Rebounding confidence drives mid-market Central Europe ... · Rebounding confidence drives...

Private EquityMay 2016

Rebounding confidence drives mid-marketCentral Europe Private Equity confidence survey

2

The confidence to put money to work shows an appetite and willingness to build CE businesses and create returns for investors.

This publication contains general information only. The publication has been prepared on the basis of information and forecasts in the public domain. None of the information on which the publication is based has been independently verified by Deloitte and none of Deloitte Touche Tohmatsu Limited, any of its member firms or any of the foregoing’s affiliates (collectively the “Deloitte Network”) take any responsibility for the content thereof. No entity in the Deloitte Network nor any of their affiliates nor their respective members, directors, employees and agents accept any liability with respect to the accuracy or completeness, or in relation to the use by any recipient, of the information, projections or opinions contained in the publication and no entity in Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies thereon.

Our 27th survey reveals renewed confidence after a dip last autumn. The Index rose by a third to reach 124, putting sentiment of Central European (CE) private equity (PE) deal-doers at roughly the level seen a year ago.

It is also encouraging to see that confidence is improving and strong across many of our metrics: there are expectations of improving economic conditions; liquidity is expected to remain the same or improve and an increasing number of deal-doers are expecting to focus mostly on putting money to work in the coming months. Perhaps on the back of all this, nearly a third expect market activity to pick up. These numbers are all up on last autumn’s survey.

There are a number of reasons for this. Many of the region’s deal-doers raised funds two or three years ago, meaning they still have capital left to deploy and time to deploy it, while pressure to exit is less urgent than when funds are about to launch. In fact nearly three quarters of respondents (73%) intend to focus on new investments in the coming months, a five-year high. This may also be a reflection of the increased availability of debt (see page XX) and the increased optimism surrounding the economy.

The exits that are being recorded – 23 in the last six months according to Deloitte research –are mostly going to trade buyers, excellent vindication of the success and international interest a CE-based business can achieve under the stewardship of private equity. In other, more mature markets, sales to other private equity houses are more common, with trade buyers more elusive. Two-thirds of the exits we recorded were via this exit route, which should go a way to convincing international investors to take another look at CE private equity.

The EBRD released its latest Transition Report last autumn1, and reminded us that despite its ability to select high-potential businesses and then help to accelerate their growth, the asset class remains underrepresented in transition countries. In fact the report states that just 1% of global private equity is channelled into EBRD countries. Admittedly some of CE’s strongest performers have graduated out of EBRD’s remit (the Czech Republic, for example, hasn’t received EBRD funds since 2008), however the report paints a stark picture of how much farther the region has to go as regards private equity.

We look forward to continuing to work with CE deal doers as they keep driving the asset class forward in the region.

Mark Jung Garret Byrne Partner PartnerPrivate Equity LeaderCentral Europe

Introduction

4

This year’s results are interesting and we think underline the importance of continued focus on driving acquired businesses forward. Responses suggest to us that valuations will remain strong (or perhaps see some upward pressure) – as respondents are more positive about the economy, and will focus on new investments. An improvement in efficiency of financial investments is expected – against a background of stable debt availability however.

This means that improved returns will need to be generated by strong growth in margins – and this is recognized. Whilst consolidation and operational excellence are important levers, organic growth is seen as the key value driver. This means that investors will need to focus on driving improvements in sales and pricing strategy, as well as developing new products, and perhaps diversifying or entering new markets. A current engagement we are involved with is very much along these lines – we support an investor to decide pricing and distribution strategy for a medtech product, based on detailed customer insight.

An effective digital strategy is a key element of this. There is a growing awareness of the importance of the digitalization, changing not only the B2C but also B2B market. With digital maturity and effective digital strategy becoming one of the vital elements of a successful business, we would urge more investors to develop a rigorous approach to the digital world, also as they assess a potential acquisition. This may prove to be a key lever to defend existing sales and drive upsides.

Daniel CappellettiPartner, Consulting

Central Europe PE Confidence IndexConfidence is improving for private equity in CE, with the index climbing by more than a third to 124 points over the last six months. The uptick means it has regained most of the confidence lost in the two years following a drop in April 2014 after an 18-month long continuous ascent.

This increased confidence is manifesting across various metrics. The economy is considered to be stable or improving, with an eight-fold increase in optimism to nearly a quarter of respondents (24%) expecting an improvement in conditions. Liquidity is also expected to remain consistent or improve, and nearly three quarters of deal-doers (73%) expecting to focus on deploying capital over the coming months.

This is perhaps the strongest indication of increasing confidence: in uncertain times, portfolio management becomes the biggest priority, as reflected in our survey over the last 13 years. The confidence to put money to work shows an appetite and willingness to build CE businesses and create returns for investors.

