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Private equity investment in Central and Eastern European companies reaches record EUR3.5bn

Private equity and venture capital investment into companies in Central and Eastern Europe (CEE) reached a record EUR3.5 billion in 2017, new data from Invest Europe reveals.

With a 113 per cent year-on-year increase, this amount surpasses the region’s previous peak in 2008 by 40 per cent, 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 per cent. Polish companies were the big draw, receiving 71 per cent of the total amount, followed by those in Romania, Hungary and Latvia respectively.
“Record levels of private equity and venture capital investment into companies across Central and Eastern Europe are helping to create regional and global success stories,” says Robert Manz, Chair of Invest 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 region’s recent private equity-backed business successes include Avast Software, the Czech cyber security company which earlier this year listed on the London Stock Exchange in London’s biggest ever tech IPO. Polish grocery store chain Dino Polska grew rapidly to nearly 630 stores before its IPO last year on the Warsaw Stock Exchange. In March, Romania’s robotic process automation vendor UiPath was valued at over USD1 billion, more than ten-fold the company’s valuation when it last raised funding in April last year.
Romania was the EU’s fastest growing economy last year with an estimated GDP growth rate of 6.4 per cent, according to the European Commission. Poland, the Czech Republic and Hungary economies are also growing at a faster rate than major Western European countries. Of the 12 EU members forecast to grow GDP by 3 per cent or more in 2018, nine are Central and Eastern European countries.
Private equity fundraising in the market increased 46 per cent year-on-year to reach EUR1.3 billion in 2017, including a record EUR360 million for venture capital fundraising. European investors from outside Central and Eastern Europe provided 38 per cent of the total capital raised, while global sources of capital outside of Europe contributed 26 per cent, driven by US-based investors. Funds-of-funds were the leading source of capital at 31 per cent of the total, followed by government agencies at 26 per cent.
Company exits in CEE reached a total value of EUR1.3 billion, measured at historical investment cost, a year-on-year increase of 16 per cent and the region’s third highest annual divestment level. Secondary buyouts were the most utilised exit route with 38 per cent of the total value, followed by trade sales at 29 per cent.
The high level of private equity fundraising, investments 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 into European companies hit a ten-year high at EUR71.7 billion, a 29 per cent year-on-year increase. Almost 7,000 companies received investment, of which 87 per cent were small and medium-sized enterprises (SMEs).

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