CEE deal flow up, fundraising down

While private equity firms backed more companies in Central and Eastern Europe than last year, deal volume was down by nearly 20%, according to an EVCA study.

Deal flow in Central and Eastern Europe was up by 13 percent last year, compared to 2011, fresh research has shown.  

Last year, a total of 220 companies received private equity backing in the CEE region, compared to 195 in 2011, according to a CEE study by the European Private Equity & Venture Capital Association (EVCA). 

While private equity investments in the CEE region remained above €1 billion in 2012, investment volumes decreased by 19.2 percent compared to 2011. This was similar across Europe, where investment volumes dropped by 18.7 percent to reach €36.5 billion. 

Additionally, fundraising levels for Central and Eastern Europe dropped by 28 percent last year, the study found. This was partly because a number of fund managers who had raised capital during the 2006 and 2008 period had not returned to the fundraising market yet in 2012, or had not yet completed fundraising during the year. 

Furthermore, fundraising took more time to complete compared to fundraising rounds before the global financial crisis, EVCA said. The decrease in fundraising was in line with Europe overall, where fundraising dropped by 43 percent in 2012 compared to 2011, the study noted.  

In May, Warsaw-based Enterprise Investors reached a €314 million final close on its Polish Enterprise Fund VII, below its original target of €650 million. In March, Abris Capital Partners reached its hard-cap of €450 million on Abris II, exceeding its original €400 million target, despite the fact it has not done any exits from its debut fund.  

Mid Europa Partners is currently in market raising Mid Europa Fund IV, which has a €1 billion target, slighlty lower than its €1.53 predecessor. The reduced target size is because the average deal size in CEE has reduced as well, a source told PEI recently. “The structure of the Central and Eastern European private equity market has changed towards buy-and-build opportunities which are in the €75 million to €100 million ticket range, whereas before [the economic crisis] it used to be around €150 million,” the source said.  

PEI recently went to Warsaw to conduct an in-depth roundtable with CEE private equity insiders – premium subscribers can click here to read the interview.