There may be more deals, but there remains a belief in the discipline of retaining CE’s mid-market focus: Nearly a third of respondents (30%) expect market activity to pick up, up from 17% last autumn – but it will be about increasing the number of deals instead of cheque sizes; 81% believe average ticket sizes will remain the same.

Key findings

• Confidence has regained much momentum after a blip last year, with the index back at last spring’s level. This may be a reflection of improving economic expectations.

• There was an eight-fold increase in respondents expecting an improvement in the economy. Indeed Central Europe is Europe’s strongest region for GDP growth, with 3.6% recorded for Q4 2015 .

• Debt markets are considered stable: more than two thirds of respondents (70%) expect no change in the already good availability of debt finance for deals. There was also a near halving of the proportion of those expecting liquidity to decrease, from 30% six months ago to just 16% in the latest survey.

Overview

*The PE Confidence Index is based upon answers received from PE professionals focused on Central Europe. It is composed from answers to the first seven questions of the survey. For each period the average of positive answer ratios over the sum of positive and negative answers is computed. This average is compared to the base period, which in our case is spring 2003.

Central Europe PE Confidence Index*

0

20

40

60

80

100

120

140

160

180

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Oct. 2014

Oct. 2015

Apr. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Apr. 2014

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

Mar. 2006

Sep. 2005

Mar. 2005

Sep. 2004

Mar. 2004

Sep. 2003

Mar. 2003

148

156

100

139

154

149

155

153

159

118 102

48

78

117

140

138

153

70 71

101 101

127

144

114

130

92

124

6

Survey results

Rebounding confidence drives mid-market Central Europe Private Equity confidence survey 7

Survey results

0

25

50

75

1002%

55%

43%

4%

57%

39%

7%

61%

32%

9%

62%

29%

10%

47%

43%

66%

34%

68%

9%

23%

69%

21%

10%

31%

8%

61%

74%

16%

10%

64%

33%

3%

49%

27%

24%

60%

10%

30%

59%

41%

53%

47%

74%

26%

18%

64%

18%

28%

67%

5%

93%

7%

51%

43%

6%

Deteriorate Remain the same Improve

Over the next 6 months I expect the overall economic climate to:*

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Sep. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

Nearly a quarter of respondents (24%) expect the economic backdrop to improve in the coming months, up eight-fold from the last survey, when just 3% were optimistic for the future. Indeed CE is Europe’s strongest region for GDP growth, with 3.6% recorded for Q4 2015. In Poland, the region’s largest economy, unemployment was down from 11.5% to 10% in the year to March 2016 . Households throughout the region are seeing their disposable incomes increase owing to low inflation and low oil prices.

There are, however, risks. The upcoming referendum on British EU membership could have repercussions on the region’s economies. The UK is a large contributor to the EU’s coffers, and most CE EU members are net recipients of EU funding, meaning a vote for British Exit, or ‘Brexit’, could have a negative impact. Less clear cut is the impact on the entire EU if it loses a member state.

The ongoing tragedy of the migrant crisis casts a large shadow on the whole of Europe, including CE. A recently concluded deal with Turkey to create a sort of ‘one in, one out’ policy may or may not improve the situation in the short-term.

These factors among others put forecasts for this year’s GPD growth above 3% – healthy but a bit slower than last year.

Economic climate

* Results are displayed only for the 20 most recent surveys.

8

0

25

50

75

1005%

57%

38%

4%

87%

9%

4%

69%

27%

5%

79%

16%

3%

63%

34%

64%

36%

61%

37%

3%

21%

76%

31%

69%

3%

10%

76%

14%

30%

17%

53%

16%

70%

14%

67%

33%

84%

16%

46%

36%

18%

52%

48%

78%

22%

19%

67%

14%

7%

75%

18%

61%

39%

Over the next 6 months I expect the availability of debt finance to:

Decrease Remain the same Increase

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Sep. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

Deal doers perceive CE’s debt markets to be very stable, with more than two thirds of respondents (70%) expecting no change in availability of debt finance for deals. There was also a near halving of the proportion of those expecting liquidity to decrease, from 30% six months ago to just 16% in the latest survey.

A vote for ‘remain the same’ is refreshingly consistent since the markets corrected – in all but two surveys since 2009, the majority of respondents have anticipated no change. In fact in the last survey, the majority expected an improvement in liquidity, likely partly a reaction to the announcement of further quantitative easing.

The last time the majority deemed an improvement imminent was in spring 2006, when debt markets were increasingly frothy.

A couple of large deals suggest leverage is indeed available in the region: Bridgepoint and Cornerstone jointly acquired Polish department store chain Smyk in a deal valued at €244m.

