Genesis Capital: Genesis Private Equity Fund III has secured over CZK 2 billion for equity investments into SMEs, part h

15.09.2016
GPEF III

Genesis Private Equity Fund III (GPEF III), fourth in the line of private equity funds advised by Genesis Capital, has completed its fundraising. The fund has secured more than EUR 80 million (CZK 2.2 billion), mostly from institutional investors. These resources are now available for investment into small and medium-sized enterprises in the Czech Republic and Slovakia and partly also in Poland, Hungary and Austria. The first investment has already been made, others are in negotiation.

Genesis Capital announced the launch of the new GPEF III fund in August 2015. Eventually, it became clear that the investors’ interest would be greater than in the previous Genesis funds. At the time of the first closing, the investors contributed EUR 45 million to the fund and the interest kept growing in the following months. By the end of August 2016, Genesis Capital, the Genesis funds’ adviser, announced the final closing at over CZK 2.2 billion (€82 million). This amount was committed by traditional investors as well as new investors, such as insurance companies and pension funds, which are institutions that had not invested in private equity funds in the Czech Republic before.

The first investors, just like in case of previous Genesis funds, included Česká spořitelna, the European Investment Fund (a subsidiary of the European Investment Bank) and eQ Private Equity (a large Finnish asset manager). They were joined by the IKS KB (a member of the French group Amundi, Europe’s largest asset manager), and insurance companies Kooperativa pojišťovna and Česká podnikatelská pojišťovna. In subsequent closings, they were further joined by an internal pension fund of a major global company and a Czech family office.

“Successful subscription by these investors in the GPEF III fund proves that the Czech Republic has become a standard country in terms of operation of private equity funds,” says Jan Tauber, Managing Partner at Genesis Capital, explaining further: “The previous funds were invested mostly by international financial institutions, with Česká spořitelna being the only exception. Now we have found greater interest from Czech investors and we are pleased that they also include insurance companies, which constitute usual private equity investors in the developed markets.”

“The investment into the Genesis private equity fund marks our entry into a new class of assets as part of our ongoing effort to seek new opportunities to enhance the value of our investment portfolio. The private equity segment offers above-average long-term return in combination with a reasonable degree of risk,” said Petr Zapletal, a member of the Board of Directors of Kooperativa, which, just like Česká podnikatelská pojišťovna, is a member of the Vienna Insurance Group.

The GPEF III fund provides opportunities for private individuals as well. Individuals can invest in GPEF III, and therefore in Czech and Slovak enterprises, through funds established by IKS KB for private banking clients of Komerční banka. ”In cooperation with IKS KB, we have established a new, closed KB Private Equity Fund, through which private individuals (qualified investors) can invest in the GPEF III fund, and therefore in Czech and Slovak enterprises. We have observed demand for this type of investments and therefore made steps to accommodate such demand,” explained Petr Slabý, Head of Private Banking at KB.

The Genesis funds do not plan more direct investment by private individuals. Radan Hanzl, a partner of Genesis Capital, adds: “Standard private equity funds usually have a smaller number of large institutional investors. For private individuals with considerable assets, the best – and often the only – option to invest in private equity is to use a special, professionally prepared ‘feeder’ fund. This is why we welcomed the initiative of the leaders of private banking of Komerční banka to establish such a feeder fund for their clients, which was a brand new product on the Czech market.”

As a generalist private equity fund, GPEF III will invest in companies from all sectors of economy, with the exception of real estate, armaments, gambling, adult entertainment, tobacco and liquor production. Just as previous Genesis funds, GPEF III will provide growth capital, financing for acquisitions, and funds for management buyouts to companies that meet the relevant criteria.

“We do not worry about lack of investment opportunities,” assures Ondřej Vičar, a partner of Genesis Capital. “We have observed that the number of investment opportunities nearly doubled in the past year. Ongoing generation change is a major source of this development. Entrepreneurs who established their companies usually in the 1990s are passing their ownership to other entities. Genesis funds can offer such founders not only the possibility of one-off or gradual sale of their companies, but also continuation of the companies’ further independent development.”

In June 2016, the GPEF III fund entered QUINTA ANALYTICA, where its original founders were leaving the company. Currently, several other transactions are in process, including generation change motivated deals, management buyouts and provisions of growth capital. Genesis Capital plans on adding two more companies to the GPEF III portfolio in the coming months.

Establishment of a new fund of larger size and the increasing number of investment opportunities have been a strong impetus to expand the Genesis Capital team. Only this year, four new experts were hired, including Pavel Kvíčala, a renowned attorney-at-law, who previously was a partner at the legal offices of Havel, Holásek & Partners and Norton Rose Fulbright.

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