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1、Private Equity and Venture Capital in Central and Eastern Europe Private investments in Central and Eastern Europe are ready to ride the rising tide of growth,fuelled by strongly performing economies and broad talent pools.Inwestorw KapitaowychPolskie StowarzyszenieCopyright 2022 Bain&Company,Inc.Al
2、l rights reserved.This work is based on secondary market research,analysis of financial information available or provided to Bain&Company and a range of interviews with industry participants.Bain&Company has not independently verified any such information provided or available to Bain and makes no r
3、epresentation or warranty,express or implied,that such information is accurate or complete.Projected market and financial information,analyses and conclusions contained herein are based on the information described above and on Bain&Companys judgment,and should not be construed as definitive forecas
4、ts or guarantees of future performance or results.The information and analysis herein does not constitute advice of any kind,is not intended to be used for investment purposes,and neither Bain&Company nor any of its subsidiaries or their respective officers,directors,shareholders,employees or agents
5、 accept any responsibility or liability with respect to the use of or reliance on any information or analysis contained in this document.This work is copyright Bain&Company and may not be published,transmitted,broadcast,copied,reproduced or reprinted in whole or in part without the explicit written
6、permission of Bain&Company.AuthorsJacek Powiata,Bain&CompanyPawel Szreder,Bain&CompanyPawel Kozub,Bain&CompanyMagorzata Bobrowska,Resource Partners,PSIKEdgar Kolesnik,Abris Capital Partners,PSIKTomasz Swieboda,Inovo VC,PSIKMaciej wikiewicz,PFR Ventures1Private Equity and Venture Capital in Central a
7、nd Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.ContentsIntroduction .2Summary perspectives .4The macroeconomys solid foundation for growth creates opportunities for PE and VC investments .6Private equity:After years of waiting,its time to soar .21Venture capital:The boom continues .292Private E
8、quity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.IntroductionJacek PowiataManaging Partner,Bain&Company Poland/CEEI am delighted to present you with our first ever report on private equity and venture capital in Central and Eastern Europe(CEE),which highlight
9、s the regions continued strong economic growth and examines the rich opportunities this presents for the industry.After two decades of development,the PE ecosystem in our region is well positioned for accelerated growth as local and international funds leverage CEEs clear economic advantages.The Cen
10、tral 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 rec
11、onsider their global supply chains,and EU funding to help close the gap in infrastructure and support the transition to a green economy.Against that backdrop,PE and VC funds have already scored some impressive successes in our region,and Im proud to be able to tell their stories in this report.Im al
12、so proud of Bain Poland/CEEs role in this ecosystem:in the past 12 months alone,our consultants have advised on more than 20 projects in the region,working with local and global clients across the deal cyclefrom GP investment strategy,through commercial due diligence,to post-acquisition strategy and
13、 exit support.And,of course,were part of the worlds leading consulting firm for the industry,with a global practice more than three times the size of our nearest competitors.The report also discusses industry leaders outlook for the coming years,including positive trends such as consolidation within
14、 economies and the emergence of regional and global champions.Issues such as the war in Ukraine do indeed loom large in investors minds,though the good news is that respondents to our survey are convinced that the effect on their business is transitory.In that regard,its important to bear in mind th
15、at all the countries we cover in this report are members of the EU and NATO,benefitting from guarantees of military and economic security.Id like to thank all the representatives of the industry who took the time to participate in our interviews and survey,contributing useful insights that youll see
16、 highlighted throughout these pages.Id also like to thank our partners from PSIK and PFR for helping make this report possible.Im convinced that you will find the report to be a valuable contribution on the role of PE and VC in our region,and I look forward to participating in the many conversations
17、 it will inspire.3Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Magorzata BobrowskaPresident of PSIK,the Polish Private Equity and Venture Capital Association Co-Founder and Managing Partner,Resource PartnersThis report provides a valuable opportu
18、nity to take a fresh look at the PE and VC ecosystem in Central and Eastern Europe as we emerge from the global pandemic and gear up for a period of faster growth in the industry.Im grateful for the chance to present our members views on the prospects for PE funds throughout the region,including the
19、 opportunities presented by CEEs unique macroeconomic advantages.Over the past two decades,PE professionals have worked hard to create a mature ecosystem for the industry,and theyre positioned to reap the rewards of that effort as CEE continues its long-term process of catching up with more develope
20、d economies in Western Europe.Experienced GPs,founders who are open to working with financial investors,and a deep pool of management talent for both funds and portfolio companiesall this adds up to a time of remarkable opportunity.The insights in this report are sure to provide useful guidance for
21、investors both old and new,and PSIK looks forward to continuing to support the industry as we move into a time of accelerated growth.Maciej wikiewiczPresident of the Board,PFR VenturesVenture capital in CEE has been booming in recent years,and PFR is proud to have played a fundamental role in that.A
22、s this report clearly shows,the fundamentals are strong and include world-class technical education,new opportunities in areas such as green transformation,and an emerging flywheel effect as alumni of successful companies begin to fund and mentor the next generation of start-ups.This report provides
23、 key insights into the forces behind those trends and forecasts for how they will play out over the next few years.Im particularly intrigued and excited by the thesis that VC in Central and Eastern Europe can grow as fast as two to three times over the next four years if the historical trajectory of
24、 Western European ecosystems is followed.As PFR presses forward with our mission of supporting Polands economic development,this report offers clear insights into the factors that are driving the industry and that will account for its continued success.Were grateful to our partners,Bain&Company and
25、PSIK,for the opportunity to contribute to this impressive work.4Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Summary perspectivesThe economies of Central and Eastern Europe(CEE)are on a path of sustained,fast growth as they catch up to their West
26、ern peers,offering attractive opportunities for private equity and venture capital investors.The industry itself has developed steadily over the past two decades,despite the global financial crisis and other headwinds that have kept its role in the economy smaller than in comparable regions.Today,wi
27、th a mature ecosystemincluding a pool of management talent,experienced GPs,and founders who are more open to working with fundsthe PE and VC industry in this part of the world has all the pieces in place to embark on sustained acceleration.That should allow funds to capitalise on the unique advantag
28、es that will help the region continue to outperform more mature markets.Those advantages include a well-educated and comparatively low-cost labour force and trends such as intra-regional consolidation and global manufacturers looking for locations close to the key markets of Western Europe.All of th
29、is is undergirded by membership in the European Union:the 11 countries offer access to the single market,with all the legal protections found in developed EU economies,combined with emerging markets faster rates of growth.That makes the region a sweet spot for investors,in comparison both with Weste
30、rn Europe and with emerging economies in less stable regions such as Southeast Asia or Latin America.Of course,challenges also remain,such as less developed infrastructure,more difficult regulatory environments,and the effects of the war in Ukraine.Bear in mind,though,that the countries membership i
31、n the EU and NATO also provides a basis for addressing each of those issues:respectively,development funding from the EU,guarantees of the rule of law,and the political and economic security that come from membership in the bloc and the transatlantic alliance.Against this backdrop,PE investments in
32、CEE are in a steady growth phase,continuing the rebound that began in 2014 following the global financial crisis and the subsequent eurozone crisis.However,their dynamics have not matched the global PE market bonanza,leaving headroom for convergence to international benchmarks.The regions maturing P
