Private equity and venture capital investment in Central and Eastern Europe (CEE) reached EUR 3.5 billion in 2017, new data from Invest Europe reveals after a 113 percent year-on-year increase. This figure surpasses the region’s previous peak in 2008 by 40 percent, according to the industry association’s Central and Eastern Europe Private Equity Statistics 2017 report, which also shows strong results across fundraising and exits.
CEE’s consumer goods and services sector attracted the majority of investment capital with three-quarters of the total, while technology (ICT) followed with 11 percent. Polish companies were the big draw, receiving 71 percent of the total amount, followed by those in Romania, Hungary and Latvia respectively.
“Record levels of private equity and venture capital investment in companies across Central and Eastern Europe are helping to create regional and global success stories,” said Robert Manz, CEO of CEE Europe’s Central and Eastern Europe Task Force and Managing Partner at CEE private equity firm Enterprise Investors. “International investors are drawn to the region’s attractive economic growth, strong consumer spending and private equity fund managers with proven ability to identify high-growth investment opportunities.”
Examples of the recent private equity-backed business success include Avast Software, the Czech cyber security company listed earlier this year on the London Stock Exchange in London’s largest ever tech IPO. Polish food chain Dino Polska grew rapidly to nearly 630 stores before its IPO last year on the Warsaw Stock Exchange. In March, UiPath’s robotic process automation vendor was valued at over USD 1 billion, more than ten times the company’s valuation when it last raised in April last year.
Romania was the EU’s fastest growing economy last year with an estimated GDP growth rate of 6.4 percent, according to the European Commission. Poland, the Czech Republic and Hungary are also growing at a faster rate than major Western European countries. Of the 12 EU members, GDP will grow by 3 percent or more in 2018, nine are Central and Eastern European countries.
Private equity fundraising in the market increased 46 percent year-on-year to reach EUR 1.3 billion in 2017, including a record EUR 360 million for venture capital fundraising. European investors from outside Central and Eastern Europe provided 38 percent of the total capital raised, while global sources of capital outside Europe contributed 26 percent, driven by US-based investors. Funds-of-funds were the leading source of capital at 31 percent of the total, followed by government agencies at 26 percent.
Company exits in CEE reached a total value of EUR 1.3 billion, measured at historical investment cost, and the year-on-year increase of 16 percent and the region’s third highest annual divestment level. Secondary buyouts were the most used exit route with 38 percent of the total value, followed by trade sales at 29 percent.
The high level of private equity fundraising, investment and exits in Central and Eastern Europe last year is just part of the success story for the entire European market. Across the continent, total investment in European companies hit a ten-year high at EUR 71.7 billion, and a 29 percent year-on-year increase. Almost 7,000 companies received investment, of which 87 percent were small and medium-sized enterprises (SMEs).