Highlander makes first central European exits

In a rush of year-end transactions, the Dallas-based firm has announced two exits and an acquisition in Poland.

Dallas-based mid-market firm Highlander Partners has exited its first two investments in Poland through the sale of Zrew Transformatory and MEDI-Systems in December.

The firm acquired power transformer manufacturer Zrew in 2012 and sold it last month to Switzerland’s power distribution product company R&S International Holding. MEDI-Systems, a provider of long-term care, including nursing homes and rehabilitation clinics, was sold to Euronext Paris-listed ORPEA.

In the same month, the firm acquired a 60 percent stake in Poland’s Quantum Food Group, which produces meat-based convenience foods.

“They were our first two exits. It’s a milestone,” Warsaw-based managing partner Dawid Walendowski told Private Equity International.

“Three deals is not a typical month,” he said, adding that the firm’s five-strong central European team, which undertook its first transaction in 2010, typically targets a deal a year.

It now has three platform investments in Poland, which include the merger of two acquisitions.

The financial terms of the transactions were undisclosed. When asked about return exit multiples, Walendowski said: “We are happy. They exceeded our expectations.”

Highlander Partners operates like an evergreen fund, with about $1 billion under management to invest in the US and central Europe, specifically Poland, of which about 90 percent is invested in private equity and the remainder in mezzanine financing in the US.

There is no investment vehicle or plans to launch one, but investment capital is supplied by an unchanging group of private investors, Walendowski said.

The firm seeks controlling stakes in companies in the manufacturing, food and beverage, specialty chemicals, building materials, and consumer products sectors, with sales of $10-500 million, a strong market position and growth prospects, according to its website.

“We are generalists and we are opportunistic but we have a particular affinity for business to business-type models — more than business to consumer — and manufacturing,” Walendowski noted, adding that its sweet spot was an equity investment of about $20-30 million.

In terms of deal flow, Walendowski noted he had been in Poland since 1999 and “people have complained about weak deal flow for those 17 years, but it is also challenging to find good opportunities.”

However, the firm faces little competition in its space, he said. “We don’t have cause for complaint.”

Private equity deal flow in central Europe rose 16 percent in 2015, with 288 deals completed, of which more than half were new entries, according to a report from law firm CMS. The Emerging Europe M&A 2015/16 report compiled with EMIS noted that the largest transactions attracted mainly US and UK investors.

“Both deal volume and value was high, as large private equity houses secured portfolio investments and mid-market deal flow from more traditional real estate investors surged. This is expected to continue in 2016,” the report said.

Highlander’s US team made three platform investments in 2015, acquiring packaging company Popular Ink, automotive care products Niteo Products and polymer coating manufacturer Twitchell Technical Product, as well as four add-on acquisitions, it said in a statement. In the US, the firm invests equity tickets of $10-75 million, according to is website.