33、E ecosystem,with more experienced GPs,entrepreneurs,and managers,is ever better equipped to absorb capital.Emerging opportunities will feed into the deal flow of both regionally based and international GPs.Meanwhile,VC investments in CEE are booming.After reaching an inflection point in 2016,funding
34、 skyrocketed,making CEE outpace most other VC ecosystems in Europe.Further growth has strong fundamentals and will benefit from the start-up ecosystem flywheel effect,in which successful entrepreneurs inspire and sponsor succeeding generations.A comparison with other VC ecosystems supports the thesi
35、s that prospects for Central and Eastern Europe are dynamic,with growth as fast as two to three times over four years if the historical trajectory of Western European ecosystems is followed.For this report,we define Central and Eastern Europe as the 11 countries of the region that are members of the
36、 European Union.They have a total population of more than 100 million and a combined GDP of 1.3 trillion(see Figure 1).5Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Sources:IMF;IHS MarkitReal GDP(T,2021)CEE region is 11 countries and a large comb
37、ined economyEuropean Union countriesCentral and Eastern EuropeOther European countriesCEE share in European Union GDP10%LithuaniaEstoniaLatviaPolandCzechiaSlovakiaHungaryRomaniaBulgariaCroatiaSloveniaCEE1.3Benelux1.2Nordics1.4SouthKorea1.4Canada1.4Figure 1:The Central and Eastern Europe regions econ
38、omy has a combined GDP of 1.3T,comparable to Benelux,the Nordic countries,South Korea,or Canada6Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.The macroeconomys solid foundation for growth creates opportunities for PE and VC investments The CEE eco
39、nomyThe 11 countries of Central and Eastern Europe had a combined GDP of 1.3 trillion in 2021,comparable to the GDPs of the Nordic countries,South Korea,or Canada,at 1.4 trillion each.That accounted for 10%of the EUs economy,even though the region has about a quarter of the Unions populationillustra
40、ting the room for growth.And indeed,growth of about 3%in 2016 to 2021 consistently outpaced the Western European rate of around 1%(see Figures 2 and 3).These faster rates of growth also come with lower volatility than other emerging markets,as seen in the narrower fluctuations of the regions currenc
41、ies.Integration with Western European economies through the single market;steady,long-term inflows from the EU;and the EUs guarantees of legal certainty combine to have a stabilising effect.In fact,five of the 11 countries have already adopted the euro,while another two have established pegs to the
42、single currency.An educated labour forceThe regions workforce is another attractionnot 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
43、 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 EUs 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
44、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.Within the region,Polands education system stands out as an effective engine for innovation,with 1.2 million students in its 368 academic
45、centers.That includes 106,000 students in technical fields,and another 220,000 in business and administration.Already boasting CEEs largest population at about 38 million,Poland is also increasingly attractive to international students from other emerging markets such as India and Ukraine.Infrastruc
46、ture development and EU fundsCentral and Eastern Europes digital,technological,and transportation infrastructure are still catching up to those of Western Europe,with development underpinned by continual inflows of EU funds(see Figure 4).The rate of household broadband connections is similar to that
47、 of Western Europe,at 87%versus 92%,while 5G coverage lags behind,reaching 6%of households compared with 18%.Corporates have room for improvement in cloud computing usage,bringing their rate up from 25%,closer to the Western European level of 41%.7Private Equity and Venture Capital in Central and Ea
48、stern EuropePSIK|PFR Ventures|Bain&Company,Inc.Sources:World Bank;EuromonitorSome CEE counties already have the euro and other CEE countries have stable value of currencyHighest valueAverage valueLowest valueLocal currency vs.EUR(index,2001=100,200221)CountryEstoniaLatviaLithuaniaSlovakiaSloveniaBul
49、gariaCroatiaCzechiaHungaryPolandRomaniaCurrencyBulgarian levCroatia kunaCzech korunaHungarian forintPolish zlotyRomanian leuCountries in European ExchangeRate Mechanism(ERM II)12511496Poland948072Czechia189161120Romania14011395Hungary304164111Brazil215149112Colombia293210109Mexico18414896Indonesia15
50、3130107Philippines12610787ThailandCEELatin AmericaSoutheast AsiaFigure 3:CEEs economy is less volatile compared with other emerging regions,illustrated by others currencies fluctuationsNote:Western Europe includes Austria,Denmark,Finland,France,Germany,Greece,Ireland,Italy,Luxembourg,Netherlands,Por
51、tugal,Spain,Sweden,Belgium,Norway,Switzerland,UKSources:IMF;IHS MarkitCEE is EUR 1.3T economic region,witnessing 3%historical(201621)GDP growth0180WE2006 1116212%1%3%1%CEECAGR0616CAGR1621CAGR0616CAGR1621PolandRomaniaCzechiaSlovakiaBulgariaOthers4%4%2%2%2%3%2%3%4%2%2%2%3%3%TotalReal GDP at
52、 2006 fixed prices(Indexed,2006=100,200621)Real GDP in CEE countries(T,fixed exchange rate,200620)Western EuropeCEE2006(27%)(4%)0.9(32%)(13%)(17%)(7%)2011(24%)(4%)1.0(35%)(13%)(17%)(7%)2016(24%)(4%)1.1(36%)(13%)(16%)(7%)2021(24%)(4%)1.3(37%)(14%)(15%)(7%)Figure 2:CEEs economic growth has consistentl
53、y outperformed Western Europe8Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Figure 4:Digital infrastructure in CEE has the opportunity to catch up to Western EuropeNote:Regional metric is based on GDP weighted averageSources:Kantar;Eurostat;Europe
54、an CommissionDigital,technological,and transportation penetration in CEE and Western EuropeCEE6%WE18%CEE87%WE92%CEE25%WE41%5G coverageBroadband householdsCloud computing usage5G broadband coverage(Percentage of households,2020)Broadband connection coverage(Percentage of households,2020)Use of cloud
55、computing services(Percentage of enterprises,2020)In the two decades from 2007 to 2027,the EU is plowing 584 billion of cohesion policy funding into the region to support development.During the most recently completed phase,in 20142020,24%of the funding went into network infrastructure in transporta
56、tion and energy;the No.2 priority was the low-carbon economy,with 11%,followed by environmental protection and resource efficiency at 10%.The current funding period,which runs from 2021 to 2027,is focusing on five policy objectives:a more competitive and smarter Europe;greener,low-carbon transitioni
57、ng toward a net-zero economy;a more connected Europe,by enhancing mobility;a more social and inclusive Europe;and a Europe thats closer to its citizens by fostering the sustainable and integrated development of all types of territories.As infrastructure catches up with more developed economies in We
58、stern Europe,so too does productivity.The gap in average labour productivity per capita between the regions countries and their Western peers has steadily narrowed over the past 15 years(see Figure 5).9Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc
59、.Note:Average labour productivity is defined as GDP per person employed in purchasing power standards(i.e.,eliminating differences in price levels between countries)Sources:Eurostat;World Robotics(2020)Average labour productivity perperson by European region(indexed)CEE countries have transformed th
60、eir production and employmentstructure to increase the share of highly productive industries and servicesRobot installationsRobot densityAnnual installations,2019(in thousands)Robots installed in 2019(per 10,000 full-time equivalents)2.6Poland2.6Czechia20.5Germany169Slovakia157Slovenia346Germany0501
61、00150CEEWE2005201020152020Difference in 2005=58494335Figure 5:Productivity in CEE is still below Western Europe level,but the gap has decreased considerably over the last 15 yearsFDI inflowsIn addition to the flow of EU cash,private investment also continues to move into the region.The value of gree
62、nfield FDI projects in CEE grew faster than the global rate in 20152020(see Figure 6).Poland in particular ranked No.3 in Europe by the value of such projects announced in 2020,outpacing the larger economies in France,Spain,Italy,and the Netherlands.Four other markets in the region also made the top
63、 15.And once again,the story of CEE is not just about low labour costs:these investments are increasingly advanced,with several multinational tech companies choosing this part of the world as a location for their R&D centres and hubs(see Figure 7).Poland posted a compound annual growth rate(CAGR)of
64、about 8%in the number of R&D personnel from 2010 to 2020,and a 14%CAGR in the number of R&D entities.An improving regulatory climateCompanies and investors in CEE still face higher bureaucratic hurdles,including regulatory uncertainty,compared with those in more developed markets,and this concern is
