Central and Eastern Europe is the target of Mezzanine Management’s most recent fund, Accession Mezzanine Capital (AMC). The fund, which has held its first closing at €76 million, is the first mezzanine fund to focus on the region. AMC is aiming for a final closing of €100 million, but says Rory Brooks, founding director of the firm; this will take some time. “Now we’ve got a first close, it should make the [fund raising] process a bit easier. Over the next few months we will make some initial investments and hopefully attract some more money. It would be nice to have a final close by the end of the year.”
The fund is seeking investments in the accession countries of Central Europe, in particular Poland, Hungary, Czech Republic, Slovenia and Slovakia, which are most likely to be in the next wave of EU entrants. Mezzanine Management has established offices in Vienna, Warsaw and Budapest in order to be close to the market place. Franz Hoerhager, managing director of Mezzanine Management Central Europe based in the firm’s Vienna office, and Ben Edwards from the London office have full operational responsibility for the fund and are assisted by Przemek Szezepanski in Warsaw and Laszlo Olah in Budapest. Fund raising is being co-ordinated by Christiian Marriott, the firm’s director of investor relations.
Franz Hoerhager said: “There is little doubt that the countries we are targeting in Central Europe are maturing quickly and the developing private equity market combined with positive economic and political developments make this an excellent opportunity to introduce mezzanine finance to the region.”
Investors in the fund are European and US institutions, including the European Bank for Reconstruction and Development (EBRD). AMC is working with other private equity investors and corporates investing in the region. Typical investments will include management buyouts and development capital opportunities in established businesses in various sectors. The fund has no specific sector focus, but investee companies will typically be old economy.
The fund has not made any investments as yet, but Rory Brooks says there are deals in the pipeline and deals will happen when the time is right. “What is interesting is that deal flow on the Western side in general is pretty tight, but there are quite a lot of proposals in Central and Eastern Europe,” he says. The fund will invest in between 10 to 20 deals Typical mezzanine investments are structured as subordinated loans with warrants to the equity of the target company. Average investment size will be between €5 million and €20 million in companies with values of between €50 million and €200 million.