The appetite for Russian private equity has reached new heights with a maiden fund smashing its target by US$160m.
Renaissance said that the group itself has committed around US$264m, or 40%, to the fund, with the remainder coming from the likes of fund-of-funds, family offices, European pension funds and a US insurance group. The fund, which plans to focus on making investments in the countries of the former Soviet Union, has already made two investments, both in Russian media companies.
The group has some experience in private equity field. It has two direct investment funds for the Russian financial sector– RenFin1 and RenFin2 (US$200m and US$154m respectively) and both are virtually invested. Furthermore, it is currently managing a US$32.5m pre-IPO fund and is considering raising another.
This experience in private equity investment, albeit on a small scale, undoubtedly played a part in the positive reception the new fund received. Also, Renaissance is one of the most prominent financial groups in Russia. It was founded in 1996 by the group of private investors including its current CEO Stephen Jennings.
The group consists of investment banking, asset management, merchant banking and consumer credit divisions and operates on the territory of Russia and former Soviet Union, and in 2006 launched operations in Sub-Saharan Africa with offices in Lagos and Nairobi.
In the wake of the Renaissance success, other local private equity players are not wasting any time hopping on the fundraising wagon. According to Hans Christian Dall Nygard, managing director of
Furthermore, two of the most established players in the Russian private equity market,
In comparison to US and Western European private equity, the industry in Russia is still playing catch up, but it is a market which is expected to develop quickly over the coming years. Regular private equity companies like Delta Capital or Barings Vostok Capital Partners compete (or sometimes co-invest) with local players like Nafta-Moskva or Renova, who mange the money of major Russian businessmen. Buyouts by large global funds have been almost non-existent with notable exception of a US$500m purchase of Nidan Soki, a juice drinks producer, by Lion Capital.
Carlyle group has twice opened and closed office in Russia and failed to raise US$300m Russia dedicated fund. Having made and successfully exited only one deal– Apoteka Holding, a pharmaceuticals distributor – the group won’t be returning for a while.
A recent notable exception to this trend is the US$800m investment of TPG Capital, the US LBO giant, into SIA International, a Russian pharmaceuticals distribution company. TPG is getting a 50% stake in the US$2.7bn revenue business.
All this shows an interesting trend emerging in the Russian market at a time when local mid-sized companies are finding it difficult to raise debt financing at reasonable terms due to the current credit crises, making private equity look a very attractive alternative.