65、 reflected in our conversations with the PE industry.However,the ease of doing business in the region has improved steadily over the past 10 years,approaching the EU average and well ahead of Southeast Asia,according to the World Banks annual ranking(see Figure 8).Statistics from the OECD also show
66、steady improvement,with stakeholder engagement levels actually ahead of those in Western Europe(see Figure 9).10Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Sources:Microsoft;Data Centre Dynamic;TheMayorType of investmentGoogleMicrosoftData4Size
67、of investmentCloud technology developmentcentre1.8B data centre investment announced for 2021Digital transformation plan900M investment over seven years(including its first data centrein CEE)New data centre campus200M investment commitment for threedata centres until 2025Figure 7:Recently announced
68、investments by global tech players in Central and Eastern Europe indicate the technology potential of the regionNote:Europe is defined as EU plus UK,Norway,and SwitzerlandSource:United Nations Conference on Trade and DevelopmentValue of greenfield foreign direct investment(FDI)projects in CEE grew f
69、aster than global value Poland top three in Europe by value ofannounced greenfield FDI projects Value of announced greenfield FDI projects(indexed to 2015)Value of announced greenfield FDI projects,2020Rank1112131415CountryUnited KingdomGermanyPolandFranceSpainIrelandItalyNetherlandsBelgi
70、umPortugalRomaniaHungarySwitzerlandSlovakiaCzechiaValue(EUR B)30.521.120.512.511.28.55.85.44.03.53.33.12.51.91.80500%WorldWECEE2001820192020Figure 6:Private capital is flowing to CEE as well,resulting in superior dynamics of foreign direct investment11Private Equity and Venture
71、 Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Figure 8:The overall business ecosystem is improving,with CEEs average ease-of-doing-business score now marginally below Western Europe and ahead of Southeast AsiaNotes:EU includes current members and excludes UK;Southeast Asia
72、 includes Brunei,Myanmar,Cambodia,Timor-Leste,Laos,Malaysia,Philippines,Singapore,Thailand,Vietnam,Indonesia(Jakarta);Mercosur includes full and associate members of Mercosur including Venezuela;nominal GDP in USDSources:World Bank;International Monetary Fund(IMF)Ease-of-doing-business score weighte
73、d with nominal GDP(number,201020)5560657075808590MercosurSoutheast Asia EUWECEE20000192020Figure 9:The regulatory environment in CEE is steadily improving,illustrated by the regulatory policy outlook rating published by OECD*Weighted with nominal GDP in USD;assessmen
74、t in each of the categories is based on a survey conducted by Organisation for Economic Cooperation andDevelopment(OECD)every four yearsSources:World Bank;IMFRegulatory impact assessment,primary lawsweighted with nominal GDP*Stakeholder engagement,primary laws weightedwith nominal GDP*(index,201421)
75、20142.42.120172.62.320212.62.320142.12.220172.32.420212.32.4Western Europe countriesCEE countriesRegulatory impact assessmentStakeholder engagement12Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Sources:Penn World Table;Savills;Thomas survey(2020)
76、;literature searchCEEWestern EuropeManufacturing costsElectricity costsInfrastructure and trade opennessNearshoring is likely to increaseCEE countries rank high in Savills nearshoring potential indexEU countries with top Savills Nearshoring Index(2020)of Germanmanufacturers areplanning to diversifyt
77、heir supply chainsafter the pandemic of German producersare looking to shortentheir delivery routes of US manufacturerssay reshoring willfollow the pandemic024681012141618DenmarkGermanyBelgiumItalyFranceFinlandSwedenNetherlandsSpainGreeceSlovakiaPortugalCroatiaPolandRomaniaHungaryCzechia68%12%64%Fig
78、ure 10:Nearshoring:Covid-19-related supply chain issues will increase the popularity of manufacturing nearshoring,and CEE is well-positioned to capitalise on that trendTrend:Nearshoring and reshoringCEE is already a nearshoring hub for business services and is now in the spotlight for manufacturing
79、as Covid causes entire industries to rethink their global supply chains(see Figures 10 and 11).About 68%of German manufacturers say theyre planning to diversify their supply chains after the pandemic,and 64%of US manufacturers expect reshoring.CEE countries took six of the top seven spots in the 202
80、0 Nearshoring Index from Savills;major corporates with planned or completed investments to nearshore manufacturing into the region include German engineering and technology group Bosch,French sporting goods retailer Decathlon,and German carmaker BMW.PE funds are already getting in on the action.We d
81、iscuss examples of nearshoring plays later in the report.Trend:Consolidation and internationalisationCompanies in the region are on average smaller than their counterparts in Western Europe,indicating higher fragmentation within sectors and greater potential for consolidation(see Figures 12 and 13).
82、A higher share of people in CEE work for companies with fewer than 250 people,and the average number of employees per company remains lower,compared with that of Western Europe.13Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Sources:PSIK website a
83、nd data;literature searchDanwood is one of Europes most prominent suppliers of prefabricated timber-framed houses in turnkey standardConstruction:homebuilding servicesConstruction:roofs and facadesIT:software design6 years6 years2.5 years9x4.7x3x Supporting international expansion,using cost-efficie
84、nt production base in Poland Tripling production capacity by upscaling facilities and increasing employment Establishing best practices supporting operational and commercial excellence Increased market share in Europe,mostly exporting to Western Europe and CEE,with further growth potential in Wester
85、n Europe Diversification of the customer base,thereby reducing dependence on large,one-off projects Discontinuation of noncore activities such as steel structures and installation services Multiple acquisitions completed to acquire technology capabilities and expand in strategic,high-growth geograph
86、ic regions Enhanced delivery capabilities by expansion into Ireland,Ukraine,and Romania and offering combination of on-and near-shore deliveryTrimo is one of Europes leading companies offering complete building envelope solutions in the area of fireproof roofs and facadesIntive is a software enginee
87、ring company with CEE and LATAM nearshoring capabilitiesDanwoodPE:Enterprise InvestorsTrimoPE:Innova CapitalintivePE:Enterprise InvestorsSectorDescriptionDuration ofinvestmentGross return on investmentsValuecreationleversFigure 11:Nearshoring:PE Investment case studiesNotes:Excludes Denmark,Austria,
88、Portugal,Greece(20152017),Ireland(20152016),and Norway(20162018)due to incomplete data;for data on the numberof enterprises per size:Italy 2017 and 2018 assumed in line with 20152019 compound annual growth rate(CAGR)for selected sizes,Sweden 2015 assumedin line with CAGR 20162019 for selected sizes,
89、Norway 20162018 assumed in line with CAGR 20152019 for all sizes,UK 2019 assumed in line withCAGR 20152018 for all sizes,Estonia 2018 assumed in line with CAGR 20152019 for selected sizesSource:EurostatCEE with higher share of employees workingfor SMEs and smaller average size of enterpriseSize of e
90、nterprise by number of employees(percentage,2019)Average number of employees per enterprise(number,201519)WE(26%)(20%)(15%)(39%)100%CEE(32%)(19%)(18%)(32%)100%20156.25.120196.34.950249250+104909WECEEFigure 12:Consolidation:CEE companies are on average smaller than counterparts in Western Europe,indi
91、cating higher fragmentation and potential for consolidation14Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.In addition to mentioning space for consolidation,33%of respondents to a survey carried out by Bain&Company among leading private equity fun
92、ds in CEE chose cross-border integration within CEE as the most important trend in the region,with the same share identifying international expansion of local companies.“I would certainly be more willing to buy a CEE regional champion than a single-country-focused player,”a partner at an internation
93、al GP told us.“The issue is that there are not many such opportunities.If the local GPs can step in and create them,they should be able to earn a premium.”And a senior partner at a CEE-based GP points out that international corporations are dissuaded from organically scaling across the region by fac
94、tors including small domestic markets and language barriers,and thus are ready to pay a premium to buy a regional player that gives them access to several markets with a single transaction.Some PE funds are building regional champions(see Figure 14).In addition to those champions,CEE also boasts glo
95、bal players such as mobility company Bolt,communications provider Skype,and financial services app Wise,all with roots in Estonia(the smallest of the 11 countries);Hungarian software maker Prezi;and Polish games developer,publisher,and distributor CD Projekt.Sources:PSIK website and data;literature
96、searchPEP is a payment processor delivering innovative business services and providing support for payment transactionsPayments processing technologyCourier servicesHealthcare services4 years5 years Not exited yet5.2x3.8xN/A Growth through several acquisitions,including PayLane and PayUp The former
