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CEE sees record private equity investment in 2017

EU

Private equity and venture capital investment in companies in Central and Eastern Europe (CEE) reached a record USD 3.5 billion in 2017, according to new data from Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors.

A 113% year-on-year increase, the amount surpasses the region’s previous peak in 2008 by 40%, according to the association’s Central and Eastern Europe Private Equity Statistics 2017 report, which also shows strong results across fundraising and exits.

The 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%, according to a press release sent to the Budapest Business Journal. Polish companies were the big draw, receiving 71% of the total amount, followed by firms in Romania, Hungary and Latvia.

“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,” said 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,” Manz added.

Examples of the region’s recent private equity-backed business successes include Avast Software, the Czech cybersecurity company which earlier this year listed on the London Stock Exchange in London’s biggest ever tech IPO.

Among other successes are Polish grocery store chain Dino Polska, which 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 USD 1 bln, more than ten times the company’s valuation when it last raised funding in April last year.

Fast-growing economies

Romania was the EU’s fastest-growing economy last year with an estimated GDP growth rate of 6.4%, according to the European Commission. The economies of Poland, the Czech Republic and Hungary are also growing at a faster rate than major Western European countries, noted Invest Europe. Of the 12 EU members forecast to grow GDP by 3% or more in 2018, nine are Central and East European countries, it added.

Private equity fundraising in the market increased 46% year-on-year to reach USD 1.3 bln in 2017, including a record USD 360 million for venture capital fundraising. European investors from outside Central and Eastern Europe provided 38% of the total capital raised, while global sources of capital outside of Europe contributed 26%, driven by U.S.-based investors.

Funds-of-funds were the leading source of capital at 31% of the total, followed by government agencies at 26%.

Meanwhile, company exits in CEE reached a total value of USD 1.3 bln, measured at historical investment cost, a year-on-year increase of 16% and the region’s third highest annual divestment level. Secondary buyouts were the most utilized exit route, with 38% of the total value, followed by trade sales at 29%.

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, says Invest Europe. Across the continent, total investment into European companies hit a ten-year high at USD 71.7 bln, a 29% year-on-year increase. Almost 7,000 companies received investment, of which 87% were small and medium-sized enterprises (SMEs).

Invest Europe, as the Brussels-based non-profit association representing European private equity, venture capital and global investors, describes itself as “the guardian of the industry’s professional standards, demanding accountability, good governance and transparency from our members,” claims the press release.

“Invest Europe aims to make a constructive contribution to policy affecting private capital investment in Europe,” it adds. “We provide information to the public on our members’ role in the economy. Our research provides the most authoritative source of data on trends and developments in our industry.”

Invest Europeʼs Central and Eastern Europe Private Equity Statistics 2017 report is free to download from the association’s website.

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