EBRD equity investment

• Author: Simen, A.
• Position: Dept. of Economic Sciences and Business Administration, Transilvania University of Brasov
• Pages: 163-168

Bulletin of the Transilvania University of Braşov • Vol. 5 (54) •No. 1 - 2012

Series V: Economic Sciences

EBRD EQUITY INVESTMENT

Antoneta SIMEN1

Abstract: The EBRD is the largest investor in private equity funds, mainly

focusing on growth and expansion in countries of operation. The significant

support to its private equity fund managers accelerates the development and

institutionalisation of the private equity industry in the region. For EBRD,

equity investments are made indirectly through regional and sector funds.

These funds are created by groups of investors, mostly private, to which the

EBRD participates with capital.

Key words: European Bank for Reconstruction and Development, EBRD,

investment funds, equity investment.

1 Dept. of Economic Sciences and Business Administration, Transilvania University of Braşov.

1. Introduction

In the transition countries of Central and

Eastern Europe, the State has not

participated directly in capitalization and

enterprise development, leaving it under

the private capital care. Existing banks

themselves suffered a profound process of

privatization and restructuring, were

unable to provide the necessary funds and

external financing was quite low. The high

interest rates and increased risk of new

private enterprises made it difficult the

financing from credits only. In this context,

the EBRD created a new opportunity to

support transition by equity investment.

This form is addressed to companies which

prefer the maturity and interest free

financing, benefiting from a transfer of

management.

In practise, EBRD equity investment

takes many forms: direct equity

investment, investment funds, post

privatisation and restructuring funds.

2. Investment funds

The achievement of a larger number of

direct equity investments raises the

question of insurance representatives in the

management of companies, as the EBRD

intends to hold control package together

with strategic partners. This problem was

solved by promoting investment funds

with other partners.

Investment funds are legal entities

formed by the association of several

investors that manage capital for placing

the purchases of shares in private

companies. The main investor is usually a

credible financial intermediary

(commercial or development bank, capital

investment company) or a strategic

investor.

Its management is entrusted to a manager

who is usually represented by a team of

experts or a specialized firm.

Investment funds have expanded rapidly,

competing with the credit system in the

medium and long term.