Debt availability


0

25

50

75

100 7%

53%

40%

58%

42%

9%

64%

27%

9%

67%

24%

7%

74%

19%

24%

63%

13%

15%

76%

9%

14%

76%

10%

14%

65%

21%

11% 7%

76%

13%

86%

7%

5%

84%

11%

3%

81%

16%

6%

67%

27%

85%

15%

68%

4%

28%

73%

3%

24%

35%

57%

8%

Over the next 6 months I expect the average size of transactions to:


29%

60%

11%

13%

65%

22%

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Sep. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

0

25

50

75

100

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Sep. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

86%

7%7%

79%

5%

16%

77%

14%

9%

62%

14%

24%

42%

3%

55%

49%

48%

3%

68%

29%

3%

58%

39%

3%

59%

23%

18%

38%

45%

17%

35%

55%

10%

59%

34%

7%

50%

31%

19%

42%

42%

16%

37%

33%

30%

47%

20%

33%

73%

16%

11%

74%

13%

13%

64%

24%

12%

77%

17%

6%

Over the next 6 months I expect to spend the majority of my time focusing on:

New investments Portfolio management Raising new funds

The focus on new investments hit a five-year high in the latest survey, with nearly three quarters (73%) expecting to concentrate on this over the next six months. Aside from a blip in spring 2011, this level is on a par with those seen in the heady days between 2004 and 2007. There has been a commensurate drop in the expected level of focus on fundraising, down to just over a tenth (11%) of respondents. There have been a number of GPs reported to be in pre-marketing for vehicles, such as

Value4Capital, while Genesis Capital is expected to hit a final close for its third private equity fund by year-end. The level of those expecting to focus on portfolio management is fairly stable, with 16% concentrating on this, down a tad from 20% last time. Interestingly, these levels represent a reversion to the pre-2008 surveys, and the last time such a low figure was recorded was in spring 2008.

Average deal sizes should remain steady, with 81% of respondents expecting no change. Expectations have remained consistent for two and a half years. The 19% that do expect a change are mostly anticipating increasing cheque sizes. There has been a more than doubling of those expecting sizes to increase – from 7% last autumn to 16% now. At the same time, the proportion of respondents expecting average sizes to drop has more than halved from 7% in the autumn to

just 3% now. CE volumes are driven by mid-market opportunity, with large-scale privatisations/deals occurring as outliers in a region where maturing businesses offer the most consistent private equity dealflow. As such, any given year’s deal statistics may be skewed by a mega-deal, but local players continue to drive activity. In the last six months, the largest deal was Bridgepoint’s €244m investment into Poland’s Smyk, highlighting just how the CE PE space truly is a mid-market one.

Investors’ focus

Size of transactions

10

0

25

50

75

1003%

67%

33%

79%

21%

9%

59%

32%

67%

33%

40%

5%

55%

24%

57%

19%

Over the next 6 months I expect efficiency of my financial investments to:

65%

32%

4%

61%

35%

5%

52%

43%

4%

58%

38%

5%

53%

42%

3%

48%

49%

40%

60%

35%

65%

64%

36%

24%

63%

13%

12%

56%

32%

7%

72%

21%

7%

48%

45%

7%

56%

37%

Decline Remain the same Improve

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Sep. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

0

25

50

75

100

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Sep. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

6%

47%

47%

5%

37%

58%

3%

47%

50%

5%

67%

28%

2%

55%

43%

2%

32%

66%

5%

32%

63%

62%

38%

45%

5%

50%

59%

29%

12%

66%

7%

28%

66%

17%

17%

66%

17%

17%

59%

30%

11%

50%

43%

7%

65%

35%

9%

64%

27%

19%

62%

19%

80%

8%

12%

19%

65%

16%

Over the next 6 months I expect the overall market activity to:


This latest survey revealed a reversal of the dip in expectations for market activity reported last autumn. While the majority still expect deal volume to stay the same – typical for the last five years – nearly a third (30%) expect an increase, up from just 17% in the autumn. With confidence up generally, and particularly as regards the economy and liquidity, it is unsurprising that the market feels dealflow may improve. With 84% of

respondents expecting liquidity to remain the same or improve (see page/slide on Leverage), it is clear that conditions are conducive to putting money to work. Most of CE’s longstanding deal-doers recorded transactions over the last six months: Innova, Enterprise, Mid Europa, BaltCap, Resource and Penta were among those to sign deals, while relative newcomer 21 Concordia and Livonia also made announcements.

Nearly half expect the efficiency of their financial invest-ments to improve – a marked increase on last survey’s 37%.

Pessimism is down after hitting a two and a half year high last autumn. Currently just 3% expect a decrease in efficiency of investment, down from 7% in the last survey.

