In 2018, the Czech private equity and venture capital (PE/VC) market was about divestments and fundraising. The number of divestments doubled year-on-year, and the volume of new funds raised from investors amounted to EUR 200 million, which is the highest figure in the past 11 years. At the same time, fewer new investments were made in 2018 than in 2017. However, their number has been consistent in recent years. These are the results of the CVCA 2018 Private Equity Report, which was jointly prepared by Deloitte and the Czech Private Equity & Venture Capital Association (CVCA).
The sale of Zentiva by Sanofi-Aventis to Advent International, a multinational PE fund, turbo-charged equity deal values for 2018. “While this mega-deal served as a useful reminder of the strong, sizeable businesses the country can turn out, the Czech market is a mid-market one, and overall activity was subdued for 2018. This may be on the back of dampened economic confidence given the gentle softening of the country’s GDP growth; it could also be deal-doers exercising discipline in a high-valuation market,” says Dušan Ševc, a partner at Deloitte’s Financial Advisory function.
The strengthening activity of local funds and the weakening presence of international funds is visible in the structure of transactions. In addition, local funds place a greater focus on small and medium-sized businesses. “They employ more than 58% of all employees and create 55% of the gross added value generated in the corporate sector. This is why we not only see an opportunity but also a deep sense in making investments in small and medium-sized businesses. At the same time, we believe that diversity in decision-making processes and corporate governance may yield extraordinary results,” says Andrea Ferancová Bartoňová, the found of the ESPIRA Investments fund.
Compared to last year, the value of divestments has significantly increased. A total of nine divestments were made in the total volume of approximately EUR 180 million. “Funds’ behaviour is completely rational in that, at a time when the market is keenly interested in purchasing, they sell portfolio businesses in respect of which they have already exhausted their potential, thereby generating greater profits for their investors. Of course, in this context their situation in seeking new investments is much more difficult,” adds Zuzana Picková, the CVCA’s CEO.
Last year also saw a record level of funds raised by Czech PE/VC funds. Their fundraising amounted to almost EUR 200 million, which is the highest figure in the past 11 years. “We are pleased about what would have been practically inconceivable as recently as five years ago. Domestic funds are now regularly able to raise funds from domestic entities, including many different types from institutions to individual investors,” says Jaroslav Sopuch, the founder of the SkyLimit Industry PE fund.
Sings of economic slowdown can not only be seen in the Czech Republic, but also in Central European investors’ expectations. According to the most recent Deloitte Central Europe Private Equity Confidence Survey, the Central European private equity market is reverting to a steady inflow of medium-sized deals.
“The year-on-year decline in acquisitions in Central Europe is offset by an increase in divestments. This is probably owing to the fact that a period of high valuations that does not favour investments to such a degree is the right time for a ‘harvest’,” concludes Dušan Ševc.
The CVCA 2018 Private Equity Reportis based on data collected by Invest Europe, a European PE and VC association, that are the most representative in the PE/VC segment. To view the report, follow this link.
For the conclusions of the Deloitte Central Europe Private Equity Confidence Survey, visitthis link.
The Czech Private Equity & Venture Capital Association (CVCA) represents the interests of entities engaged in private equity and venture capital in the Czech Republic. Its members include firms making private equity and venture capital investments (regular members) and entities that provide advisory services in respect of private equity and venture capital (affiliated members). The CVCA is a members of Invest Europe (formerly known as EVCA, European Private Equity & Venture Capital Association) and works closely with other associations (namely from the CEE region) through a network of national associations united under Invest Europe.