97、company specialises in processing payments for online purchases The latter distributes services provided by electronic terminals at retail outlets Assisting the company in developing its strategy,customers,and product portfolio Successful merger of Cargus and Urgent,creating Urgent Cargus Consolidat
98、ion of Romanias very fragmented market(five add-ons and one merger)Optimised courier and distribution routes to increase efficiency and reduce fuel consumption Consolidation of the laboratory market by completing more than 90 follow-on acquisitions(significant acquisition of Fryda Laboratories)Opera
99、tional excellence by successful integration of acquired companies,and constant optimisation of its laboratory footprint to improve efficiencyUrgent Cargus is one of the leaders in the Romanian courier services market,focusing on B2C segment and consolidation of the marketDiagnostyka is the largest m
100、edical laboratory chain in Poland offering comprehensive diagnostic laboratory servicesSectorDescriptionDuration ofinvestmentGross return on investmentValuecreationleversPolskie ePatnociPE:Innova CapitalUrgent CargusPE:Abris Capital PartnersDiagnostykaPE:MidEuropaFigure 13:Consolidation:PE investmen
101、t case studies15Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Sources:PSIK website and data;literature searchBambiPolflamCargounitPE:MidEuropaBambi is the leading and mostdynamic Serbian biscuit andconfectionery producer in the countries of former
102、 YugoslaviaConsumer food products4 years4.5x Focusing on core product categories allowed for further expansion and innovative new product offerings Successful international expansion by changing the perception of the brand as specialty to mainstream Capital investment in productivity improvements al
103、lowed for capacity expansion and further automationPolflam is a leading Polish fire-resistant glass manufacturer with a growing presence in all European marketsIndustrial materials5 years2.9x Tripling production capacitysince original investment Constantly growing share of export sales due to superi
104、or product offering and leading technology Establishing a position as a company that is ideally suited toaccelerate expansion in EuropeCargounit is the leading provider of tailor-made solutions for the leasingof locomotives on the Polish and CEE marketsLocomotive leasing4 years3.3x Transition from a
105、 founder-led organisation to an independent management with divisional support Expansion of service offering through dry/soggy/wet lease,modern locomotives,shunters and passenger units Ambitious fleet expansion through acquisitions,sale and leaseback,and selective purchases PE:Syntaxis CapitalPE:Abr
106、is Capital PartnersDescriptionDuration ofinvestmentGross return on investmentValuecreationleversSectorFigure 14:Regional champions:PE investment case studiesTrend:The green transitionThe regions transition to a low-carbon economy is one of the priorities for EU funding,in line with the blocs objecti
107、ves,and CEE will receive a disproportionate share of EU funds in this area(see Figures 15 and 16).The share of renewables in the energy balance has been growing across the re-gion,receiving a boost from the need to give up Russian fossil fuels following the countrys invasion of Ukraine in February 2
108、022.Headwinds:The coming global slowdownDespite this generally sunny outlook,there are of course some clouds on the horizon(see Figure 17).Leading indicators foreshadow turbulence for the entire global economy.Within the eurozone,the worst performance since the global financial crisis may be in stor
109、e(see Figure 18).Meanwhile,central banks ability to respond by cutting rates is limited by accelerating inflation.Still,during the previous downturn,CEE countries proved more resilient,with Poland coming through the crisis as the only EU state that avoided recession.Here too the story of convergence
110、 with Western Europe is the dominant narrative,as strong domestic consumption and continued inflows of both EU funding and foreign direct investment can help blunt the effects of any slowdown.16Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Figure
111、16:Green transition:PE investment case studiesSources:PSIK website and data;literature searchNovago is a leader in municipal waste treatment and the largest producer of alternative fuel in PolandWaste managementEnergyWaste management3 years6.5 years7 years3.8x2x3x Diversification of revenue by inclu
112、ding alternative fuel,energy sales,and services Significantly improving waste recovery levels and quadrupling the amount processed Reduced waste sent to landfill,increased green energy generation,and built employee well-being Merger of assets owned by two energy groupsPolenergia and Polish Energy Pa
113、rtnersto create the largest independent vertically integrated utility in Poland Expansion of renewable energy sources portfolio,including both wind farms and photovoltaic power plants Fast growth due to implementation of advanced technologies,extension of services range,and modern management Investm
114、ent in the best equipment that helps sort waste faster and meets EU environmental standards Engaging in public education activities by organising recyclable waste gathering eventsPolenergia is a Polish independent power utility that comprises vertically integrated companies active in conventional an
115、d renewable energyEcoservice is the leading waste management company in Lithuania,undertaking collection,transportation,and processing of different wasteNovagoPE:Abris Capital PartnersPolenergiaPE:CEE Equity PartnersEcoservicePE:BaltCapSectorDescriptionDuration ofinvestmentGross return on investment
116、ValuecreationleversNote:CEE GDP represents 10%of EU GDP vs.CEE 24%allocation of NGEU fundsSource:European CommissionRenewable energy contribution is expected to continue growing in line with EU objectives,further bolstered by additional European Recovery Plan fundingNextGenerationEU(NGEU)funding all
117、ocation(grants and loans)The EUs long-term budget,coupled with NextGenerationEU(EUR 750B),will supply a total ofEUR 1.8T to help rebuild Europefollowing the pandemic.Climate change as the largest objective includes:Environmentally friendly technologies Decarbonisation of the energy sector Energy eff
118、iciency for buildings Environmental standards improvementsRecovery fundEU budget(58%)NGEU(42%)EUR 1.8T NGEU fundsdistributionClimate change(37%)Digital transition(20%)Other(43%)EUR 750B NGEU CEEallocationEUR 177B PL(34%)RO(16%)CZ(13%)HU(9%)Other CEE(28%)NGEU regionalallocationEUR 750B CEE(24%)Other
119、EU states(76%)EU funding Figure 15:Green transition:CEEs green transition will be supported by disproportionate EU funds allocation17Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Figure 18:During the global financial crisis,CEE countries demonstra
120、ted stronger performance than Eurozone countriesNotes:GFC=global financial crisis;Polish National Bank survey of professional forecasters,including 25 financial,research,and other institutions fromMarch 2022Sources:Eurostat;IMF;literature searchCEE countries showed more economic resilience during th
121、eglobal financial crisis compared with eurozoneKey reasons for betterCEE performancePercentage of real GDP growth compared with previous year(200612)5.02.50.02.55.07.5%CEE weighted average2006200720082009201020112012PolandEurozoneGFC Strong domestic consumption(Western Europe catch-up)Resilient expo
122、rt(floating exchange rate)Capital investments(EU convergence funds)FDI inflowFigure 17:The global and European economies are facing a risk of economic downturn,which is also likely to affect CEE*Sentix economics index based on monthly surveys of professional investorsa leading economic indicator for
123、 forecasting regions GDP changes;expectationsconcern next six months and measured via 5-scale questions sent to investors:0 implies neutral opinion about state of economy or its six-month prospects,i.e.,it will neither grow nor declineSources:Sentix;Eurostat;literature searchLeading indicators fores
124、hadow economicturbulence in the eurozone not seen since the global financial crisis with central banks hands tied this time due toincreasing inflation problemsInvestors sentiment*(Eurozone,January 2011May 2022)Eurozone HICP inflation(2021,January 2022May 2022)Assessment of current economic situation
125、Economic expectations for the next 6 monthsJan11Jan12Jan13Jan14Jan15Jan16Jan17Jan18Jan19Jan20Jan21Jan22May222021 avg 2.6%Jan 225.1%Mar 227.4%May 228.1%18Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Sources:NATO;European UnionMember of
126、EU only seekingNATO membershipMember of NATO and EUMember of NATO onlyMember of EU onlyCEE countriesFigure 19:Because all CEE countries belong to NATO and the EU,it is unlikely that CEE would be disturbed by military conflictHeadwinds:The War in UkraineRussias war on Ukraine also delivered a shock t
127、o all countries in CEE,including a security crisis,inflows of refugees,and the economic effects of sanctions.Of the 11 countries covered in this report,four(Poland,Slovakia,Hungary,and Romania)border Ukraine.Poland and Lithuania also border Russias Kaliningrad exclave,and Estonia and Latvia border R
