There is a fashion element to the industry,” according to Dariusz Pronczuk, a managing partner at Enterprise Investors. “Latin America was considered sexy, but these things tend to change quickly. Two years ago, people were ecstatic about Turkey, and now Turkey seems to be out of fashion. LPs were talking about how Brazil was great and these days I would bet most of the people say [that] Brazil is maybe not such a good place to invest. It’s also a question of the perception of risk and returns. I speak to investors who say: ‘we are busy with Latin America’ – but I don’t think the grass is so green over there.”

But there are LPs that continue to believe the region has good returns to offer. “We have invested for over 20 years [in CEE], and we continue to focus on investing in good GPs with a relevant strategy and strong team which leads to growth in the real economy – there remain good opportunities [in] this promising market,” said Anne Fossemalle, director of equity funds team at the European Bank for Reconstruction and Development.

Click here to read our recent roundtable discussion between a group of CEE experts.