Financial Times | The rising trend in private equity investments in the Czech Republic
|10. 7. 2014
Jakub Vagner, the most famous fisherman in the Czech Republic and a household name, makes for an unlikely target for private equity investors.
But then again, Robert Schonfeld, a former banker whose family happens to own the largest collection of fishing lakes in the northwest of the country, is not your typical private equity investor.
The resulting company, Jakub Vagner Rybarstvi, is the product of one of the most innovative strategic private equity deals in the central Europe region this year. But the pair’s fishing business is reflective of a rising trend in private equity investments in the Czech Republic, as investors who got their fingers burnt in the global financial crisis are more circumspect with their money, and put their capital into businesses they understand.
“People learned their lessons. Investors are starting to look far more at fundamentals,” says Daniel Heler, member of the board of directors at Ceska Sporitelna, the Czech Republic’s largest bank by deposits. “People want to see the individual quality and potential of each specific investment. Strategic buyers will have certain advantages from knowing the potential target.”
The Czech Republic is the second-largest private equity market in central and eastern Europe (CEE), trailing only Poland with almost €135m worth of investments last year, according to the European Venture Capital Association (EVCA). That represents a 27 per cent increase on 2012, bucking a 20 per cent fall across the wider CEE region, but is still just a fraction of the €1.4bn invested in the heady days of 2009.
“Although the statistics look rather negative, what we are seeing is that there was a period of uncertainty . . . but now dealmaking appetite is increasing,” says Ivan Jakubek, vice-president at Enterprise Investors, one of the region’s largest private equity managers.
“This is too small a country to make large deals. Instead, you need to be closer to the entrepreneur to understand what the business is, and talk the local language to be able to make the deals,” says Mr Jakubek, whose company recently exited AVG, the Czech software firm now listed in New York, after a nine-year investment.
Mr Vagner and Mr Schonfeld certainly speak the same language.
A chance meeting with Mr Vagner’s father brought the two men into contact, just as the fisherman was weighing up his options to turn his passion into a multi-faceted empire. “This is more than just business for both of us. You put your heart where you normally just put numbers,” says Mr Schonfeld, chief executive of RSBC Private Equity.
Mr Vagner says: “It is about passion for me. I see straight away if someone brings passion and money. Or just money. I needed to find someone who knows business, and knows the space.”
Determined to become a famous fisherman since he was seven, Mr Vagner slept rough in Australia and worked odd jobs in restaurant kitchens before landing a position on a television fishing series. Today, he has contracts to make programmes for the National Geographic and Discovery channels, and is stopped on the street everywhere he goes in the Czech Republic.
The two men aim to create a fishing empire in the country, with clubs and locations for sports fishing, and holiday resorts for more leisure fishermen, alongside shops and a fish breeding business. The venture will seek further funding through a private bond placement, according to people with knowledge of the situation, and expects to be fully operational within two to three years. “I see private equity as the right model for smaller ideas in this space, that would otherwise be dependent on more volatile sources of funding,” says Mr Schonfeld.
Nearly 90 per cent of the private equity capital invested in the Czech Republic last year went into buyouts, according to the EVCA, underlining the trend towards strategic buys, rather than speculative investments.
Exit values, however, fell last year, as the absence of a large, blue-chip disposal saw the total value drop 75 per cent to just over €170m. But the number of exits increased, thanks partly to renewed appetite for public listings.
After the financial crisis, international private equity giants that had made inroads into the Czech market took to their heels, says Mr Jakubek at Enterprise Investors. But as the market begins to recover, and capital remains cheap and easy to access, they are returning, sometimes alongside developing regional and local outfits.
The country’s standout information technology sector is often a target. This year, global private equity heavyweight CVC Capital Partners bought a large stake in Prague-based IT security company AVAST, in a deal that valued the company at $1bn.
That followed a string of IT deals in 2013, including investments in Czech online travel portal Invia.cz and software company Futurelytics.
“Technology companies and IT companies are where people are looking now,” says Ceska Sporitelna’s Mr Heler.
“People are cautious but . . . volumes are going up. There is still plenty of money to be invested, and there are plenty of opportunities.”