Mid Europa Partners is expected to reach a first close on its fourth buyout fund in late Q3 or early Q4 of this year, according to a source close to the matter.
It is understood that Mid Europa Fund IV, which is targeting €1 billion and has a €1.25 billion hard-cap, came to market in February. The London-headquartered firm hired Credit Suisse as a placement agent in September last year to prepare the paperwork, the source told Private Equity International.
Mid Europa declined to comment. At press time, Credit Suisse was unable to respond to a request for comment.
The fund’s €1 billion target is less than its €1.53 billion predecessor, a 2007 vintage vehicle, according to PEI’s Research and Analytics division.
Mid Europa has reduced its fund target because the average deal size in CEE has reduced as well, the source said. “The structure of the Central and Eastern European private equity market has changed towards buy-and-build opportunities which are in the €75 million to €100 million ticket range, whereas before [the economic crisis] it used to be around €150 million,” the source said.
It is understood Mid Europa doesn’t want to have more than 10 assets in its fund and likes to offer investors co-investment opportunities, which has also led to the reduced fund target.
Investor appetite for the region has decreased, several sources told PEI. “There is some disappointment with some managers in Central and Eastern Europe”, the first source said. “Mid Europa has a good reputation, but it’s still a tough market,” a second source said.
The European Bank for Reconstruction and Development (EBRD) will be committing up to €80 million to Mid Europa Fund IV, according to a spokesperson.
LPs in Mid Europa’s previous funds include: 57 Stars, AlpInvest Partners, AP Fonden 2, Berenberg Private Capital, Finnish Local Government Pensions Institution (KEVA), Government of Singapore Investment Corporation (GIC), HarbourVest Partners, Idinvest Partners, Quartilium /Groupama Private Equity and Unigestion, according to PEI’s Research and Analytics division.
While the amount of capital raised for Central and Eastern Europe plummeted during 2010 and 2011, fundraising appears to be picking up recently. In 2012, six CEE-focused funds were raised with a combined total of $1.83 billion, compared to seven funds worth $527 million in 2010 and eight funds worth $1.5 billion in 2011, according to PEI’s Research and Analytics division. So far this year, four funds have been raised for Central and Eastern Europe totalling $1.1 billion. However, the figures are still in stark contrast with the 17 funds that were raised in 2008, totalling $4.8 billion.
CEE is also facing competition from other emerging markets. From 2008 to date, $11.6 billion was raised for 51 funds focusing on CEE, significantly less than the 96 funds totalling $24 billion that were raised for Brazil in the same period. Funds focused on India also collected more, with 94 funds worth $19.3 billion being raised from 2008 to date.