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The Dichotomy of the Central and Eastern Europe Private Equity Market – June 2014

by Kathryn Sharpe

  • 17 Jun 2014
  • PE

According to Preqin’s Fund Manager Profiles online service, there are 228 private equity fund managers based in Central and Eastern Europe (CEE) that have garnered just under €22bn in aggregate capital commitments in the last 10 years. With 93 fund managers, Russia has the largest number of GPs out of the CEE countries and has also raised over half of the total capital for the region in the past decade. Poland also strongly contributed to the total capital raised with 29 managers gathering 18% of the aggregate figure. In fact, managers in the three most active countries (Russia, Poland and Turkey) have raised €18bn, or 85% of the total. This figure highlights the disparity within the region as the remaining 17 countries are comparatively less well represented within the private equity space in terms of number of active private equity firms and funds raised.  It is apparent that the private equity industries of Russia, Poland and Turkey are beginning to show levels of maturation on par with some of their Western European counterparts. 

Of the 228 CEE-based fund managers, 71 have chosen to solely concentrate investments in a singular country in the CEE region, with over two-thirds (69%) of managers that invest in only one country once again looking towards Russia, Poland and Turkey. Preqin’s data shows that a further 60 private equity firms consider investment opportunities outside of the CEE region as part of a wider focus, illustrating the sophistication some CEE-based GPs possess in having capabilities to seek private equity deals outside of their domestic region. 

Out of all the private equity firms headquartered in the CEE region, the Russian Direct Investment Fund has raised the largest amount of capital in the past decade. The Moscow-based firm has raised just under €2.3bn over the last ten years with an estimated dry powder of almost $3bn, and is currently raising a series of country specific-focused funds. Unsurprisingly, fund managers based in Poland and Turkey also feature in the top ten firms by total capital garnered. Enterprise Investors, a firm that invests throughout the CEE region, has raised the most capital out of the Polish fund managers with over €1.4bn, while Actera Group, the largest Turkish firm, accumulated €1.3bn in total capital in the last ten years to finance buyout and growth investments. 

Therefore, is Central and Eastern Europe as a whole a strong region for private equity activity or is the opportunity reserved to only a select few countries? Preqin’s Fund Manager Profiles online service shows that a polarization is apparent, with Russia, Turkey and Poland historically dominating the other CEE nations and accounting for the vast majority of private equity activity in the region. Nevertheless, as political stability, quality of infrastructure and more transparent legal frameworks develop in other CEE countries, the outlook for investment opportunities across the region is laden with promise.  

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