Private equity and venture capital investment into central and eastern Europe (CEE) shot up last year, according to new statistics from trade body Invest Europe, reaching the highest level since 2009.
The total amount ploughed into the region in 2016 reached €1.6bn, with most money going to Poland. The Czech Republic, Romania and Hungary followed.
Consumer goods and services was the most targeted sector, attracting 23 per cent of the investment value, while information and communication technology (ICT) came a close second with 22 per cent.
“The region’s fund managers are hard at work maximising buying and selling opportunities, while institutional investors are showing renewed appetite for the region,” said Robert Manz, managing partner at Polish private equity firm Enterprise Investors.
CEE’s appeal shows no signs of slacking, according to Robert Knorr at London-headquartered firm Mid Europa. The figures for 2017, although not yet published, have already exceeded even 2016’s exceptional heights.
Private equity has struggled to keep sustained interest in CEE, as the scarcity of sizeable companies and historic political volatility has caused many investors to overlook the region. Until relatively recently, many assets were state-owned which limited their growth.
“Since the privatisation of the markets in the mid-90s, these assets have matured and consolidated,” said Ross Allardice, partner at law firm Dechert. He pointed to a group of eastern European beer brands which were sold to Asahi last year for €7.3bn, and online retail business Allegro which was bought by private equity firms Cinven, Permira and Mid Europa for $3.253bn.
The amount private equity and venture capital funding raised to invest in CEE also rocketed by 62 per cent between 2015 and 2016, to €621m. More than half of this came from European investors outside CEE.
Knorr warned against placing undue weight on the fundraising figure, since a large proportion of it was due to large funds returning to market. But a more interesting figure, he added, was that funding from outside of Europe – mainly the US – grew almost nine-fold.
After US investors withdrew from European funds in the wake of the financial crisis, they took their time coming back to CEE. But Knorr added that they are now realising that the region is “not that different” from western Europe, and the playing field is being evened out.