Private equity fundraising for CEE falls by three-quarters in 2015

Private equity fundraising for CEE falls by three-quarters in 2015
By bne IntelliNews August 31, 2016

Private equity fundraising for Central and Eastern Europe (CEE) fell by almost three-quarters in 2015 to €418mn, indicating that the big increase in fundraising in 2014 was temporary, before sentiment towards the region soured again with Russia’s continuing incursions into Ukraine.

However, the report issued on August 31 by Invest Europe (the new name for the European Venture Capital Association) and law firm Gide Loyrette Nouel also shows that PE activity inside the region remained brisk, with investments up 25% to €1.66bn, the highest since 2009, and exits down 2% to €1.2bn, still the third highest ever. All figures exclude Russia.

“Last year’s increase in regional investment activity, at a new post-financial crisis high, points to a healthy and evolving market,” said Robert Manz, managing partner at Poland’s Enterprise Investors and chairman of Invest Europe’s Central and Eastern Europe task force.

Larger firms held back from trying to raise new funds in 2015 because of the Ukraine crisis, emerging market turbulence and the stalling of privatisation programmes in Southern Europe.

Fundraising had more than tripled in 2014 to €1.57bn, by far the highest figure since the global financial crisis. But in 2015 fundraising fell 73% to the below €1bn range it has moved in since 2009, at less than 2% of all European fundraising. Buyout fundraising was down 91% to €107mn, though venture capital fundraising was almost flat at €166mn, representing 40% of all CEE fundraising.

PE firms focused instead on using existing funds to make investments, as well as exiting investments, many of them made in the boom years before the global financial crisis.

Buyout investments increased by 36% to €1.3bn, representing 78% of all investments. Poland accounted for 54% of the total, boosted by CVC’s acquisition of PKP Energetkya. Mid Europa’s investment in Danube Food Group put Serbia in second place again, with 14% of all investments.

Venture capital investment was down 16% at €84mn, but the number of deals was almost stable at 222, close to the record last year of 228. Hungary was again the most active market, with 57 deals worth a total of €25mn, 30% of the CEE total value.

There were a record number of PE exits at 97, boosted by a doubling of venture capital fund disposals. Poland was again the leader, with 65% of all exits by value (at historical investment cost), followed by Bulgaria with 14%.

CEE private equity investment still represents just 3.4% of the European total, with venture capital investment just 2.2%. Investment reached almost 0.2% of CEE gross domestic product (GDP), compared to 0.3% in Europe as a whole (Serbia’s influx made it one of the highest achievers in Europe at almost 0.7% of GDP).