Divestments Pick-Up in Central and Eastern Europe in 2023
Invest Europe, the association representing Europe’s private equity, venture capital and infrastructure sectors, as well as their investors, said that there has been a pick-up in divestments from 2022 lows, signalling increased confidence among trade buyers in the resilience and potential of companies built by private equity and venture capital firms.
In its report entitled “2023 Central & Eastern Europe (CEE) Private Equity Statistics,” which was released in partnership with law firm Gide Loyrette Nouel on Thursday, Invest Europe said that the divestment value rose 17% to $998.44 million in 2023 as private equity and venture capital firms made exits from 98 businesses.
Trade sales were over a quarter of all exits by number and 67% of divestment value, underlining strategic buyers’ belief in private equity and venture capital backed businesses to weather challenging market conditions and grow, the report said.
Buyout value rose 40% to $1.04 billion from 2022 levels, although overall investment value slowed to $1.83 billion as growth and venture capital investment reduced. The total number of companies backed contracted by some 19% to 493, reflecting a decline in venture capital funding rounds.
“Incremental fundraising fell to $873.5 million. European investors from outside CEE were the largest source of capital, accounting for 40% of the total, above the five-year average of 31%,” the report said.
Funding from investors outside Europe increased and represented 21% of the total, up from 9% in 2022.
The data reflects the headwinds against private equity and venture capital activity across all of Europe, as well as the local effects of conflict in Ukraine, which particularly weighed on long-term investor allocations.
However, the research also highlighted the positive ongoing transformation at the heart of CEE and its contribution to European competitiveness and growth.
Challenges Aplenty
Eric de Montgolfier, CEO of Invest Europe, said that the challenges facing investment in Central and Eastern Europe were many in 2023, yet the signs of resilience and optimism were plain to see. “Companies built by private equity and venture capital have shown their ability to withstand tough conditions and are now attracting buyers, drawn by a compelling combination of skills and talent with long-term growth potential,” Montgolfier added.
Bill Watson, Chair of Invest Europe’s CEE Task Force and Managing Partner at Value4Capital said that transformation takes time, and Central and Eastern Europe remains on a path of growth and European integration, creating businesses that will contribute to a stronger and more competitive Europe on a world stage. Both the region and private capital are on the right track, yet there is still vast untapped potential for investors and managers alike.
Invest Europe’s CEE Statistics incorporate data highlights the growth of the region and its industry since the fall of communism over three decades ago. CEE countries consistently rank among the fastest growing in Europe, with average GDP per capita for the region rising to 59% of the EU average from just 40% in 2009, when Invest Europe started collecting CEE data.
The figures also show the increasing importance of economic links to the EU and global economies, as exports’ average share in GDP has risen strongly from under 47% in 2009 to over 63% in 2023.
Invest Europe’s own research tracks the outsized contribution of private equity and venture capital to CEE employment growth.
Data from the association’s Private Equity at Work report showed that CEE companies backed by private equity and venture capital hired 6.6% more workers in 2022, more than seven times the growth of 0.9% for all businesses across CEE, the greatest outperformance of any European region.
