PEF IV targeting larger investments

Enterprise Investors (EI) has announced the first closing of Polish Enterprise Fund IV (PEF IV) at $200 million. The Poland-based private equity firm, which is becoming active throughout Central and Eastern Europe, is hoping to reach a target of $300 million for its largest fund to date. The first closing included eight investors in the shape of insurance companies, pension funds and financial institutions based in the US and Western Europe. The second and final closing is expected to take place by the end of 2000.

The fund will focus on Poland with up to 20 per cent of capital being invested in Central and Eastern European countries other than Poland. The are four main countries outside of Poland that are being focused on are Romania, the Czech Republic, Hungary and Bulgaria. The company is also considering the prospects of companies in Estonia. Previously, EI invested mainly in Poland. In 1999, the company entered the Romanian market with a $14 million investment in a leading Romanina telecom company, Mobil Rom that has a 50 per cent

market share in Romania.

The fund’s strategy remains the same as for its predecessors, although the company has increased its range of investments. Previous funds had an investment range of between $3 million and $15 million; the third fund has increased the upper limit to $25 million, with an expected average investment size will be around $10 million. EI expects to invest the fund over a period of four years.

Another difference of the fund will be the sector focus. The previous funds were invested in more traditional industries but there are plans to invest up to 35 per cent of PEF IV in IT, Internet and telecommunications, up to 25 per cent in the pharmaceuticals and health care sectors and up to 15 per cent in consumer goods.

According to the firm, the healthcare market is becoming increasingly attractive for investments. Significant opportunities have developed following recent reforms of the Polish healthcare system that have introduced a competitive market for healthcare services. Combined with the rising private expenditure on healthcare, the reforms have created a niche for private equity activity in this segment of the Polish economy.

Transactions considered by PEF IV will include expansion capital for private companies, medium to large privatisations, post-privatisation investments, turnarounds, selective start-ups, buyouts and joint ventures with foreign industry partners. Jacek Siwicki, managing partner of Enterprise Investors said: “Polish Enterprise Fund IV will continue the group’s strategy of investing in companies with a solid management team, strong market position and potential for significant growth and expansion on local and international markets”.

EI manages the following funds – Polish Enterprise Fund, Polish Private Equity Fund I & II and Polish-American Enterprise Fund. The funds have invested over $550 million in more than 70 companies across all economic sectors in Poland and an additional $14 million in Romania. The funds have exited 33 investments and returned over $400 million to investors. Recent exits have included Polar SA, a leading white goods producer in Poland, and Krosno SA, a leading Polish glass manufacturer.

The fund has recently announced that it has invested $1 million in a start-up company called Apteki Polskie (Polish Pharmacies) and over the next three years EI plans to invest up to

$10 million in the project aimed at consolidating the pharmaceutical retail market in Poland.