128、ussia proper.Several countries,including Poland,Czechia and Estonia,have been prominent in their provision of military aid.All 11 countries are NATO members.Their Western allies,led by the US,have made strong declarations of support and backed them up by sending additional troops to the region,meani
129、ng the direct military threat is minimal(see Figure 19).Instead,the dangers are economic:higher inflation,volatile markets for energy and food,and the costs of caring for refugees.The potential benefits to the labour markets from the presence of refugees have so far been limited:most refugees are wo
130、men and are unlikely to take jobs in the construction and logistics sectors that have lost workers as migrant Ukrainian men have returned home to fight.Many would also need reliable childcare,and its not clear how long theyll stay.In fact,many are already returning to Ukraine,with EU border agency F
131、rontex reporting in June that more people were travelling to Ukraine from mem-ber countries than entering them.19Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.In the longer term,the war is likely to lead to structural changes in the regions econom
132、ies,including greater military and security spending,which will benefit sectors such as cybersecurity;an accelerated transition to green energy;and the potential for long-term involvement in the postwar reconstruction of Ukraine.Those macroeconomic factors are reflected in the findings of our survey
133、:industry professionals are seeing a negative impact at the moment but are confident that it will be transitory.While survey respondents see a significant negative effect on fund-raising and exit options,88%expect them to fade away by the end of 2023(see Figure 20).They see good prospects for doing
134、business with Ukraine once the war ends,primarily benefitting the construction,industrials,and business services sectors(see Figure 21).Overall dependence of CEE economies on trade with Russia is not large(about 3%of the regions exports and imports).And in areas where this dependence is strongersuch
135、 as imports of natural gasmany countries in the region are better positioned than big Western economies such as Germany and Italy.The growth story continuesReturning to our basic theme:Central and Eastern Europe is set to continue posting impressive macroeconomic growth in the long term,as factors i
136、ncluding its deep pools of talent and physical proximity to key markets keep drawing in international investors and allowing local companies to Note:Results for options from previous question:“Significantly negative,”“Rather negative”Source:PSIK 2022 PE&VC landscape in CEE survey(n=18)Impact on oper
137、ationsCurrent exposureHow do you assess the impact of the conflictin Ukraine across different areas of the buyout/growth equity market in CEE so far?By when do you expect this effect tofade away?1What share of your portfolio belongs tothe following categories?Rather positiveNeutralRather negativeSig
138、nificantly negativeHard to sayFund-raisingDeal flowavailabilityExecutedtransactionsPerformanceof portfoliocompaniesExit optionsFund-raisingPerformanceof portfoliocompaniesExit options44%44%11%13%50%38%22%67%44%89%44%11%11%11%2022202320242025+0%88%12%75%25%0%75%13%13%Companies with some exposure to U
139、kraine(17%)Companies based in CEE,without any exposure to Ukraine(69%)Companies based outside CEE(13%)Figure 20:The direct impact of the conflict on investment funds operations is limited and likely to diminish within the next year20Private Equity and Venture Capital in Central and Eastern EuropePSI
140、K|PFR Ventures|Bain&Company,Inc.Source:PSIK 2022 PE&VC landscape in CEE survey(n=18)How do you(PE/VC)think business activity of EU-,CEE-based companies in Ukraine will change afterthe conflict ends,taking into account the expectedreconstruction effort?It will be For which sectors do you expect highe
141、r business activity in Ukraine after the conflict?(Rank 1the most important,5the least important)Significantly lower than before the war(11%)Similar to pre-war levels(22%)Slightly higher than before the war(44%)Significantly higher than before the war(22%)020406080100%Percentage of all respondentsHe
142、alth-care(67%)(33%)50%3.3Indus-trials(20%)(40%)(20%)(20%)83%2.4 Businessservices(20%)(20%)(20%)(40%)83%3.8Averagerank(67%)(33%)50%2.7Consumerproducts(33%)(33%)(33%)50%3.0Trans-portationRank 1Rank 2Rank 3Rank 4Rank 5Con-struction(83%)(17%)100%1.3Figure 21:Most investors believe that cooperation with
143、Ukraine will increase after the conflict,mainly benefitting construction,industrials,and business servicesdevelop.Smart investors are building regional champions that have the size and scope to make them attractive to global players looking to enter several markets with a single deal.And the Europea
144、n Union and NATO continue to provide credible guarantees of security and stability,and aid to develop infrastructure and fund the transition to a green economy.The difficulties investors in the region face are realbut the solutions that are emerging are just as real.The convergence story is set to c
145、ontinue.21Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Private equity:After years of waiting,its time to soarEdgar Kolesnik Vice President of PSIK,the Polish Private Equity and Venture Capital Association Partner,Abris Capital PartnersAs it enter
146、s its third decade as an industry,private equity in Central and Eastern Europe is well positioned for a period of sustained growth.After rebuilding from the slump caused by the global financial crisis and the euro crisis that followed,and now that the pandemic era seems to be fading,the asset class
147、looks set to take up its rightful place in the economic landscape,growing as a percentage of GDP toward levels seen in Western European markets.That position hasnt come easily;everyone in the industry has worked long and hard to build the necessary ecosystem.Now that all the pieces are in place,the
148、time has come for hard work of a different kind:capitalising on the rich opportunities offered by the economies in this part of the world.Of course,the industry still faces plenty of threats,including the need for continued investment in infrastructure,and the spillover effects of the war in Ukraine
149、.But officials and investors are aware of those potential difficulties and are taking encouraging steps to counteract them.I am confident that this report will provide you with a wealth of information about an industry thats about to enter an exciting phase of growth.Pawe SzrederAssociate Partner,Ba
150、in&CompanyOne unquestionable conclusion of our report is that there is huge potential for private equity in Central Eastern Europe that has not been fully realised yet.Invariably strong macroeconomic performance of the local economies and several secular trendsboth global and regionalcreate a multit
151、ude of investment opportunities for investors with a long-term perspective and the ability to support ambitious companies along their journeys.And we seeand supportever more of them in the region.At Bain were proud of the role weve played in the development of the local PE ecosystem over the past tw
152、o decades.As the GPs put their two decades of experience in investing across the region to work,local LPs begin to emerge,and a new generation of entrepreneurs take a fresh look at the prospects for working with the industry,were looking forward to partnering with our clients to help them capitalise
153、 on the next exciting phase that the industry is embarking on.22Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Notes:Total CEE includes Estonia,Latvia,Lithuania,Slovakia,Slovenia,Montenegro,Bosnia and Herzegovina,Ukraine,Bulgaria,Croatia,Czechia,Hu
154、ngary,Poland,Romania,Serbia,Moldova,North Macedonia;CEE growth in deal transactions value and volume includes rescue/turnaround and replacement capitalSource:Invest Europe/EDCCEE buyout and growth deal transaction value(EUR B,200821)CEE buyout and growth deal volume(number,200821)20101221.820111052.
155、120121121.620131001.420141042.620151122.520161032.520191046.12008984.02009944.420176.48820181055.020202.69620211345.4Deal volumeDeal transaction valuePost-EU accessionboomCrisis-inducedscale-downRenewed growthFigure 22:The last two decades of PE in CEE had three distinct phases,from a boom to a scal
156、e-down to a return to growth,which was then interrupted in 2020Private equity in CEEOver the past two decades,the private equity industry in Central and Eastern Europe has gone through three distinct phases.The sector boomed after eight countries joined the EU in 2004(all but Bulgaria,Croatia,and Ro
157、mania from the 11 included in this report).But just four years later,the arrival of the global financial crisis prompted investors to pare back their activity.Since then,the past decade has brought stabilisation and a return to a growth trajectory(see Figure 22).After a Covid-driven drop in 2020,buy
158、out value reached a record high in 2021.Still,despite that decade of growth,PE in Central and Eastern Europe hasnt kept up with the global boom(see Figure 23).Investments as a percentage of GDP trail behind international benchmarks,implying substantial room for growth.Investors are increasingly opti
