Polling day

CVC Capital Partners’ acquisition of Polish energy company PKP Energetyka obtained European Commission approval last month.

The firm outbid state-owned utility Energa to buy the unit from PKP, the state-run railway operator, and is reportedly investing more than $500 million.

It’s a hefty and headline-grabbing first deal in Poland that raised the hackles of the country’s main opposition party ahead of this month’s national elections. The Law and Justice Party cited concerns over the implications for the state’s economic security. But the deal is going ahead.

CVC seems unperturbed. London-based member of CVC’s Central and Eastern Europe team Przemek Obloj told Reuters there would be more investments coming. “We have not said our last word,” he said.

The establishment of the firm’s first Polish office in Warsaw backs his claim. The unit will be headed by local PE veteran Krzysztof Krawczyk, poached from established Polish firm Innova Capital.

The Polish economy, unlike some of its neighbours in Central Europe, has been resilient. Its GDP has continued to grow post-crisis and even in the shadow of Russia’s recession and the conflict in Ukraine, rose 3.4 percent in 2014 to $548 billion, according to the World Bank. Growth is forecast at 3.6 percent this year and the same in 2016.

With a population of 38 million, gross national income per capita of $13,730 and an expanding middle class it appears again to be a market on the private equity radar.

21 Concordia, the local business of 21 Partners, has also seen the opportunity. It closed its debut Polish fund at €100 million last month. The fund, run by managing partners Dariusz Górka, Andrzej Mierzwa, Marek Modecki and Dawid Sukacz, will take majority stakes in mid-market Polish companies, investing €7 million-€10 million per deal.

It has already made investments in debt collection business EGB and discount clothing chain TxM, and expects to make up to another 10. Sukacz identifies specialised manufacturing, retail, healthcare and IT services as among the most attractive sectors in a market dominated by small and medium-sized companies.

He makes the case that 21 Concordia is not competing with established international firms, such as Bridgepoint. But still, the local challengers are there in the form of Innova, Enterprise Investors and Krokus PE for instance, which have decades of experience.

The fundraising was not easy, Sukacz told Private Equity International, and 21 Partners tapped its existing limited partners, including family offices, funds of funds and pension funds, as well as development finance institutions. The fund held a first close at €60 million in December 2013 and then took its time to reach final close at the bottom end of its target range.

Overall, the environment has been tough. New funds raised in Poland totalled only €10.6 million in 2014, down from €261 million in 2013 and €486 million in 2012, according to the European trade association Invest Europe. This is a sharp drop from pre-crisis levels of €824 million in 2007.

Investor interest in Poland has waned over the last few years, Rede Partners’ Scott Church agrees, but senses it might be returning. “US investors in particular are interested in refreshing their view of the landscape,” the fundraising adviser says.

And with country specific funds and pan-European firms like CVC increasingly active, investors looking to benefit from Poland’s growth story will have some choice.