CEE/CIS Year-End 2017 Insight

Major transactions from experienced managers characterized the private capital industry in CEE and CIS in 2017, illustrating the continued maturation of the region’s private capital ecosystem. Most notably, regional veteran Mid Europa Partners completed the region’s largest deal on record, cooperating with Western European buyout firms Cinven and Permira to invest over US$2 billion in equity in Polish online marketplace Allegro. Experienced GPs also raised the majority of capital for the region, with CEE-focused Enterprise Investors and Abris Capital Partners raising follow-on funds of US$592 million and US$566 million, respectively. In contrast, Turkey-focused funds raised just US$25 million in 2017, a significant decline from last year’s US$824 million total. However, this drop likely reflects the relatively shallow pool of fund managers dedicated to Turkey rather than a sudden decline in LP interest in the country, especially given strong exit results in Turkey over the past year. Most notably, Turkven completed IPOs for Mavi Jeans and DP Eurasia in Istanbul and London, respectively, with plans for an offering of hospital network Medical Park in 2018. An uptick in public markets exits across CEE and CIS suggests that GPs may no longer have to default to strategic sales for liquidity going forward.

View all Year-End 2017 Data Insights here.

EMPEA on the Road: 3rd Annual Executive Briefing on Private Equity in Turkey and Environs

The 3rd Annual Executive Briefing on Private Equity in Turkey and Environs, which was held by Globalturk Capital in partnership with EMPEA, convened over 200 delegates from more than 100 countries and representing over US$1 trillion in assets. President Recep Tayyip Erdoğan emphasized in a written message that Turkey has not closed down but opened up further to the world and values the contribution of private equity and venture capital funds to the economy.

Addressing the audience of global investors, Erdoğan said: “Incubation centers, research centers, fast-growing private equity funds and the granting, incentive and aid mechanisms that support our state show the value that we give to entrepreneurship. On the other side, a growing number of our companies are partnering with international ones.” His message continued, “We attach great importance to the contribution of private equity and venture capital funds to the economy. Unlike classical investments, we know that the strong growth appetite of fund investments has coincided with our growth targets, which can lead to productive and profitable results for all parties. In this context, we’ll be offering investors many more possibilities besides the Sovereign Wealth Fund, which will soon start its operations. By simplifying the company startup process, we make it easier to invest and accelerate legal and administrative processes related to investments. We reduce foreign trade costs, which will facilitate the integration of investments into domestic and foreign markets.”

Read Globalturk Capital’s press release here.

UK General Election Impact on Brexit: Overview of Events for EM PE Funds

The UK has had its first general election since it voted to leave the European Union (EU) last year, just weeks ahead of the start of Brexit negotiation talks. The asset management industry continues to face a period of uncertainty whilst we wait to see how the UK/EU relationship will take shape, particularly what it might mean for UK and EU investor appetite for emerging market private equity funds. This article gives an update on the implications—if any—that the UK’s general election on 8 June 2017 has on Brexit and provides an overview of the current state of affairs.

Download the full article here. 

Response to Call for Evidence ESMA: AIFMD Passport and Third Country AIFMs

EMPEA respects ESMA’s mission to gather input on the key issues that will determine the orientation of ESMA’s opinion to the European Parliament. EMPEA is mindful of ESMA’s responsibility to submit an opinion to the European Commission on the following matters by 22 July 2015: 1) the functioning of the EU passport under the AIFMD; and 2) the functioning of the marketing of non-EU AIFs by EU AIFMs in the EU and the management and/or marketing of AIFs by non-EU AIFMs in the EU (under the national private placement regimes); and 3) whether the current passporting regime should be extended to the management and/or marketing of AIFs by non-EU AIFMs and to the marketing of non-EU AIFs by EU AIFMs. EMPEA has focused this submission on point 3. Our GP members with direct experience of points 1 and 2 note their strong agreement with EVCA’s submission on these points. We stand ready to provide whatever further contribution to this work the Commission might find helpful, including attending meetings and contributing further materials in writing.

