Following the global financial crisis, and hand in hand with the economic recovery, Central and Eastern Europe has been put back on the map of private equity investment. Poland has shown the most potential in this respect, which is no surprise given the fact that the Polish economy experienced considerable growth, even during the crisis.
“Private equity activity in Central and Eastern Europe was strong in all key areas last year — investments, divestments and fundraising — demonstrating a vibrant market with robust interest from GPs and LPs”, said Robert Manz, Managing Partner at Poland’s Enterprise Investors and Chairman of Invest Europe’s (a private equity investment association) regional task force. “The region’s fund managers are hard at work maximising buying and selling opportunities, while institutional investors are showing renewed appetite for the region”, he added.
Private equity investments have poured into the Central and Eastern Europe region and reached a total of €1.6 billion in 2016, the highest amount since the global financial crisis. Invest Europe’s data reveals that total venture capital fundraising reached €621 million, a 62% increase since 2009. In 2016, the total number of companies that divested increased to a record high of 112.
In 2016, investment capital was most focused on Poland, followed by the Czech Republic, Lithuania, Romania and Hungary. Consumer goods and services was the most targeted sector, attracting 23% of the total investment value, while information and communication technology (ICT) was a close second with 22%.
As data shows, larger fund managers, in line with a Europe-wide increase in fundraising, returned to the CEE market by 2016. European investors from outside the CEE region provided 58% of the total capital raised, while funding from investors outside of Europe, primarily from the US, grew nearly nine-fold compared to the crisis years. Long-term private investors contributed 43% of the overall fundraising amount, with funds-of-funds by far the largest source of capital (27%), followed by pension funds (16%).
The number of companies divested in CEE also increased to a record high of 112, mainly driven by exits of venture-backed companies. Sales to another private equity houses was 2016’s most utilised solution for exits. Poland was the largest market in the region for exits, followed by the Czech Republic. ICT was the region’s most important sector for divestments in terms of both amount and the number of companies.