Market activity

Investment return


0

25

50

75

100

53%

40%

7%

53%

47%

68%

32%

67%

33%

56%

44%

54%

43%

53%

47%

65%

35%

74%

26%

51%

49%

71%

29%3%

38%

59%

6%

47%

47%

5%

43%

52%

4%

42%

54%

7% 10%

50%

43%

30%

60%

42%

58%

38%

62%

34%

66%

3%

Over the next 6 months I expect the highest competition for new investment opportunities in:

Market leaders Middle sized growing Co. Start ups

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Sep. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

0

25

50

75

100

Apr. 2009

Apr. 2010

Oct. 2010

Oct. 2011

Oct. 2012

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Sep. 2015

Apr. 2016

Oct. 2009

Apr. 2011

Apr. 2012

Apr. 2013

Oct. 2008

Apr. 2008

Oct. 2007

Apr. 2007

Oct. 2006

4%7%

13%

80%

6%

68%

26%

9%

27%

64%

9%

29%

62%

11%

66%

23%

11%

13%

76%

7%

29%

64%

14%

18%

68%

26%

70%

2%

32%

66%

3%

38%

59%

52%

14%

35%

34%

28%

38%

34%

19%

47%

19%

35%

46%

53%

21%

26%

40%

40%

20%

27%

23%

50%

27%

22%

51%

16%

8%

76%

Over the next 6 months I expect to:

Sell more Buy and sell equally Buy more

The majority of deal-doers (51%) expect to buy more than they sell in the coming months. This has been the norm across all our surveys since 2004 except for spring 2015. This is also reflected in our own data, with 36 buy-side deals recorded in the six months covered by the survey, against 23 exits. Just over a fifth expect to sell more over the coming months, roughly equal to last survey’s figure and lower than a year ago. Highlander

Capital achieved a hat-trick of exits over the last semester, selling Poland’s ZREW to trade buyer Rauscher & Stoecklin in December; selling Poland’s Medi-system in January to a French trade buyer and, most recently, selling Poland’s ProService Agent Transferowy to Oaktree and Cornerstone in March. BaltCap recorded two divestments at the beginning of this year when it sold Lithuanian Eurakras and Estonian Tuuleenergia, both to Lietuvos.

Most deal doers continue to favour market leaders in their origination efforts, with the majority (51%) planning to seek them out in the coming months. This is down nine percentage points on the last survey. The fight to win middle-sized, growing companies became more difficult since last autumn, with 43% deeming it the most competitive space for new investment opportunities, up nearly 50% since the last survey. Just a year ago, this segment was deemed the most competitive space to win

a deal (the only time in the survey’s history). As the CE market matures, there are an increasing number of these opportunities. Start-ups continue to blip on the survey, with 5% expecting them to command the most competition. A couple of years ago, a handful of venture funds raised capital and will be putting this to work. Prior to that, start-ups didn’t register on our survey with any regularity, unlike the last two and a half years.

Investors’ activities

Competition for new investments

12

Perhaps unsurprisingly, driving growth and profitability are very important to CE deal doers, as generating alpha for investors becomes more crucial in a competitive global fundraising market.

To this end, deal doers are firmly focused on organically growing their portfolio companies. The majority (51%) expect this to be their priority over the coming months, with industry consolidation coming in a distant second at just 22%. This priority narrowly pipped cost management, which was deemed a priority by nearly a fifth (19%) of respondents.

Interestingly, no respondents felt they needed to focus on improving their portfolio company financial reporting.

Deal doers in CE are increasingly aware of the significance of digital strategy in their portfolio companies, with 83% of respondents considering this when assessing an investment decision.

The approach in which deal doers assess this varies greatly. Less than a tenth (8%) have a rigorous and highly structured approach, indicating that the significance of a digital strategy is only just beginning to be appreciated. While this was once deemed to be the preserve of high-tech businesses and start-ups, it is now widely accepted that a digital strategy is paramount to the success of any company operating in the 21st century. Many B2C companies adopted digital strategies some time ago, as consumers increasingly expect digital channels to enhance their purchasing experience; B2B businesses are now going the same way.

For all businesses, a digital strategy is more than just about serving your clients – it can be an effective way of collecting data on them. Mining information gleaned through browsing and purchase history can provide useful intelligence on the behaviour of customers.

Looking at my portfolio I expect my priorities to be:

When you value a target company and formulate an investment decision, to what extent do you formally assess the digital maturity of a target company (“digital maturity” being the nature and extent of the target’s development and usage of digital channels and technology)?

We have a rigorous and highly structured approach to assessing digital maturity in a target company.

Cost management/Operational excellence

Organic Growth

Consolidating my industry

None of the above

Organic growth plus M&A opportunistically

Making exits

We assess digital maturity, however, we do not have a structured approach which we consistently use.

We assess digital maturity only in an ad hoc manner, and usually only after other key business levers and drivers have been bottomed out.

We generally do not consider or assess digital maturity.

