Private equity fundraising for Central and Eastern Europe (CEE) hit the highest annual level in a decade in 2018 with EUR 1.8 billion, according to new data from Invest Europe.
Buyout funds in CEE raised EUR 1.1 billion, while the region’s venture capital funds attracted over EUR 500 million for the second year in a row, reveals Invest Europe’s 2018 Central and Eastern Europe Private Equity Statistics report, released today.
Private equity investment into companies across CEE reached EUR 2.7 billion in 2018, the second-highest amount ever achieved, following 2017’s record EUR 3.5 billion. The number of companies backed increased by 50% year-on-year to almost 400, also the second-highest level on record. This was driven by a sharp increase in CEE companies supported by venture capital.
The number of private equity and venture capital-backed exits in CEE reached an all-time high of 128 companies divested in 2018. This represented a total value of over EUR 1 billion for the fifth year running, measured at historical investment cost. Poland accounted for over half of this total exit value with EUR 575 million.
“The strong levels of private equity fundraising, investment and exit activity in Central and Eastern Europe in 2018 demonstrate that the region continues to develop as an attractive investment destination,” said Robert Manz, Chair of Invest Europe’s Central and Eastern Europe Task Force. “Global investors see that private equity and venture capital investment is one of the best ways to access the region’s robust markets and high-growth companies.”
All countries in the CEE region covered by Invest Europe’s report surpassed the European Union’s 2.1% GDP growth rate in 2018, according to data from the International Monetary Fund (IMF). Eight of the countries achieved annual growth above 4%, with Poland, Hungary and Latvia experiencing particularly high growth rates, reaching 5.1%, 4.9% and 4.8% respectively.
As in prior years, CEE private equity investment activity in 2018 was concentrated in a few countries. Poland remained the leading destination with 32% of the region’s total investment value, followed by the Czech Republic (29%), Hungary (13%) and Romania (12%). Hungary again saw the largest number of companies receiving private equity investment in 2018 at 191, or 48% of the CEE total.
Poland saw CEE’s highest amount of private equity investment with its companies receiving EUR 850 million in total last year. The Czech Republic was close behind with EUR 767 million invested into its companies via private equity and venture capital funds.
The annual investment results in the region and in individual countries can be influenced by large single investments in particular markets. In 2018, the five largest investments accounted for 54% of the total regional amount invested and took place in the Czech Republic, Hungary, Romania, Poland and Estonia. By comparison, in 2017 just the two largest transactions (both in Poland) accounted for 57% of the total investment amount.
The biotech and healthcare sector took the highest share of CEE’s private equity investment with 32% of the total value in 2018, while consumer goods and services companies received 27% of funding. The region also has strong technology start-up credentials, including Czech cyber-security group Avast which was 2018’s largest tech initial public offering (IPO) on the London Stock Exchange at a valuation of £2.4 billion. Meanwhile, Romania’s robotic process automation firm UiPath achieved a EUR 7 billion valuation during a funding round earlier this year, making it one of the world’s most valuable artificial intelligence companies.
Poland was again the region’s largest market for exits in 2018 with EUR 575 million of divestments at cost – 52% of the CEE total – and the highest number of companies exited at 43, or 34% of the total. The Czech Republic was the second most active country by value of exits, with EUR 182 million at cost, or 16% of the regional total. Hungary ranked third, accounting for EUR 116 million of exits at investment cost, or 11% of the total. The results in both the Czech Republic and Hungary were mainly driven by one large transaction in each market. Hungary ranked second in number of companies exited with 29, or 23% of the regional total. Romania was in fourth place in value of exits with EUR 90 million (8% of total). The four countries mentioned above accounted for 87% of the total CEE divestment value at cost and 67% of the total number of companies exited in 2018.
Hungary was the leading destination for venture capital investment in CEE in 2018 with €71 million, an all-time high for the country, accounting for 44% of the regional VC segment total. The country also took the lead in terms of number of companies, with a record 183 companies receiving VC funding, representing 61% of the total number of all CEE VC-backed companies. Poland followed with €36 million, or 22% of the regional total, invested into 35 companies, representing 12% of the CEE total. Together, these two countries accounted for 67% of the CEE region’s total venture capital investment by amount and 73% by number of companies. Information and communication technology (ICT) companies in CEE continued to receive the most VC funding, with a 19% year-on-year increase to €89 million invested into 131 companies.
ICT accounted for 56% of the region’s total venture investment by value and 44% by number of companies. Consumer goods and services was second, tripling in value to €25 million, invested into 55 companies. It accounted for 15% of the region’s total VC investment by value and 18% by number of companies. These two sectors together accounted for 71% of the total venture investments in CEE in 2018 by value and 62% by number of companies. Following these sectors, transportation recorded €12 million of investment into 12 companies, while business products and services saw €10 million invested into 42 companies.
Poland was again CEE’s most active buyout and growth market in 2018 with €815 million invested into 37 companies, accounting for 32% of the segment’s annual value in the region. The Czech Republic followed with €753 million, comprising 30% of the region’s total, invested among seven companies and driven by one large transaction. The next most active countries were Romania (€310 million) and Hungary (€275 million), where the results were also driven by a large transaction in each country. Notably, Estonia saw €145 million of buyout and growth investments in 2018, the country’s largest recorded amount, also driven by a single large transaction. These five countries combined accounted for 91% of the 2018 CEE buyout and growth segment by value and 68% by number of companies.