The Polish Development Fund, through PFR Ventures – a fund of funds investing in venture capital and private equity markets, has invested EUR 10 million in the Polish Avallon MBO III Fund.

Avallon, specializing in management buyouts, is just about to finish collecting the third fund, under which it raised over EUR 80 million for investments last year.

In 2021, the new fund plans to conduct at least four new deals, working at the same time on exits from several companies from the previous funds.

PFR Ventures, which belongs to the Polish Development Fund, has just announced a new investment in four private equity funds, including the Polish Avallon MBO Fund, financed with the amount of EUR 10 million.

Avallon is a pioneer in the management buyout market in Poland. For 2021, the fund has planned to spend at least EUR 40 million on new portfolio companies. The money obtained from PFR Ventures will support the implementation of these plans.

– We expect 2021 to be the busiest and most interesting year in our 20-year history. Our goal for the coming months is to conduct at least four investments. It is the result of both hard work last year, the effects of which we are currently expecting to see, as well as the constant influx of new projects, caused especially by problems companies have with succession or the desire to consolidate – comments Tomasz Stamirowski, managing partner at the Avallon Fund.

Individual transactions which Avallon supports usually amount to EUR 10-15 million. Among others, the fund tends to look at entities representing the healthcare sector, where it sees a lot of room for consolidation. Also, companies providing services related to e-commerce, as well as entities from the consumer goods sector and IT industries may represent promising clients .

– We are pleased with the support of PFR Ventures – assures Tomasz Stamirowski. – It is one of the few Polish institutional investors in private equity, while worldwide over 50% of smaller funds capital are made up of  domestic investors. It is a pity that for regulatory reasons in Poland there are no investments of pension funds, which are one of the main providers of long-term capital worldwide.

As Tomasz Stamirowski explains, it is extremely important for the money of Polish investors to work on the market, because such a situation is of  benefits to the entire national economy. He points out that returns on private equity transactions are very good when compared with other asset classes, and it is worth taking advantage of. For example, looking at the evaluations of Avallon companies at the end of last year, the previous fund provided investors with a net return of nearly 20%, even despite the negative impact of the Covid-19 pandemic.

– In my opinion, both the inflow of funds caused by low interest rates and the activity on this market will be increasing from now on. Many owners, considering the current situation, prefer to talk to a financial investor who is able to quickly and efficiently close a buyout or provide funds for consolidation. We can also observe an increased activity and interest in transactions on the part of experienced managers – he says.

The expected increase in project activity is to some extent the result of a downtime period in the 2020 transaction market, especially in the area of ​​mid-sized companies. Many companies not benefiting from the pandemic were focused on stabilizing the business in the wake of the crisis, rather than talking about capital investment. However, this approach changed at the end of last year, when the number of mergers and acquisitions increased significantly. This trend should accelerate further this year.

There are currently 10 companies in Avallon’s portfolio. The last investment, already completed under the third fund, is Clovin – a company dealing in the production of cleaning products. Currently, the fund also has two companies representing the food industry in its portfolio – Ceko and Wosana. There are also EBS, dealing with security systems, Stangl Technik, providing installation services, MPS International, a producer of cosmetics and packaging, the EDC Expert marketing company, and the Marketplanet purchasing platform, as well as Novo Tech, dealing with the processing of polymers, and Zaberd –  the road infrastructure industry company.