159、mistic about the regions prospects(see Figure 24).Another argument for the growth potential of private equity in CEE is seen when we compare it with other regions.Again,CEE countries membership in the European Union provides guarantees of economic,political,and legal stability that other emerging ma
160、rkets lack.And yet when we compare PE activity in the region to PE activity in Southeast Asia,we find that countries with significantly worse risk profiles,as measured by the World Banks Ease of Doing Business Index and the Corruption Perceptions ranking from Transparency International,are outpacing
161、 CEE states(see Figure 25).23Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Notes:Total CEE includes Estonia,Latvia,Lithuania,Slovakia,Slovenia,Montenegro,Bosnia and Herzegovina,Ukraine,Bulgaria,Croatia,Czechia,Hungary,Poland,Romania,Serbia,Moldova
162、,North Macedonia;Global fundraising growth data represents buyout only;data for 20032006 calculated by Bain based on average shareof CEE buyout and growth in total fundraising value in CEE region for years 20072009Sources:Invest Europe/EDC;Bain&Company Global Private Equity Report 2022Fund-raising i
163、n CEEFund-raising CEE vs.worldCEE growth,buyout,generalist,and mezzaninefund-raising value(EUR B,200321)Index PE fund-raising value(200321)030.3040.4051.2062.0073.9082.3090.3100.4110.7120.7130.4141.4150.3160.7171.1182.0190.8200.6210.9Pre-GFCGlobalslowdownRenewed growthPre-GFCGlobalslowdownRenewed gr
164、owth05001,0001,50003 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21GlobalCEEFigure 24:Investments in PE in CEE are about 0.2%of GDP compared with 0.8%in Western Europe,but investors expect the region to continue to growNotes:Western Europe includes Austria,Denmark,Finland,France,Germany,Greec
165、e,Ireland,Italy,Luxembourg,Netherlands,Portugal,Spain,Sweden,Belgium,Norway,Switzerland,United Kingdom;CEE includes Bulgaria,Czechia,Hungary,Poland,Romania,Ukraine;other CEE:Bosnia and Herzegovina,Croatia,North Macedonia,Moldova,Montenegro,Serbia,Slovakia,Slovenia;Baltic countries:Estonia,Lithuania,
166、LatviaSources:Invest Europe/EDC,PreqinThere is still room for growth in PE in CEEInvestors expect growing attractiveness of the regionPE investment value as percentage of GDP by country of destination(percentage,2021)Investors views on the emerging markets presenting best opportunities in PE(percent
167、age of respondents,2019 vs.2020)Region average(+4 p.p.)WECEEChina44%55%SoutheastAsia 50%37%CEE19%23%SouthAmerica 13%10%Middle East7%8%CentralAmerica 7%7%Africa8%4%Other CEE0.13%Hungary0.15%Poland0.22%Czechia0.32%Baltic countries0.77%Greece0.27%Germany0.50%Spain0.60%Netherlands0.95%France1.03%United
168、Kingdom1.43%Western Europe 0.8%0.2%CEE20192020Figure 23:Despite the recent positive trajectory in local investments,PE fund-raising in CEE has not matched the global boom24Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.1)2020 data;2)20162020 Notes:
169、SEA includes Vietnam,Indonesia,Thailand,and Malaysia;CEE includes Bulgaria,Croatia,Czechia,Estonia,Hungary,Latvia,Lithuania,Poland,Romania,Slovakia,and SloveniaSources:AVCJ;Invest Europe/EDC;DealLogic;World Bank;United Nations;IWS;Eurostat;Transparency International Southeast Asia(SEA)countries with
170、 PE activity similar to that of CEE despite on average higher-risk profilePE investment value as percentage of GDP by country of destinationof investment(percentage,2020)Population,2021(#M)GDP per capita,2021(K EUR)GDP growth,201721(CAGR)Human Development Index,2020(#,1st=best)Internet penetration20
171、21(%of pop.)Ease of doing business,2020(#,1st=best)Corruption perceptions,2021(#,1st=best)Export&import to GDP,2021(%)FDI as%of GDP,2020(%)VietnamIndonesiaThailandPolandCzechiaRomania982767038935274970732.4%76.8%77.8%78.2%87.7%73.8%5.8%1.8%1.0%2.9%2.6%1.4%231%37%97%1
172、118%142%79%16.7%3.2%3.2%5.1%5.3%6.5%22.73.86.215.122.311.31Malaysia0.04%Thailand0.1%Indonesia0.2%Vietnam0.5%SEA1Region averageCEE 1st to 3rd quartileCEE0.1%SEA0.2%Figure 25:Despite a higher-risk profile,PE activity is similar in Southeast Asia countries compared with the CEE regionWe expect this gap
173、 to narrow as investors come to realise the attractiveness of markets that are firmly anchored in the European Union and what that means for regulation and corruption over the long term.GPs in the region expect the fund-raising outlook to improve,as a result of better current and future returns on i
174、nvestments.While all respondents say the fund-raising outlook for CEE-based funds is either“slightly worse”or“significantly worse,”which cannot surprise given recent geopolitical and macroeconomic disruptions,as many as 56%expect an improvement over the next three to five years.Compared with three t
175、o five years ago,66%say returns of their funds are“slightly”or“significantly”better.For the next three to five years,67%expect similar returns,with 33%forecasting an improvement.Meanwhile,the regions PE ecosystem has matured over the past two decades,allowing investors to capture opportunities more
176、effectively(see Figure 26).GPs in the region have increased their level of specialisation and their focus on value creation and have standardised investment processes.The quality of the deal flow has also been increasing,as a new generation of founders comes to the fore.Todays founders are more prof
177、essional and open to working with PE,in contrast to the bold entrepreneurs who kick-started the regions free market boom in the 1990s(and,to be sure,were heroes for their role in transforming the economy).In our survey,78%of respondents said entrepreneurs are now more willing to work with PE funds.T
178、alent for investment fund professionals is also more available than it was three to five years ago,according to the same proportion of respondents.25Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Figure 26:The PE ecosystem in CEE has been maturing,
179、with all the key stakeholder groups gaining experience and the pool of opportunities wideningSource:PSIK 2022 PE&VC landscape in CEE survey(n=18)Founders approachTalent availability Exit optionsDeal flowSignificantly increased(11%)Slightly increased(22%)Remained the same(67%)Significantly increased(
180、11%)Slightly increased(78%)Remained the same(11%)It is significantly better(22%)It is slightly better(33%)It is similar(22%)It is slightly worse(22%)It is significantly better(22%)It is slightly better(56%)It is similar(11%)It is slightly worse(11%)To the same extent willing to cooperate (22%)Signif
181、icantly more willing to cooperate(11%)Slightly more willing to cooperate(67%)How has the deal flow of companies“investable”for PE/GE funds changed in CEE in the last 35 years?How has the range of exit options available for your PE/GE fund portfolio companies changed in CEE in the last 35 years?How d
182、o you(PE/GE)assess the availability of talent for management of portfolio companies today compared to 35 years ago?How do you(PE/GE)assess the availability of talent for investment fund professionals today compared to 35 years ago?How has entrepreneurs willingness to cooperate with PE/GE funds in CE
183、E changed in the last 35 years?ESG becoming a priorityGPs based in CEE are ambitious in setting their ESG agendas,with 89%having already set or planning to set specific commitments or targets.And investing in companies from the region can be positive for measures of gender diversity.Of the 11 countr
184、ies we examine,all but one are above the EU average for the percentage of women in management;CEE countries hold the top five spots in the bloc(see Figure 27).The percentage of female senior investment professionals in PE and VC is already comparable to the level in developed markets.Local LPs take
185、the stageAlthough they are still more rare than in developed markets,local LPsboth public and privateare beginning to emerge,a trend that may further accelerate the scaling of the regions PE landscape(see Figure 28).One local LP is the state-owned Polish Development Fund(PFR),which has allocated PLN
186、 1.1 billion to buyout,mezzanine,and private debt funds(see Figure 29).The fund not only invests in PE and VC projects but also is actively working toward necessary regulatory changes allowing pension funds in Poland to invest in PE and VC.Local GPs in Central and Eastern Europe tend to target small
187、-and mid-cap deals,with their international peers conducting the largest transactions(see Figure 30).This division of the market 26Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Figure 27:CEE leads Europe in business management gender diversity,whi
188、le womens representation in PE and VC is roughly in line with developed marketsNotes:Management positions defined according to International Standard Classification of Occupationspeople responsible for planning,direction coordination,and evaluation of overall activities at given organization;data as
189、 of Q419 instead of Q320;data for Poland from Level 20“Women in Private Equity and Venture Capital”2021 Report;other countries from IFC“Moving toward gender balance in PE&VC”2018 report(senior positions defined as partners and managing directors)Sources:Eurostat(EU Labour Force Survey);International