32%

32%

16%

3%3%

3%

8%

8%

43%

43%

Guest questions


Selected investments (October 2015 – April 2016)

PE House Country Company Period Est. Value EUR m

Stake Description

Abris Capital Partners Poland Fungis Sp. z o.o. April 2016 32.91 100 Abris Capital Partners-backed Polish business Mykogen Polska has acquired Fungis, a Polish producer of substrate for cultivation of button mushrooms, Post acquisition, the combined plants are expected to generate revenues of PLN 140m (EUR 32.91m)

Ambienta Sgr S.p.A. Croatia Calucem Group April 2016 n/a n/a Ambienta has acquired a majority stake in Calucem Group, a Croatian manufacturer of calcium aluminates cements and quick-setting cements, from Argus Capital.

Enterprise Investors Romania Noriel Group April 2016 - pending

n/a n/a Enterprise Investors has acquired Noriel Group, a Romanian toy and games maker, from Axxess Capital and the Constantinescu family.

Rockaway Capital Czech Republic Invia.cz March 2016 - pending

56 83.28 Rockaway Capital has acquired an 83.28% stake in Invia.cz, a Czech on-line travel agency, from MCI Capital for EUR 55.9m.

Oaktree Capital Management; Cornerstone Partners

Poland ProService Agent Transferowy

March 2016 - pending

n/a 100 Cornerstone Partners and Oaktree Capital Management have agreed to acquire ProService Agent Transferowy, a Poland-based provider of professional support services of transfer agency, accounting and IT solutions for financial institutions, from Highlander Partners.

Livonia Partners Estonia Ha Serv OU February 2016

20 87 Livonia Partners has acquired an 87% stake in Ha Serv OU, an Estonian manufacturer of wooden sauna components, ready-made saunas, and thermo-treated wood materials, from Aivar Kokk, an Estonia private investor. The deal is estimated to be valued at EUR 20m.

Palmyra; IK VII Fund of IK Investment Partners

Poland Ferro S.A. February 2016 - pending

51 100 IK Investment Partners has made an offer to wholly acquire Ferro, a listed Polish manufacturer and distributor of sanitary and installation fittings. The equity value of the transaction will be PLN 223.05m (EUR 50.72m).

DYWIDAG-Systems International (Triton Partners)

Poland JENNMAR Europe February 2016 - pending

n/a 100 Triton-backed DYWIDAG-Systems International (DSI), a Luxembourg-based manufacturer and supplier of post-tensioning and geotechnical systems, has acquired JENNMAR Europe, the Poland-based based company engaged in the manufacturing of ground control products for the mining, civil construction and tunneling industries.

Nextebank; Axxess Capital

Romania Banca Comerciala Carpatica

January 2016

27 54.79 Axxess Capital-backed Nextebank has agreed to acquire a 54.79% stake in Banca Comerciala Carpatica, a listed Romanian bank, in a RON 220.50m (EUR 48.68m) transaction.

China-CEE Fund Czech Republic Energy 21 January 2016

n/a 100 CEE Equity Partners has agreed to acquire Energy 21, a Czech solar business, from Mid Europa Partners and Darby Overseas Investments.

Wallis Asset Management; Mr. Karl-Heinz Keth

Hungary Praktiker Bau - Und Heimwerker-maerkte AG (Hungary Operations)

January 2016 - pending

n/a 100 Wallis Asset Management and private investor Karl-Heinz Keth have acquired the Hungarian operations of Praktiker Bau - Und Heimwerkermaerkte AG (Praktiker), a listed Germany-based operator of home improvement stores.

Bridgepoint Advisers Limited

Poland Smyk January 2016

244 100 Bridgepoint and Cornerstone Partners have acquired Polish department store chain Smyk from NFI Empik Media & Fashion SA, a listed Polish consumer goods business, for PLN 1.06bn (EUR 243.877m).

TA Associates Management

Czech Republic W.A.G. payment solutions

January 2016

n/a 100 TA Associates has acquired a minority stake in W.A.G. payment solutions, a Czech provider of payment solutions for mobility within Europe.

Highlander Partners Poland QFG Spolka January 2016

n/a 60 Highlander Partners has acquired a 60% stake in QFG, a Polish producer of poultry', beef', and pork-based products.

Deals watch

14


Stake Description

Bookzz Holdings Limited (Penta Investments Limited)

Poland Learning Systems Poland S.A.

January 2016 - pending

10 100 Penta Investments has agreed to acquire Learning Systems Poland, an operator of language schools, from Empik Internet, a subsidiary of listed NFI Empik Media & Fashion SA (EMF) for PLN 40.81m. (EUR 9.63m).

MCI.EuroVentures 1.0 Poland Mobiltek December 2015 - pending

n/a 100 MCI Capital has agreed to acquire Mobiltek SA, a Polish provider of payments services by premium text messages and direct carrier billing.

Providence Equity Partners

Lithuania Bite Group December 2015 - February 2016

n/a 100 Providence Equity Partners has agreed to acquire Bite Finance, a Lithuanian provider of mobile telecommunication and mobile Internet services, from Mid Europa Partners.

