#Romania #Growth Fund #Fund II #Bucharest #Morphosis Capital

Morphosis Capital Launches Fund II

Morphosis Capital Partners BV, a prominent growth capital fund, has officially launched its second fund, Morphosis Capital Fund II, with a remarkable €100 million in committed capital. This ambitious financial milestone reflects the positive track record of their predecessor fund, which was established with approximately half that amount. This initiative underscores Morphosis Capital's commitment to bolstering small and medium enterprises (SMEs) in Romania and the surrounding region, particularly in critical sectors such as healthcare, B2B services, consumer goods, retail, and niche manufacturing.

A Leap Forward in Investment Strategy

The new fund is a significant leap forward, doubling the investment capacity compared to the first fund. According to Andrei Gemeneanu, managing partner at Morphosis Capital, the successful outcomes of their initial fund, which led to six strategic acquisitions in high-growth sectors, have paved the way for this new endeavor. The increased capital will enable Morphosis to facilitate rapid growth for businesses, unleash their full potential, and foster the long-term development of the entrepreneurial ecosystem throughout Central and Eastern Europe.

With a strong internal rate of return (IRR) exceeding 30% generated by the previous fund, the path forward looks promising. As the first fund is reaching maturity, Morphosis is optimistic about uncovering further lucrative exit opportunities, thus strengthening its reputation as a reliable partner for both portfolio companies and investors.

Investment Focus and Areas of Expansion

Morphosis Capital Fund II aims to execute 9 to 10 investments, each ranging from €10 to €15 million. In contrast, the inaugural fund executed six investments valued between €5 and €10 million. The strategy is primarily centered on Romanian companies but also opens doors to other regional markets including Bulgaria, Croatia, the Czech Republic, Poland, Slovakia, and Slovenia.

Targeting companies with EBITDA between €1 and €5 million, Morphosis will pursue majority stake acquisitions either independently or in collaboration with co-investors. This strategy signifies the first regional expansion effort for Morphosis, which previously focused solely on Romanian investments. To implement this new strategic direction, the team is expanding from 8 to 12 members in 2024.

The nearly doubled fund size and increased ticket sizes from the first to the second fund illustrate the solid performance of the initial fund, which has significantly enhanced investor engagement and trust.

Targeting Growth and Strong Performers

In selecting companies for its portfolio, Morphosis Capital is keen on businesses that operate in fast-growing markets within fragmented industries. They emphasize firms with the potential for growth through organic means or through acquisition strategies. The fund also prioritizes financially sound enterprises, robust organizational cultures, and strong merger and acquisition prospects.

Morphosis Capital Fund II has already completed its first two investments: one in Mark Twain International School (MTIS), Romania's first private institution offering a dual curriculum, and another recently closed deal with the local supermarket La Cocos in December 2024.

This capital initiative is co-financed by Romania's National Recovery and Resilience Plan and the European Union's InvestEU fund, which is managed by the European Investment Fund (EIF) to support investment funds. The EIF, a principal investor in Morphosis's first fund, remains a vital player in promoting SME growth in Romania and the wider region.

Additionally, Morphosis Capital has garnered funds from the European Bank for Reconstruction and Development and a commitment from the International Finance Corporation. This achievement positions Morphosis as the first private equity fund focused chiefly on Romania to attract capital from three major international financial institutions.

The fund has also secured the confidence of several local and international family offices, including Vybros Capital Partners and Inspire Asset Management based in Belgium, thereby further diversifying its investor base. This operation is financed as part of the European Union's NextGenerationEU initiative with the support of the Romanian government.

In summary, Morphosis Capital Fund II stands as a beacon of growth opportunity, strategic investment, and a pathway for the entrepreneurial ecosystem in Romania and beyond.