Read EMPEA’s full submission and response here. 

EMPEA’s Response to HM Treasury’s Proposal

EMPEA welcomes the opportunity to respond to HM Treasury’s Proposal on using Legislative Reform Order to change partnership legislation for private equity investments (July 2015) and submits this response on behalf of its members.  In summary, EMPEA strongly supports the proposed reforms and believes that they will ensure the continued commercial viability of English and Scottish limited partnerships as private fund vehicles and, thereby, will improve the competitiveness of the United Kingdom as a jurisdiction of choice for (UK and foreign) private fund managers. In addition, we have reviewed the response prepared by the BVCA. We support and second that response.

Read EMPEA’s full response here. 

EMPEA Submission: BEIS Scotland Call for Evidence: Review of Limited Partnership Law

Limited partnerships are the vehicle of choice for private equity and venture capital funds, and both English and Scottish limited partnerships are commonly used to bring significant economic benefit in emerging markets across the globe.In summary, it is our view that, if limited partnerships are being used as an enabler of criminal activity, this should be tackled primarily using existing investigative and enforcement powers. Given the significant use of Scottish limited partnerships for legitimate enterprises, we would strongly advocate against increasing regulatory and compliance burdens on limited partnerships. In addition, we have reviewed the response prepared by the British Private Equity & Venture Capital Association (“BVCA”). We support and second that response.

Download EMPEA’s full response here. 

ESMA’s Latest Advice on AIFMD: Extending the AIFMD Marketing Passport to Non-EU Fund Managers

ESMA published Advice to the European Parliament, the Council and the Commission on the application of the AIFMD passport to non-EU AIFMs in July, 2015. On July 18, 2016, ESMA published its further Advice addressing the possibility of extending the AIFMD marketing passport to non-EU based fund managers, and the non-EU countries which could be able to benefit from the passport. In 2015 ESMA published advice on six non-EU countries, setting out that the AIFMD passport could be extended to Jersey, Guernsey and potentially Switzerland, but noting that further consideration was needed to be given to the US, Singapore and Hong Kong.

Read the full article here. 

Assessing Challenges and Opportunities for Private Equity in Russia and CIS

Private equity in Russia and the Commonwealth of Independent States (CIS) has been buffeted in recent months and years by successive political and economic crises, most notably currency depreciation, declining oil prices, economic estrangement from Europe and military conflict in Ukraine. Indeed, between 2014 and 2015 the Russian ruble depreciated significantly against the U.S. dollar, while crude oil prices fell from more than US$60 a barrel to less than US$40 a barrel (see Exhibit 1). In EMPEA’s 2015 Global Limited Partners Survey, Russia and the CIS was ranked as the least attractive emerging market region for investment in the coming years by limited partners. However, as many investors can attest, the best deals are often struck when markets are struggling rather than booming. During 2015, the consumer services and technology sectors showed particular promise, attracting the majority of both capital invested and the number of deals (see Exhibit 2). In this Views from the Field, veteran fund managers and investors in Russia and the CIS share their assessment of the state of private equity in the region and their outlook for the asset class going forward.

Read the full article here. 

Evaluating the State of the Venture Capital Market in Turkey with Cem Baytok, Managing Partner, idaCapital

The Turkish VC market is at the tipping point of major growth. In the last two years, noteworthy technology acquisitions have been completed (e.g., Germany-based online food delivery company Delivery Hero’s US$589 million acquisition of Turkey-based online food delivery company Yemeksepeti); Turkish entrepreneurs have shown success in Silicon Valley (e.g., Turkey-based online learning platform Udemy); and most importantly, a vibrant market economy has driven the emergence of new start-ups and helped them to create, on average, 10 to 20x enterprise value growth in Turkey, according to market analytics company Startups.watch.

Read the full article here.