Penta Investments Limited

Slovakia Sberbank Slovensko

December 2015 - pending

n/a 99.5 Penta Investments has agreed to acquired a 99.5% stake in Sberbank Slovensko, a Slovakia-based bank that provides banking and financial services to commercial and private customers, from Sberbank Europe AG, an Austria-based banking group within the Sberbank CIB umbrella.

Innova Capital Slovenia Trimo December 2015 - pending

50 97.45 Innova Capital has acquired a 97.45% stake in Trimo, a Slovenian provider of steel buildings, roofs, facades, steel constructions, containers, and sound-proof and insulation systems, from Nova Ljubljanska banka in a deal estimated to be worth more than EUR 50m.

Biser Bidco (Apollo Global Management)

Slovenia Raiffeisen Banka December 2015 - pending

n/a 100 Apollo Global Management has acquired Raiffeisen Banka, the Slovenia-based banking arm of Raiffeisen Bank International.

21 Concordia (21 Partners)

Poland Wojcik Fashion December 2015 - January 2016

n/a 100 21 Concordia has acquired a 80% stake in Wojcik Fashion, a Polish children's clothing business, from private individuals Ilona Wojcik and Boguslaw Wojcik.

Resource Partners Poland Golpasz December 2015

n/a 100 Resource Partners has backed the management of Golpasz in a buyout of the Polish animal feed manufacturer.

BaltCap Estonia EKT Group December 2015 - pending

n/a 100 BaltCap has agreed to acquire a 75% stake in EKT Group, an Estonian waste management business as part of an MBO.

Abris Capital Partners Slovenia Paloma November 2015 - pending

41 100 Abris Capital Partners has acquired Paloma, a Slovenian maker and exporter of hygienic tissues, in a privation which saw a €15m capital increase grant Abris a 57.23% stake. A mandatory takeover is to follow, with an offer price of €3.3 per share. The deal valued the firm at €26.02m.

BaltCap Estonia Dental Invest Ou November 2015 - pending

n/a 56 BaltCap has acquired Dental Invest Estonia Ou, an Estonian operator of dental and laboratory centers.

Bounty Brands; Coast2Coast Investments

Poland Sonco November 2015

n/a 100 Coast2Coast Investments-backed Bounty Brands, a South African company focussed on personal care, apparel, home and personal care products, has acquired Polish rice cake maker Sonko from the Nowacki family.

BaltCap Private Equity Fund II

Lithuania, Estonia; Latvia

OpusCapita, UAB; Fitek AS; AS OpusCapita

November 2015 - pending

n/a 100 BaltCap has acquired the Lithuanian, Estonian and Latvian subsidiaries of OpusCapita Group, a Finland-based provider of cash flow automation solutions and integration solutions to banks, businesses, and public sector organizations.

Warburg Pincus Poland BIURO Aptek Gemini

November 2015 - February 2016

n/a 100 Warburg Pincus has agreed to acquire a majority stake in Biuro Aptek Gemini, a Polish pharmacy chain.



Stake Description

Walton Street Capital; Algonguin; Benson Elliot Capital Management

France, Italy, Poland, Germany, Belgium

Host Hotels & Resorts (8 Prime Europe Hotels)

October 2015

420 100 A group of investors have acquired a portfolio of 8 prime Europe hotels from Host Hotels & Resorts Inc., the listed US-based hospitality and real estate company, for a consideration of approximately EUR 420m.

Mid Europa Partners Czech republic Walmark October 2015 - pending

n/a 50 Mid Europa Partners has agreed to acquire a 50% stake in Walmark, a Czech Republic-based manufacturer, distributor and seller of nutritional supplements and pharmaceuticals drugs, from the Walach family.

Walmark (Mid Europa Partners)

Czech Republic Valosun October 2015

n/a 100 Mid Europa-backed Walmark, a Czech manufacturer, distributor and seller of nutritional supplements and pharmaceuticals drugs, has acquired Valosun, a Czech probiotic and cosmetic business.The vendors were holiding company Antilia as well as private investors Petr Odehnal, Pavel Strasak and Jiri Okac.

Paragon Partners Germany, USA, Romania

Balda AG (Operational Units)

September 2015

63 100 Paragon Partners has agreed to acquire the operating units of Balda AG for EUR 62.9m: Balda Medical in Bad Oeynhausen Germany; Balda C. Brewer and Balda Precision, both in California, USA; as well as Balda Medical Systems in Romania.

Polish Enterprise Fund VII (Enterprise Investors)

Poland SMT Software September 2015 - November 2015

36 100 Enterprise Investors has agreed to acquire SMT Software Services from SMT for EUR 31.1m.

Papyrus AB (Altor Equity Partners; Triton Partners)

Czech Republic Ospap September 2015

n/a 100 Altor- and Triton-backed Swedish paper and packaging company Papyrus has agreed to acquire Ospap, a Czech supplier of printing and packaging materials, in an insolvency transaction.

