BY Fraser Tennant
A vibrant market typified by strong interest from GPs and LPs, Central and Eastern Europe (CEE) companies saw private equity (PE) and venture capital investments totalling €1.6bn in 2016 – the highest since 2009 – according to new data.
In its ‘Central and Eastern Europe Private Equity Statistics 2016’ report, Invest Europe reveals that the CEE region’s total PE fundraising amount rose 62 percent year-on-year to €621m in 2016, as larger fund managers returned to the market, and in line with a Europe-wide increase in fundraising for the asset class.
In addition, European investors from outside the CEE region provided 58 percent of the total capital raised, while funding from investors outside of Europe grew nearly nine-fold, particularly from the US. Long-term private investors contributed 43 percent of the overall fundraising amount, with funds-of-funds the largest source of capital, accounting for 27 percent, followed by pension funds with 16 percent.
In terms of investment capital, 2016 was mostly focused on Poland, followed by the Czech Republic, Lithuania, Romania and Hungary respectively. The most targeted sector was consumer goods and services, which attracted 23 percent of the investment value, while information and communication technology (ICT) followed on 22 percent.
“PE activity in Central and Eastern Europe was strong in all key areas last year,” said Robert Manz, managing partner at Poland’s Enterprise Investors and chairman of Invest Europe’s CEE Task Force. “Investments, divestments and fundraising all demonstrated a vibrant market with robust interest from GPs and LPs.
The report also notes that the total number of companies divested in CEE increased to a record high of 112 in 2016, mainly driven by exits of venture-backed companies. Furthermore, sale to another PE house – the secondary market – became 2016’s most utilised exit route in terms of amount, accounting for €476m of value at historical investment cost and 46 percent of the region’s total divestment value.
Finally, trade sale remained the most common route in terms of the number of companies divested at 37. Poland was the largest market in the region for exits, at 35 percent of divested amount at cost, followed by the Czech Republic, while ICT was the region’s most important sector for divestments, including two out of the four largest exits last year.
Mr Manz concluded: “The region’s fund managers are hard at work maximising buying and selling opportunities, while institutional investors are showing renewed appetite for the region.”