CVCA Private Equity Report Reflecting on 2017 June 2018 CVCA Private Equity Report | Reflecting on 2017 CVCA Private Equity Report | Reflecting on 2017
Welcome to the 2017 Introduction Activity Report of the The private equity (PE) market in the Czech Czech and Slovak medical labs business / entrepreneurs harvesting their efforts Republic and the entire Central & Eastern AeskuLab and Alpha Medical in a €370m and ploughing their proceeds back into the Czech Private Equity Europe (CEE) has continued its strong run, deal, while local family office R2G Rohan private sector, is increasingly acquisitive with a healthy macroeconomic backdrop acquired a majority stake in Pegas and became a new type of player in the helping to drive realisations, deals and Nonwovens in a €300m deal. Czech M&A space. & Venture Capital fundraising in 2017. The buoyant market follows the increased activity levels seen in Deal-doing has been further supported by High valuations are good for sellers, with 2015 and 2016, with the region’s progress liquid leverage markets as well as record a number of succession-led opportunities Association, produced mirroring the uptick in Western Europe. levels of fundraising across Europe in 2016 creating deal-flow for private equity firms. and 2017. CEE has been no exception: in In May 2018, Genesis Capital launched The Czech Republic had a particularly September 2017, regional heavyweights a growth equity fund to back succession by Deloitte in association strong 2017 in terms of the economy, raised nearly €1bn between them when opportunities. Last year saw SkyLimit with GDP growth reaching 4.6% and the Enterprise Investors closed on €498m announce a fund for private investors to Czech koruna gradually strengthening, and Abris Capital raised €500m. These invest into family-owned businesses with with the Czech Private particularly after the Czech National Bank and other fundraisings, which totalled founders and owners seeking to exit. abandoned its exchange rate cap against approximately €1.3bn2 in 2017, were driven the euro in April 2017. The growth has by a number of strong exits in the region Private equity sellers are also benefitting Equity & Venture Capital affected other areas: unemployment is combined with very low interest rates, from the strong valuations, with a number at record low, boosting wages and thus meaning investors continue to seek yield in of lucrative exits taking place in 2016 consumer confidence; and the real estate alternative assets. Czech PE firm Jet Invest and 2017. The distributions these exits Association. market is strong – and perhaps too strong, has taken advantage of this demand by catalysed for investors helped whet a factor in the interest rate rises1. Interest launching a vehicle for individuals to invest appetites for the fundraisings. rates increased to 0.5% in 2017 and to in, with a minimum commitment size of 0.75% in February 2018; with Czech central CZK 100,000. Hunger for deals remains strong, though bank governor Jiří Rusnok hinting another increasing expectations of a tightening of rise could be on the cards soon owing to Competition from corporate buyers is the debt markets may see activity slow inflationary pressure. Regardless, GDP impacting deals: tight labour markets make down. Large deals expected for 2018 growth is expected to continue, even organic growth challenging, while plentiful include Advent International’s acquisition though at a slower pace (2.7% in 2018 and leverage encourages acquisitive growth. of Czech-based generic drugs business 3.1% in 2019). Combine this with the dry powder currently Zentiva for €2bn – in what will mark the available to Czech private equity firms and firm’s second private equity backer. This, The backdrop has been conducive to upward pricing pressure is unsurprising. combined with the recent success of dealflow, with a couple of sizeable Czech On top of that, Czech family offices, a fairly CVC’s flotation of Avast, means the Czech deals making headlines across Europe: new market development set up by local private equity scene is blipping heavily on Apax Partners-backed Unilabs acquired home grown high-net-worth individuals investors’ radars.
Zuzana Picková Dušan Ševc CEO Partner CVCA / Czech Private Equity Deloitte & Venture Capital Association
1 https://www.cnb.cz/en/public/media_service/interviews/media_2018/cl_18_180123_mora_reuters.html 2 https://www.unquote.com/cee/analysis/3007933/cee-closes-out-2017-with-strong-investor-confidence 2 3