Central Eastern Europe Diamonds in the rough


Pronczuk is one of the three managing partners. He specialises in the financial services, IT and construction materials sectors, and is responsible for Enterprise’s operations in the Czech Republic.

Anne Fossemalle, EBRD
Anne Fossemalle has been in charge of EBRD’s investments in equity funds since 2009. Previously, she was responsible for EBRD’s direct investments in banks. She joined EBRD from Natixis.

Potter is a partner at Alpha Associates. He has been investing in private equity funds and companies in Central & Eastern Europe and Russia/CIS since 1992. He joined Alpha Associates in September 2008 from the European Bank for Reconstruction and Development (EBRD) where he was a senior banker.

Conlon is the global co-head of international private equity, and the head of corporate and M&A in Ukraine at CMS. He has a regional role and advises on private equity and M&A transactions throughout Europe, and beyond.

Bielicki has been a partner at Royalton Partners since 1997. Between 1997 and 2004, he was also a principal of EDCM. Prior to joining Royalton Partners, Bielicki was chairman of W. Frackowiak & Partners.


It is a pleasantly sunny afternoon when Private Equity International arrives in Warsaw. Office workers are enjoying their lunchtime sandwiches in the parks and squares near the city’s business district, while the number of students around also helps to give the city a young and vibrant feel. And there’s a similar optimism in evidence up in the office of CMS, where the five industry experts in conversation at our roundtable are convinced that the region has put the economic crisis behind it.

Of course, they acknowledge that the last few years have not been easy. Deal flow has been notably subdued. Last year, 41 private equity deals were completed in Central and Eastern Europe, roughly the same number as in 2012, according to data from Mergermarket – a big drop from the 75 deals completed in 2007.

The problem in CEE currently is that business owners don’t feel compelled to sell, says Dariusz Pronczuk, managing partner at Enterprise Investors. “There are quite a noticeable number of people conside-ring selling their businesses, but they have another perception of the value of the business than the buyer. If they don’t get the preferred value, they will just wait. So many deals are being delayed and deferred.”

This issue is also recognised by Przemyslaw Bielicki, a partner at Royalton Partners, which buys the majority of its portfolio companies from founders. But he believes the situation is improving. “I think in the region the effects of the financial crisis were slightly delayed. All the entrepreneurs still believed their businesses were worth much more, as they were referring to pre-crisis stock market valua-tions. They are now much more realistic about the price.”

While deal-doing takes longer, deal flow seems to be improving, the panel agrees. “There’s an increasing number of very interesting manufacturing companies that are growing in Poland, Czech Republic and Hungary,” says Pronczuk. “We haven’t seen this in the last eight to 10 years. These companies are building really a very good investment story based on strong exports – and [they’re] building market share, not only in Europe, but also outside of Europe.”

On the exit front, things are looking much better, according to the industry experts. “We’ve seen a good number of exits last year from various countries in our eastern European portfolio, including IPOs, trade buyers and recapitalisations,” says Henry Potter, a partner at Alpha Associates.

This view is echoed by Graham Conlon, a partner and global head of international private equity at CMS. “Many funds that invested in the boom years are now getting close to the end of their lifecycle and hence are under pressure to exit, even if deal terms are not quite as good as they would have hoped. So we’ve definitely seen an increase in deal flow in recent times, and my prediction is that this trend will continue into the rest of the year.”

Enterprise has also seen a noticeable improvement on the sell-side. “[We] had the highest ever proceeds from exits last year,” says Pronczuk. “It’s a combination of IPOs, selling to strategic buyers both from the region and outside of the region. We have been able to do dividend recapitalisations as well to realise some of the value of the businesses.”