Central and Eastern Europe posts record private equity fundraising
Expectations of strong economic growth in Central and Eastern Europe have helped private equity funds there gather more assets in six months than they did all last year, bucking a falling trend across the globe.
Private equity funds based in the CEE region have already picked up 50% more funds in the first half of this year – $2.6bn in total – than they did over the whole of 2011.
A report published by the Emerging Markets Private Equity Association has revealed fundraising volumes in emerging markets this year to 30 June are far worse than last year’s figures. A similar trend is evident in both Western Europe and the US.
But the CEE region, on the other hand, has enjoyed the highest boost of private equity fundraising since the onset of the crisis in 2008.
On top of that, investor confidence in the region is growing, suggesting that the trend could continue. A recent survey by Deloitte revealed only 12% of respondents expect a decline in the CEE market during the rest of this year, compared to 29% with positive expectations.
The positive sentiment comes on the back of strong growth expectations in the CEE region.
The growth forecast for GDP in Poland – one of the larger countries in the region – stands at 3.23%, for this year before rising to 3.47% in 2013, according to Jones Lang LaSalle.
This is in stark contrast to Poland’s western neighbours, many of whose economies are contracting and facing their debt crisis. In this context, the CEE region may seem a natural port of call for investors looking for healthy companies.
Poland is particularly attractive in this respect, aided by its healthy banking sector, low levels of debt and comparatively cheap labour costs.
M&A activity in the country over the first half of the year has been strong and private equity firms have remained active, with a number of deals amounting to €100m.
Krzysztof Lewandowski, chief executive of Pioneer Pekao, the oldest and largest fund management company in Poland, said: “We call Poland ‘the green island’, because it is one of the only economies that still displays positive economic growth, so it is attractive for investors.”
Last year, the private equity penetration of the Polish market doubled to 0.13% of GDP.
Yet it still remains miniscule compared to the largest players on the market: UK, US and Israel, where private equity makes up 0.75%, 0.98% and 2.05% of GDP, respectively.
Yet while penetration in Poland grows, the previously popular UK and US are losing investments, with penetration in the UK almost halving since 2010.