Advent International rapidly brought its second Central Europe fund to a first closing on $80 million (ecu 74 million) early this year. Joanna James, the new managing director of the group’s Central Europe team, said Advent International has already received “serious indications of interest” that would take the fund to its original target of $150 million (EVCJ October/November 1997, page 30) and is optimistic about reaching the cap level, now set at $200 million. A further closing is expected in April.
The bulk closed to date has come from investors in the first Advent Private Equity Fund – Central Europe fund, which raised $58 million in 1995. One major new investor, a Dutch pension fund which is also a participant in Global Private Equity III, has also signed up. Going forward, Advent International is concentrating on fund raising in Europe and the US. In Europe, Joanna James said, UK and Dutch investors were manifesting most interest in the offering. She also noted considerable enthusiasm among US pension funds this time round, a development Advent International finds very encouraging, since none participated in the first Central Europe vehicle.
The first fund was raised for investment in Poland, Hungary, the Czech Republic and Slovakia. Its successor has an enlarged geographical focus, taking in Croatia and Romania as well. In parallel with this expansion of its regional coverage, Advent International is extending its network of affiliates in the target countries. Copernicus Capital Management in Poland, Rozvojovy Kapital in the Czech and Slovak Republics and Equinox Capital Management in Hungary have been joined by CCP Capital. CCP Capital is now in the process of raising the Adriatic CCP fund, Croatia’s first private sector venture capital fund (EVCJ December 1997/January 1998, page 13). Advent is also in the process of forming a joint venture with Creditanstalt in Romania. Altogether, these local affiliates will have a total of $75 million or more under management through their satellite funds. Investments are co-ordinated between Advent International and its affiliates: smaller deals are usually split relatively evenly between the umbrella regional fund and the local vehicles while, for larger deals, the regional vehicle provides a higher proportion of the capital.
As Joanna James made clear in a recent interview with EVCJ (Cover Story, December 1997/January 1998, page 19), demand for development capital throughout Central Europe is extremely high, and the new fund, like its predecessor, will focus primarily on expansion situations.
Advent’s first Central Europe fund is now over 60% disbursed. Investments include: the food production and processing groups Csavai Konservgyar and Hajdu Bet, plus the systems integration business Synergon, in Hungary; Star Foods and Warsaw Distribution Center in Poland; the Ciuc brewery in Romania; and US emerging markets specialist Internet Services, Inc. Two further investments, Euronet Services and @entertainment, achieved Nasdaq IPOs last year, and a further realisation from the Central Europe portfolio is expected during the early part of 1998.
Because of the higher perceived risks of investing in Central Europe, Advent international is offering investors returns several points higher than they would expect from established markets”, Joanna James said, confirming that realisations to date have easily outperformed these targets.