Proposed establishment of a fund that would make equity and equity related investments in central and eastern Europe. Its anchor presence and investment focus is in the Czech Republic, Hungary and Poland (the core countries). The fund would also invest in Bulgaria, Croatia, Estonia, Latvia, Lithuania, Romania, Slovakia, Slovenia and FR Yugoslavia (the non-core countries).
The Fund will make equity and equity related investments primarily in unquoted companies. Four main types of investment opportunities are targeted:
Expansion capital for businesses established after 1990: Successful local businesses established over the past 10 years and looking for expansion capital have reached the critical size for private equity investment.
Consolidation and asset redeployment: Traditional sectors still need significant consolidation and/or restructuring. Management Buy-out/Buy-in financing is therefore likely to be sought after.
Regional expansion: Companies are expected to consolidate regional positions or extend their country strengths across the CEE region.
Business skills improvement: Proven Western business concepts would be adapted to industries in investment countries with still underdeveloped market structures.
DBG II aims to continue to have a very active investment approach, introducing resources such as board representatives and transferring key skills that are designed to strongly increase the corporate governance and business standards of the investee companies. Investment decisions of private equity funds are regarded as increasingly based on the ability to introduce an experienced management team into the investee companies. This process has shown to develop a management culture and to help create a new class of entrepreneurs committed to rules of the market and corporate governance.
DBG II is expected to continue the policy of investing in innovative business concepts in the region that result in enhancing competition and/or increase the level of services in the market.
The Bank’s policy is also to support funds that foster private equity investments in intermediate transition countries. Supporting the development of DBG II aims to enhance local financial intermediation and create a more permanent capacity in the investment countries to import scarce equity capital for local companies.
Most of the factors discussed above are expected to have strong demonstration effects both locally and internationally. For example, the availability of capital to companies that accept active professional investors are likely to encourage local companies to behave in this manner. Further, the successful investment record of a fund management team generally encourages both domestic and foreign financiers to finance activities in these countries.
DBG Eastern Europe II L.P. (DBG II), a limited partnership to be established under the laws of England.
Up to €20 million of the capital of DBG II, but not more than 25 per cent of the Fund’s final closing.
The fund will have a target for all subscriptions of €80 million at final closing.
The Fund management will implement the EBRD’s Environmental Procedures for Private Equity Funds, which will facilitate the identification, mitigation and monitoring of environmental issues associated with investments across the region. The Fund management will further ensure that no investments are made in companies included on the EBRD’s Environmental Exclusion List. Investee companies will be required to adhere, at a minimum, to local/national health, safety and environmental regulations and standards.
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Text of the PIP