190、 Finance Corporation(World Bank);Level 20(Women in PE&VC report);press search;literature searchAlmost all CEE countries rank above EU average in business management diversity with small gap to be closed when it comes to senior positions in private equity and venture capitalWomen as a percentage of a
191、ll managers(Q3 2020)Latvia45Poland44Bulgaria42Hungary42Slovenia42Sweden42Ireland38Romania37Finland37Estonia36Spain36France36Portugal36Slovakia36Lithuania35EU34Belgium34Austria34Denmark31Germany31Czechia29Greece29Italy28Luxembourg28Malta28Cyprus27Netherlands26Croatia24CEE countriesOther EU countriesP
192、ercentage of senior investment professionalsacross PE and VC who are femalePoland8%9%Developedmarkets10%China15%EastAsia12%SouthAsia7%LAC8%MENA7%SSA12%Emerging marketsSources:Kredex;Invega;Altum;MFB Invest;Your Europe;PFR;literature searchLimited partnerships environment in the CEE regionALTUMMFB In
193、vestRegional Fund-of-FundsRomania(Romania FoF)KREDEXINVEGAFund Manager of FinancialInstruments in Bulgaria(FMFIB)Slovak Investment HoldingCzech Fund of Funds(Czech FoF)PFRVenturesSlovene Equity Growth Investment Programme(SEGIP)Croatian Growth Investment Programme(CROGIP)200018
194、202020192021FMFIBMFB InvestKREDEXSlovak Investment HoldingPFR VenturesALTUMRomania FoFCzech FoFSEGIPCROGIPNational Recovery and Resilience Program in RomaniaINVEGAFigure 28:Local limited partnerships are emerging in the CEE region,with their activity intensifying in the last five years27Private Equi
195、ty and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Note:As of February 2022Source:PFR websitePFR allocation toward PE funds through PFR PE(PLN B,2022)It fuels the local PE/VC ecosystem through direct investment PFR is the largest local investor in PE and VC funds
196、in Poland and leads initiatives aimed at popularising PE and VC investments PFR PE1.1 Established in 2017 with structure similar to BBB,KfW Capital,or SamInvest Invests across private asset classes including buyout,venture capital,mezzanine,and private debt funds Examples of PE funds PFR has investe
197、d in:Buyout:Apax,Avallon,HLG,Innova,V4C,PAI Mezzanine:ACP,Syntaxis,Private Debt:Beechbrook,CVI Member of ILPA,Invest Europe,and EVFIN PFR supported Employee Capital Plan Bill which introduced possibility for pension funds to invest in PE/VC funds in 2019 Despite being allowed,such investments are st
198、ill difficult for pension funds for several legal and process reasons PFR is actively working towards further regulatory changes supporting Polish pension funds investments in PE and VC PFR working group related to those changes includes majority of Polish pension fundsFigure 29:Local LPs are emergi
199、ng,but their presence is still limited compared with their presence in more developed marketsSources:Dealogic;Dealwatch;Pitchbook;Preqin Innova dataLarge cap(EV300M)Upper mid-cap(EV 100300M)Mid-cap(EV 50100M)Small cap(EV50M)Advent International CVC Capital Partners Blackstone KKR Warburg Pincus Pine
200、Bridge Montagu BridgepointMostly considered as add-ons to portfolio companies MidEuropa Innova Capital CEE Equity Partners MCI Capital Abris Capital Partners Penta Enterprise Investors BaltCap Resource Partners Value4Capital Avallon ARX Equity PartnersCEE-focused fundsExample fundsExample fundsPan-E
201、uropean/global investorsFigure 30:PE investors in CEE can be divided between local fundsfocusing on small-and mid-cap dealsand international funds chasing larger transaction28Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Notes:CEE includes Bulgari
202、a,Croatia,Czechia,Estonia,Lithuania,Latvia,Hungary,Poland,Romania,Slovakia,Slovenia;DACH includes Germany,Austria,Switzerland;Nordics includes Norway,Denmark,Sweden,Finland,Iceland;excluding deals with target company industry from real estate,renewable energy,and add-on acquisitions typeSource:Dealo
203、gicPE investments(percentage,201021)PE investments(percentage,202021)PE investments(percentage,201021)DACHNordic countriesCEE020406080DomesticForeign 100%020406080DomesticForeign 100%DomesticForeign 020406080100%2010 2012 2014 2016 2018 20202010 2012 2014 2016 2018 20202010 2012 2014 2016 2018 2020F
204、igure 31:The PE landscape is typically tiered,with local funds capturing the majority of mid-and small-cap transactions,which have a relatively stable share over timeis likely to remain stable in the medium term,reflecting the trends in more developed markets(see Figure 31).Advantages in deal sourci
205、ng will continue to favor local GPs in small-and mid-cap transactions:67%of respondents say they typically dont have any competitors in final bidding,and 77%say a majority of their transactions are proprietary.29Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&C
206、ompany,Inc.Venture capital:The boom continuesTomasz SwiebodaVice President of PSIK,the Polish Private Equity and Venture Capital Association Partner,Inovo VCVenture capital in Central and Eastern Europe is growing at the fastest pace of any region on the continent,as investors are coming to recognis
207、e the unique advantages offered by countries covered in this report.Those include deep local pools of tech talent,fed by robust educational systems in the hard sciences.Most encouragingly for the industry,were starting to see the first signs of a flywheel effect,where alumni of successful companies
208、invest in the next generation of start-ups.Every indication is that the growth will continue,which makes it an exhilarating time to be involved in the industry.Im grateful to my colleagues at PSIK and Bain for putting together this valuable snapshot of CEE venture capital at a crucial moment,and I h
209、ope this chapter will persuade you to take a closer look at the strong prospects for the industry.Pawe KozubAssociate Partner,Bain&CompanyThe past few years have been an exciting time to be involved in Central and Eastern Europes venture capital industry,and all signs indicate that the boom is only
210、just beginning.The region is starting to produce unicorns at an impressive rate,and theres still room for the countries here to catch up with their Western European peers.Im sure that this comprehensive report will spur a number of conversations about the future of venture capital,and I look forward
211、 to exploring the ways that the Bain team can continue contributing to our clients success as they pursue the rich opportunities in this field.Venture capital in CEEWhile the private equity industry in Central and Eastern Europe is waiting to match its pre-GFC records,venture capitals current boom i
212、n CEE is unprecedentedand its 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.Thats the fastest growth rate for any region in Europe(see Figure 32).The value of funds raised by local GPs grew five times in 20
213、16 to 2017 and has continued to scale ever since with strong support from local LPs(see Figure 33).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.
214、30Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Note:CEE includes Bulgaria,Croatia,Czechia,Estonia,Hungary,Latvia,Lithuania,Poland,Romania,Slovakia,Slovenia,Serbia,Montenegro,North Macedonia,Bosnia and Herzegovina,Albania,Kosovo,Moldova,Ukraine,an
215、d BelarusSource:DealroomCEE HQCEE-born(HQ moved,stilloperating in the country of origin)Total VC investment in CEE(B,201021)Venture capital investment 2015 vs.2021 by country/region20100.120150.520192.320201.920214.19.1x33%37%173%64%201020 202021CAGRFrance4.9xUK5.4xWestern Europe5.8xGermany6.5xSwede
216、n6.6xSpain7.1xCEE9.1xNetherlands10.0 xNotes:Only VC fund-raising;excluding growth capitalSources:Invest Europe/EDC;Dealroom Total VC fund-raising in CEE by investor type(201221,EUR B)Regional VC funds2012(34%)0.12013(58%)0.12014(61%)0.12015(43%)(57%)0.12016(50%)(50%)0.12017(12%)(63%)(25%)0.62018(17%
217、)(15%)(18%)(7%)(12%)0.62019(24%)(8%)(10%)(52%)(5%)0.82020(6%)(10%)(19%)(11%)(34%)(20%)0.72021(11%)(12%)(9%)(58%)(11%)0.8OtherBanksCorporate investorsFund of funds&other asset managersFamily offices&private individualsGovernment agencies5xPFR VenturesTotal of about 0.6B allocated by VC funds funded b
218、y PFR Ventures Inovo VC Cogito Capital SMOK SpeedUp bValue Credo Lighthouse Reflex J&T Lead Solus Capital SuperAngel United Angels Tera Trind LAUNCHub BlackPeak 3TS(66%)(42%)(39%)(31%)Pan-regionalFigure 33:Global GPs fundraising is scaling quickly,with strong support of local LPsFigure 32:The value
219、of VC investments in CEE is skyrocketing,reaching 4.1B in 2021 and making CEE the fastest-growing VC market in Europe31Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Source:DealroomVC funding in CEE by round size in USD(percentage,201621)$250M+$100
220、250M$40100M(series C)$1540M(series B)$415M(series A)$04M(pre-seed and seed)2016(42%)(41%)(18%)100%2019(17%)(12%)(14%)(15%)(16%)(27%)100%2021(8%)(10%)(12%)(16%)(22%)(32%)100%Figure 34:Larger investment rounds have been increasing in share in CEE in the last five yearsSignificantly,not only is overall
221、 funding growing,but the size of investment rounds has also expanded.In 2016,there were no rounds larger than$40 million;pre-seed and seed rounds accounted for 42%of total funds raised(see Figure 34).By 2021,megarounds of$250 million or more made up 32%of the total.Thats reflected in the number of u