PAAN CAPITAL Poland KAN September 2015

n/a Undis-closed con-trolling stake

Paan Capital has acquired a controlling stake in Kan, a Polish clothing designer and distributor.

LMS Holdco Limited (Metric Capital Partners)

Poland Less Mess Storage September 2015 - December 2015

19 94.44 Metric Capital Partners has acquired Less Mess Storage for EUR 19m.

16

Selected exits (October 2015 – April 2016)

Seller Country Company Buyer Period Value EUR m

Stake Description

City Clinic Group

Bulgaria EMP Invest Bulgaria AD

Acibadem Saglik Hizmetleri ve Ticaret AS and Acibadem Sistina Hospital

April 2016 - pending

34 n/a EMP Invest Bulgaria and private investors including Alexander Dmitrievich Minov have agreed to sell Bulgaria's Citi Clinic Group to Acibadem Saglik Hizmetleri ve Ticaret AS and Acibadem Sistina Hospital for EUR 34m.

Tomplast d.o.o. Slovenia DBG Eastern Europe II LP, the Hungary based private equity fund of Arx Equity Partners

KJK Capital Oy April 2016 n/a n/a Arx Equity Partners has sold Tomplast producer of plastic components to KKJK Capital in a secondary buyout.

Calucem Group Croatia Argus Capital Group Limited

Ambienta Sgr S.p.A.

April 2016 n/a n/a Argus Capital has sold its majority stake in Calucem Group, a Croatian manufacturer of calcium aluminates cements and quick-setting cements, in a secondary buyout to Ambienta.

Noriel Group Romania Axxess Capital and Constanti-nescu family

Enterprise Investors

April 2016 - pending

n/a n/a Axxess Capital and the Constantinescu family have sold Noriel Group, a Romanian toy and games maker, to Enterprise Investors.

Prestige Tours Romania GED Iberian Private Equity

Calypso Tours March 2016 n/a 100 GED Iberian Private Equity has agreed to sell Prestige Tours, a Romania-based tour operator, to Calypso Tour.

Invia.cz Czech Republic

MCI Capital Rockaway Capital SE


56 83.28 MCI Capital has agreed to sell an 83.28% stake in Invia.cz, a Czech on-line travel agency, to Rockaway Capital for EUR 55.9.

ProService Agent Transferowy

Poland Highlander Partners, L.P.

Oaktree Capital Management LP; Cornerstone Partners


n/a 100 Highlander Partners has agreed to sell ProService Agent Transferowy, a Polish provider of professional support services of transfer agency, accounting and IT solutions for financial institutions, to Cornerstone Partners and Oaktree Capital.

Provus Service Provider S.A.

Romania Innova Capital Wirecard AG February 2016 - pending

32 100 Innova Capital has agreed to sell Provus Service Provider, a Romanian card processing company, to Wirecard AG, a listed German company, for a cash consideration of EUR 32m.

Albalact SA Romania Recon-struction Capital II Limited

Groupe Lactalis January 2016 - pending

91 100 Reconstruction Capital has agreed to sell Albalact, a listed Romania-based producer of dairy products, to Groupe Lactalis for EUR 89.84m.

Energy 21 Czech Republic

Darby Overseas Investments; Mid Europa Partners LLp

China-CEE Fund January 2016

n/a 100 Mid Europa Partners and Darby Overseas Investments have sold Czech solar business Energy21 to China CEE Fund.

Eurakras UAB Lithuania BaltCap; Renagro UAB

Lietuvos Energija, UAB

January 2016

n/a 75 BaltCap and holding company Renagro have agreed to sell a 75% stake in Eurakras UAB, a Lithuanian wind power business.

Tuuleenergia OU

Estonia BaltCap Lietuvos Energija, UAB

January 2016

n/a 100 BaltCap has agreed to sell Tuuleenergia OU, an Estonian wind power business, to Lithuanian state-controlled company Lietuvos Energija.

MarkIT Holding AS

Estonia Ambient Sound Investments OU

Undisclosed January 2016 - pending

n/a 22.38 Ambient Sound Investments OU, an Estonia-based venture capital firm agreed to sell 22.38% stake in MarkIT Holding AS, an Estonia-based e-commerce group that provides an e-purchasing system for IT goods in the Baltics, to an undisclosed bidder for an undisclosed consideration.


Seller Country Company Buyer Period Value EUR m

Stake Description

Grupa DUON Poland Capital Partners; AKJ Investment TFI

Fortum Oyj AB January 2016 - March 2016

104 93.35 AKJ Investment TFI and Capital Partners participated in a tender offer for an 83.35% stake in Grupa DUON, a listed Polish supplier of natural network gas. The offer corresponded to an equity valuation of EUR 102.93m.

