Strategic Acquisitions in a Favorable Market: MCI Capital Capitalizes on Low Liquidity and Valuations
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Market favors buyers
Funding in the PE/VC industry has fallen sharply since the Fed began raising interest rates. Silicon Valey Bank estimates that in 2Q23, raising new financing in the PE (buyout, growth) space fell by 24% y/y, and in the VC space by as much as 64% y/y.
The number of U.S. IPOs in 2023 is below the level of a year ago, not to mention an 86% drop from the 2021 level. MCI Capital's management believes this market environment is a good time to invest due to low liquidity and valuations.
In November, the company announced its first major transaction in a long time - the acquisition of a controlling stake (65% of shares) in the Krakow-based Webcon for PLN 163m, and in December the acquisition of 80% of Focus Telecom Poland for PLN 80m.
Risks for our forecasts and valuation
Main risk factors for our valuation are limited portfolio liquidity, high concentration of portfolio investments. Our valuation is equally based on NAV (PLN40.7/share) and peers valuation to the other PE funds (PLN35.3/share) and at a 9-month horizon implies a valuation of PLN 40.3.
