Although the private equity market was created 30 years ago it started to form in Poland in the early nineties and is still in the process of maturing. The capital is provided mainly by the companies originating from the Western Europe – from the institutional investors and pension funds.
In 2007 PE/VC investments in Poland reached EUR 747 mln, rising twice comparing to the year 2006. Innova, Entreprise Investors, Advent International and international players that entered Poland recently (Bridgepoint, EQT) are amongst the investors operating on the Polish market. In 2005 Penta Investments, one of the largest private equity companies in Central Europe run by 5 local partners through evergreen fund, started to invest in Poland.
What distinguishes Penta from other private equity funds operating in Poland is the evergreen fund. It means that Penta uses the only fund supplied by its 5 shareholders. This provides company with a huge flexibility in terms of buying and exiting deals. The typical PE fund is raised for a certain period of time and must be closed at the end of that period. Penta can behave based on the market situation and is not forced to sell its portfolio companies when situation is unfavorable. On the other hand, typical fundraising provides more resources for the acquisition than evergreen fund. However in the current credit crunch, when Limited Partners are becoming more constrained, fundraising is tough, while at the same time, number of funds are forced to close due to the expiration of their operations, though the market situation is not favorable for the sellers.
The second differentiation is the way how Penta approach value creation. Penta takes a very active part in managing the companies in its portfolio. It is not acquiring investments unless not persuaded that there exists a real value creation based on its own hands-on approach. Penta’s PE investments based on active value creation and not just on the financial engineering makes its portfolio less vulnerable on unfavorable market waves or crises like the current one.
Jozef Janov
Local Managing Partner in Poland