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Central and Eastern Europe set for private equity and VC boom

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A report from management consultancy Bain & Company has predicted that private equity in central and eastern Europe is about to ‘enter a period of strong growth’.

Posted on the firm’s website, Private Equity and Venture Capital in Central and Eastern Europe, said that the region has seen ‘continued strong economic growth’ and has ‘rich opportunities’ for the private equity and venture capital industry.

Writing in the introduction, Jacek Poświata, managing partner for the firm in the region, said: “The central and eastern European macroeconomic growth story is set to continue as the economies of the region catch up with those further west. That process is being driven by factors including a highly qualified labour force backed by outstanding universities; investments in nearshoring as manufacturers  reconsider their global supply chains, and EU funding to help close the gap in infrastructure and  support the transition to a green economy.”

The report looks at the GDPs of the 11 countries of central and eastern Europe, which it said was a combined €1.3trn in 2021. This, Bain & Company, said was broadly equivalent to the individual GDPs of the Nordic countries, South Korea, and Canada. It was also a tenth that of the European economy, even though the region has a quarter of the EU’s population, a factor that it said illustrated the potential for growth. Growth of 3% between 2016 and 2021 also, said Bain & Company, outpaced the western European rate of 1%.

It added: “The region’s workforce is another attraction—not only for its lower labour costs compared with those of western Europe, but for quality and skills that are impressive by global standards. In fact, by several measures the 11 countries in this report are ahead of the West. CEE has a higher percentage of graduates with engineering majors than western Europe (14.8% versus 14.5% as of 2019) and accounts for 19% of the EU’s developer talent pool. Czechia, Hungary, Poland, and Slovakia took four of the top six places in the 2019 Skill Value Report, ranking the countries around the world with the best developers. And employment of ICT specialists in the region grew by 5% per year from 2011 to 2020, outstripping the 4% pace in western Europe.”

Paweł Szreder, associate partner at the firm, said that an unquestionable conclusion of Bain & Company’s report was the huge potential for private equity in the region.

He wrote: “Invariably strong macroeconomic performance of the local economies and several secular trends—both global and regional—create a multitude of investment opportunities for investors with a long-term perspective and the ability to support ambitious companies along their journeys.”

Regarding venture capital, the report said that the current boom within the region is ‘unprecedented’. It reads: “While the private equity industry in Central and Eastern Europe is waiting to match its pre-GFC  records, venture capital’s current boom in CEE is unprecedented—and it’s just getting started. VC investment in the region has skyrocketed in recent years, with the 2021 value just over nine times the level in 2015. That’s the fastest growth rate for any region in Europe. The value of funds raised by local GPs grew five times in 2016 to 2017 and has continued to scale ever since with strong support from local LPs. And these investments are bearing fruit: the number of current and rising unicorns is steadily increasing. CEE has arrived on the map of European venture capital, and the growth streak is set to continue.”

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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