Bain & Company: Brighter prospects for private equity in CEE after weak 2023

Bain & Company: Brighter prospects for private equity in CEE after weak 2023

Emerging Markets Private Equity Outlook
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2024—Buyout transactions by private equity funds in Central and Eastern Europe will likely continue to rebound this year as monetary policy eases around the globe and investors in the region come to terms with the impact of the war in Ukraine, Bain & Company said today after deal value remained close to a historic low in 2023.

Central and Eastern Europe buyout transactions reached $800 million last year, up from the 2022 record low of $300 million but still well below the $6 billion recorded in 2016, according to figures from the global consultancy. At the global level, private equity is now seeing the beginnings of a pick-up in activity, with ‘green shoots’ emerging for prospects this year and beyond, after 2023 saw PE’s sharpest drop-off since the global financial crisis of 2008-09, according to Bain & Company’s Global Private Equity Report 2024.

Seventeen of the industry’s 37 buyout transactions in CEE last year, excluding add-ons, came in Poland, while Czechia took second place with 10 deals. Counting add-on transactions, funds made 68 acquisitions in the region, which also includes Bulgaria, Croatia, Estonia, Hungary, Latvia, Lithuania, Romania, Slovakia and Slovenia.

International PE funds will likely increase their activity in Central and Eastern Europe in 2024, Bain forecasts. As fears recede that the war in Ukraine will spill over into the rest of CEE, and as its effects become part of the region’s new reality, investors will be more open to CEE as an investment destination.

'Last year was a tough one for the private equity industry globally, but here in CEE we saw the beginning of a rebound,” said Jacek Poświata, Bain senior partner and the chairman of the firm’s Central and Eastern Europe region. 'As interest rates ease around the globe and it becomes clear that our region is managing to cope with the consequences of the tragic war in Ukraine, we expect funds to continue deploying their record resources of dry powder on acquisition opportunities here.'

Across Europe, the total value of acquisitions last year fell by almost half to $140 billion, the lowest level since 2016, according to Bain & Company data. The number of deals across the continent also fell, slipping 13% to 1,133, with the technology and industrial sectors racking up the highest number of transactions. Dry powder, or funds available for investment, grew by 4% to a record $821 billion.

'Our region remains attractive for international investors, both private equity funds and industry players, as it continues to post faster growth than Western Europe in a process of convergence with the EU, 'Poświata said. 'Funds are continuing to pursue a buy-and-build strategy of assembling regional champions, which then are more attractive to strategic investors.'

In its global private equity report, Bain also highlights the growing significance of artificial intelligence for the industry. Funds and their portfolio companies are scaling up their use of generative AI to improve investment decision processes, carry out due diligence and find solutions to increase profitability.