Arx Equity Partners (“ARX”), the leading lower mid-market private equity firm focused on Central and Eastern Europe, has completed the € 102 M second close of its third fund, ARX III, on schedule to reach its € 125 M target. ARX III completed its € 83 M first close in October 2008 from a number of blue chip global financial institutions. ARX has been successfully investing in CEE since 1998.
The fund’s core focus continues to be succession-driven buyouts, where ARX has an established track record as a valued investment partner. ARX has a strong locally based team and has completed more buyouts to date than any private equity group in the CEE lower mid-market.
In recent years, CEE has become an increasingly attractive market for investment and, selectively, continues to offer risk-adjusted value creation opportunities. EU membership has brought financial stability for core CEE countries. The geographic proximity of CEE to the markets of Western Europe, coupled with highly skilled and lower-cost labour markets have contributed to rapid economic growth. In addition, the maturing legal and financial framework has enabled leveraged buyouts to become more established.
The lower end of the mid market offers a multiplication of investment opportunities compared to the larger end, with significantly less competition. ARX III has already made 2 investments; Kakadu, a leading Polish pet product retailer and Lexum, a healthcare business based in the Czech Republic. The fund will continue the proven investment strategy of previous funds, focusing on stable, cash-generative mid-market businesses across the CEE region. Equity investments in the fund will range between € 3 M – € 15 M, with deal enterprise values ranging between € 10 – € 50 M.
ARX, formerly known as DBG Eastern Europe, was sponsored by Deutsche Beteiligungs AG from inception through early 2008. ARX is now fully independent. Its first two funds, DBG I and DBG II raised € 46 M and € 67 M in 1997 and 2003 respectively. DBG I returned € 190 M net to investors, and ranks as one of the best performing funds in the CEE region. To date, DBG II’s current portfolio has demonstrated resilience to the current economic downturn, with no write-offs, limited write-downs plus three profitable full or partial exits.
Jacek Korpala, Co-Managing Partner, ARX commented:
„We perceive the current investment environment in CEE as particularly attractive for established investors who really understand the local market. Acquisition finance is still available in certain CEE countries, for lower mid-market deals, and while there are few alternative sources of exit liquidity, there are also a large number of business owners who have over-extended into non-core ventures. All of these factors play to our proven strengths.”
Brian Wardrop, Co-Managing Partner, ARX commented:
„We are delighted to have achieved the second close of ARX III, on target, and in an extremely difficult fundraising environment. Our ability to attract new investors, while continuing to maintain interest from investors in our earlier funds, shows the strength of our market leading track record, as well as the attractiveness of our investment model in the current environment. Even though ARX III is larger than our previous funds, we remain firmly focused on our target investment size and market, namely established small to mid-sized businesses across CEE.”