Mezzanine Management, the London-headquartered mezzanine finance provider, has held a final close of its debut fund, Accession Mezzanine Capital (AMC), that is specifically targeting buyout transactions in Central Europe. Sources close to the firm have expressed satisfaction in finally closing what some regarded as a niche offering for mezzanine investors. The firm has been raising the fund for over two years.
AMC has received a total of E115m and attracted commitments from 13 institutional investors from seven countries, with investors based in Austria comprising just over a third of total commitments. Investors include banks, insurance companies and private equity fund of funds vehicles, as well as multilateral organisations. The fund’s first investor was the European Bank for Reconstruction and Development (EBRD). AMC held a first closing of its Fund at E76m in May 2002.
AMC has been established to provide mezzanine finance in transactions involving middle market enterprises principally in Poland, Hungary, the Czech Republic, as well as the Slovak Republic and Slovenia. The fund also has the ability to invest selectively in the “second wave” accession EU candidate countries of Bulgaria, Croatia and Romania. The fund is advised from the firm’s offices in Vienna, Warsaw and Budapest.
The firm was keen to ensure that the fund was seen to have a regional footprint and made good use of Vienna's close connections with Central and Eastern Europe: the fund is registered there and hence could receive a E25m guarantee from the Austrian authorities, something that encouraged several Austrian investors to confirm their commitments.
The majority of the fund’s investments will be in management buyout and development capital situations led by a private equity sponsor. The fund will not have a specific sector focus and will typically invest in mature businesses with strong and stable cashflows, the firm said in a statement. The average investment size is expected to between E5m and E15m in deals with transaction values of between E25m and E200m.
AMC has already made its first investment in the region, providing funding for the E30m buyout of Danubius Radio, a national commercial radio station based in Hungary, with equity funding from Advent International.
“Central Europe presents an attractive investment opportunity for mezzanine, largely driven by the favourable prospects in advance of EU accession, a rapidly expanding private equity marketplace and the clear need for long-term subordinated financing for growing companies,” Franz Hoerhager, managing director of Mezzanine Management Central Europe said in a statement.
“Historically, smaller to medium sized companies in Central Europe have had limited access to non-equity capital despite the increase in foreign direct investment to the region. Given the prospect of EU accession, however, Central European companies are now looking for additional forms of capital to equity funding for growth at a time when mezzanine is becoming a more widely used instrument across Western Europe.”
Ben Edwards, a partner at the firm added: “the leverage finance market in Central Europe is developing rapidly, and the fund is very much part of this trend. We aim to be a catalyst, assisting private equity firms and local management teams in their investments in growing businesses throughout the region.”
Mezzanine Management has over E1bn under management, raised from third party investors comprising institutions based in Europe, the US, the Middle East and the Far East. Its current fund, Mezzanine Management Fund III, closed in June 2000 with a final closing of $528m.