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Posted inAlternatives

Are the Baltic states becoming the new private equity and VC hotspot?

Tallin, Estonia

New data from S&P Global Market Intelligence suggests that the largest percentage of private equity and venture capital penetration across the EU and the UK resides in the Baltic states.

The firm recently looked at what percentage of the total private companies in a country have private equity or venture capital investments. It said that a higher percentage implies conditions that support business growth, such as level of entrepreneurship and innovation, GDP growth, and commercial maturity.

Latvia, Lithuania, and Estonia had the highest percentages in their respective private business sectors, with Latvia at 3.54%, Lithuania at 2.24%, and Estonia at 1.34%.

In comparison, the EU-27 combined has a private equity penetration rate of 0.49%, while the UK has a penetration rate of 0.35%. France has the most private equity-invested companies in the EU at 11,633 but has a penetration rate of 0.77%. The lowest penetration rate was seen in Italy at 0.21%, slightly below Belgium at 0.26%.

This comes against the backdrop of a report released in May by KPMG that spoke about the ‘substantial growth’ in the Baltic private equity and venture capital sector.

That report, Baltic Private Equity and Venture Capital: Market Overview 2022, said: “Since 2010, the Baltic Private Equity and Venture Capital sector has demonstrated rapid growth, with €2.2bn of total capital raised. Capital raised by Baltic funds in 2022 reached €298m, with the amount raised by VC funds reaching an all-time high of €244m, a YoY increase in capital raised of over 130%. By the end of 2022, the amount of dry powder still to be invested by Baltic PE/VC funds was €1.1bn.”

The authors added: “In 2022, Baltic PE/VC funds completed over 220 transactions investing a record €212m into Baltic companies, delivering YoY growth of 44%. In addition to local investments Baltic funds are also increasingly expanding their geographic focus, with annual outbound investments reaching a new high of €69m. In total over the last 5 years, Baltic funds have done 318 outbound investments totalling €234m.”

Statistically, the authors said that the amounts invested in Latvia firms increased from €14m to €17m between 2021 and 2022, with a greater proportion of investments going to more-mature companies. In Lithuania, the amount invested in its companies reached €119m in 2022, with PE investment making up 85% of the total. Meanwhile, KPMG said that the amounts invested in Estonian companies in 2022 were at their all-time highest by value, at €76m, and deal count.

Pete Carvill

Pete Carvill is a reporter, writer, and editor based in Berlin who has been writing for the B2B and mainstream media since 2007. He is a contributing writer for Expert Investor and, in addition, has...

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