MEDI-system Poland Highlander partners,L.P.; Mr. Zawadzki

Orpea SA January 2016

n/a 90 Highlander Partners and private investor Marcin Zawadzki have agreed to sell a 90% stake in MEDI-system to Orpea, a listed French nursing home, rehabilation and psychiatric centre operator. MEDI-system provides health care facilities including dependency care, post-acute care and rehabilitation clinics.

Bite Group AS Lithuania Mid Europa Partners

Providence Equity Partners LLC

December 2015 - February 2016

n/a 100 Mid Europa Partners has agreed to sell Bite Finance, a Lithuanian provider of mobile telecommunication and mobile Internet services, to Providence Equity Partners.

ZREW transformatory

Poland Highlander Partners

Rauscher & Stoecklin; CGS management AG

December 2015

n/a 100 Highlander Partners has agreed to sell ZREW Transformatory, a Polish power transformer specialist, to Rauscher & Stoecklin, a Swiss trade buyer owned by CGS Management.

HAME Czech Republic

Nordic Partners

Orkla ASA December 2015

n/a 100 Nordic Partners has agreed to sell HAME, a Czech maker of durable and chilled products, in a EUR 175m trade sale to Orkla ASA on a debt-free basis.

Sequoia Poland Sorabot; Mr. Wypych; Mrs. Pakiela-Rajtkowska

Maspex Wadowice Group

October 2015

n/a 100 PAAN Capital and private individuals Mr. Wypych and Mrs. Pakiela-Rajtkowska have agreed to sell Polish vitamin and generics business Sequoia to Polish food and drinks maker Maspex Wadowice Group.

Valosun Czech Republic

Antilia; Mr. Odehnal;l Mr. Strasak; Mr. Okac

Walmark, a.s. October 2015

n/a 100 Czech investor Antilia and private individuals Petr Odehnal, Pavel Strasak and Jiri Okac have agreed to sell Czech probiotics and cosmetics business Valosun to Walmark, now owned by Mid Europa Partners.

Servodata Czech Republic

Genesis Capital

BDO Advisory April 2016 Genesis Capital has sold Czech IT services company Servodata to trade buyer BDO Advisory five years after acquiring it. The deal was done from Genesis' 2008 €40m fund.

XTB Poland Enterprise Investors

Warsaw Stock Exchange

April 2016 308,9 19% Enterprise Investors has floated X-Trade Brokers, a Polish brokerage house. Enterprise had acquired its stake in XTB in October 2010, investing €57m for its 19% shareholding.

PBKM Poland Enterprise Investors

Warsaw Stock Exchange

April 2016 17% Enterprise Investors has sold a 17.3% stake in Polish stem-cell bank Polski Bank Komórek Macierzystych (PBKM) ahead of its IPO on the Warsaw Stock Exchange. Enterprise had invested PLN 18.1m in November 2009.

Fund Raising (October 2015 – April 2016)

Company Fund Value (EUR m) Status Time Description

Value4Capital Poland Plus Fund 150,0 Aiming for first close by end 2016

18

Contacts

Mark JungCentral Europe & [email protected]

Garret ByrneCzech [email protected]

Balazs [email protected]

Linas [email protected]

Gavin [email protected]

Tomislav CuturaCroatia+385 (1) 2352 [email protected]

Mitja KumarSlovenia+386 (1) 307 28 [email protected]

Kreshnik RoboAlbania & Kosovo+355(4) 451 [email protected]

Ivana [email protected]

Darko StanisavicSerbia+381 (11) 3812 [email protected]

Hein van [email protected]

Deloitte Private Equity Leaders in Central Europe


CE Top 500www.deloitte.com/cetop500The Deloitte Central Europe Top 500 is our essential annual publication that provides insights into the key factors affecting the corporate business community across the 17 countries of the Central European region plus Ukraine. It includes a ranking of the region’s 500 largest companies and financial institutions, analysis of the ranking by industry, information on our Index of Success award and winning companies, and insights on industry trends and challenges from executives from some of the region’s largest companies.

CE CFO Surveywww.deloitte.com/cecfo2016 This annual questionnaire tracks the latest thinking and actions of CFOs representing largest and most influential companies in the Central European region. It explores top-tier CFO issues across four areas: business environment, company priorities and expectations, finance priorities and personal priorities. The findings discussed in this report represent the opinions of almost 500 CFOs based in 11 Central European countries: Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Lithuania, Poland, Romania, Serbia, Slovakia and Slovenia.

Investing in Central Europe www2.deloitte.com/investingceThe key drivers for investors making cross-border direct investments are usually either to gain access to new and growing markets, or to reduce costs. The countries of Central Europe score highly on both. This publication offers a useful guide for potential investors with Central Europe on their radar.

Additional resources

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www.deloitte.com/cepe

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte’s approximately 200,000 professionals are committed to becoming the standard of excellence.

Deloitte’s professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commit-ment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experi-ences, and enriching career opportunities. Deloitte’s professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.

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