222、nicorns the region is now producing(see Figure 35).Almost all CEE countries have produced several unicornsfrom Skype,Bolt,and DocPlanner to UiPath,Payhawk,and GoTo.Whats more,this growth is built on solid foundations.As mentioned above,one of CEEs core assets is its deep pool of tech talent,shaped b
223、y robust educational systems in the hard sciences and engineering.Students and young professionals are expressing increasing interest in becoming entrepreneurs(see Figure 36),shaking off previous generations reluctance to embark on this career path.And perhaps most crucially,a flywheel effect is beg
224、inning to emerge in which alumni of the regions successful start-ups are now investing in and managing the next generation of companies.32Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.*Based on 2019 Skill Value reportranking obtained by analysing
225、21,000 results of quizzes and algorithm exercises done on SkillValue platformSources:Skill Value;Dealroom;literature search5%36%6%5%2%30%30%18%Directly after studies5 years after graduatingPolandEnglandItalyGermanyRankCountryScore index(%)1Slovakia2Mexico7Spain8Austria9Switzerland10Germany3Poland4Hu
226、ngary5Ukraine100%95%92%92%92%90%93%93%93%93%6CzechiaTop-quality tech talentsPopular entrepreneurial career pathWorld ranking of the countries with the best developers*(score in 2019)Share of students interested in becoming a start-up founderFigure 36:CEE has the right talent to fuel growth of tech b
227、usinessesNotes:Nordics include Sweden,Norway,and Denmark;CEE includes Bulgaria,Croatia,Czechia,Estonia,Hungary,Latvia,Lithuania,Poland,Romania,Slovakia,SloveniaSources:Dealroom;US Population DivisionNumber of companies that have reached a$1B valuation by location(201021)CEE unicorns20102020 cumulati
228、ve2021UK3179110Germany253257Nordics162743Israel182442France141630Switzerland51621CEE7714Spain48032247Population(M,2020)ExitedCurrent unicorns Skype Allegro Outfit7 Wirtualna Polska Pipedrive Wise Zemanta Exponea CD Projekt Playtech Looksery EPAM Systems Telerik AVG LogMeIn Avast InPost Li
229、veChat Netrisk.hu UiPath USTREAM G5 Games K PlayWay RWS Group Tresorit Nordeus Huuuge Socialbakers Melsoft Games Bolt Printful Eobuwie.pl SiteGround Veriff Vinted Zego Payhawk JetBrains Rohlik.cz eMAG Infobip DocPlanner Group ProductboardFigure 35:CEE is starting to become one of the most important
230、ecosystems in Europe,as illustrated by the number of local unicorns33Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Notes:Western Europe includes Austria,Belgium,Denmark,Finland,France,Germany,Greece,Ireland,Italy,Luxembourg,Netherlands,Portugal,Sp
231、ain,Sweden,Norway,Switzerland,UK;CEE includes Bulgaria,Croatia,Czechia,Estonia,Hungary,Latvia,Lithuania,Poland,Romania,Slovakia,SloveniaSource:DealroomCEE dominated by pre-seed and seed roundsTotal number of rounds in given fund-raising amount ranges in selected countries(number,2021)Western EuropeC
232、EE(51%)(22%)(14%)(6%)(4%)1,268UK(54%)(21%)(13%)(6%)(3%)3,549(53%)(18%)(14%)(7%)(4%)1,384(32%)(31%)(21%)(8%)(4%)1,117(70%)(19%)(7%)150Poland(70%)(19%)(7%)287(63%)(24%)(8%)160(63%)(24%)(9%)82Average WesternEurope countryGermanyFranceAverage CEEcountryEstoniaRomania$01M(pre-seed)$14M(seed)$415M(series
233、A)$1540M(series B)$40100M(series C)$100250M$250M+Figure 37:The VC ecosystem in CEE is still at an earlier stage of development compared with Western Europe,as illustrated by higher share of early-stage funding roundsThe current stage of Central and Eastern Europes VC ecosystem is shown by the share
234、of early-stage funding rounds,which remains higher than in Western Europe(see Figure 37).In 2021,pre-seed rounds made up as much as 70%of the total number of funding rounds on average for CEE countries,compared with 51%for Western European countries.Still,thats down from 80%in the previous year,and
235、a smaller share than in any year since 2010,indicating that the market is indeed maturing.A look at the regions unicorns also indicates that the VC industry has space to grow:44%of them were bootstrapped,more than twice the 20%rate for the EU as a whole.VC in the region is equivalent to 0.3%of GDP,l
236、ess than half the Western European rate of 0.62%(see Figure 38),though Estonia is a standout,with a remarkable 4.44%.In terms of the sources of capital,CEE boasts a healthy mix of local and international funds.Funding from the US is especially present in megarounds in the region,accounting for 85%of
237、 funds raised in rounds of$100 million or more(see Figure 39).Meanwhile,the European Investment Bank,the lending arm of the EU,and the European Investment Fund recently set up the European Tech Champions Initiative,which will manage a 10 billion,multi-investor fund of funds structure.The goal of the
238、 initiative is to develop a European ecosystem fostering the growth phase of innovative tech companies,mobilising private investors alongside public commitments.34Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Western EuropeSources:DealroomUS fundi
239、ng is increasing in CEE and is especially present in megaroundsCEE2015VC funding in CEE and Western Europe by investor source(percentage,201521)Round size funding in CEE by investor sources(percentage,201521 cumulative)20212021(19%)(33%)(45%)(3%)(23%)(31%)(37%)(8%)(30%)(32%)(27%)(12%)USRest of Europ
240、eDomesticRest of the worldSeed($14M)Series A($415M)Series B($1540M)Series C($40100M)Megarounds($100M+)(46%)(34%)(16%)(4%)(35%)(40%)(19%)(6%)(9%)(66%)(17%)(8%)(30%)(55%)(10%)(85%)(2%)(5%)(2%)(11%)CEERest of EuropeUSRest of the worldWestern EuropeNotes:Western Europe includes Austria,Belgium,Denmark,F
241、inland,France,Germany,Greece,Ireland,Italy,Luxembourg,Netherlands,Portugal,Spain,Sweden,Norway,Switzerland,and UK;CEE includes Bulgaria,Croatia,Czechia,Estonia,Hungary,Latvia,Lithuania,Poland,Romania,Slovakia,and Slovenia Sources:Dealroom;IMF;literature searchVC value as a percentage of GDP by count
242、ry of destination(percentage,2021)CEERegion averageSweden1.48%UnitedKingdom1.34%Denmark1.11%SwitzerlandGermanySpainGreeceItaly0.08%Estonia4.44%Lithuania0.79%Latvia0.67%Bulgaria0.58%Romania0.33%CroatiaCzechiaPolandHungarySlovakiaSloveniaNetherlands0.69%0.57%France0.52%0.49%0.34%0.18%0.29%0.22%0.13%0.
243、06%0.06%0.05%WesternEurope0.62%CEE0.30%Figure 39:The landscape of GPs making VC investments in CEE is diverse,with a mix of local and international playersFigure 38:VC funding as a percentage of GDP in CEE lags behind that of Western Europe35Private Equity and Venture Capital in Central and Eastern
244、EuropePSIK|PFR Ventures|Bain&Company,Inc.Notes:Percentage of GDP is indexed to Polish level of VC spending as a percentage of GDP in 2021;T0 is the time of a given country reaching Polish 2021 VC level;T4 is the level of country VC level four years since reaching current PL level Sources:Dealroom;IM
245、F;literature searchVC value as percentage of GDP in selected countries0.00.20.40.60.8%UKFranceSwedenIsraelT0T1T2T30.2%Poland VC as percentage of GDP0.1%0.70.2%1.00.2%1.31.70.3%2.1Poland VC Investment(EUR B)GermanyT4Selected countriesPoland 2021Possible path of Polish developmentPotential channel on
246、which Poland VC value could move in coming yearsFigure 40:Historic trajectories of Western Europe countries indicate potential for funding in CEE to grow about two to three times in the next four yearsA comparison with other ecosystems indicates that growth may be as fast as two to three times over
247、four years if the region follows the same trajectory as Western European ecosystems from this point in their development(see Figure 40).Although the technology advancement and other enablers do not position VC ecosystems in CEE to achieve performance like that of Israel,CEE could reach a trajectory
248、like that of Germany(see Figure 41).And as the global tech industry faces headwinds,the higher share of early-stage rounds(pre-seed,seed,and series A)in this region means investment activity may be relatively less affected.All these trends add up to a sustained period of healthy growth for the VC in
249、dustry in Central and Eastern Europe.36Private Equity and Venture Capital in Central and Eastern EuropePSIK|PFR Ventures|Bain&Company,Inc.Notes:Latest available data for 2019;State of the European Tech Report 2019;Atomico;DAXX for IsraelSources:Dealroom;OECD;DAXX;literature searchR&D expenditures as
250、 percentage of GDP(2020)5.44%1.71%13.14%1.99%1.39%Percentage of population with tertiary education50%50%31%25%33%Number of software developers per 1M people33k13k11k10k8kAverage hours worked per yearOther enablers1,7801,3701,3301,7001,770 Military spending on innovations dev&technical training Centr
251、alised innovation office Diaspora support London as a hub for European tech talent Good access to VC financing Home to multinational industrial companies Large internal market Relatively cheap and well-educated workforce Relatively cheap and well-educatedworkforce High level of foreign investmentVC
252、funding as percentage of GDP(2021)4.43%1.34%0.49%0.22%0.13%Active start-ups per 1M people89058522912189Unicorns created per 1M people5.21.80.70.40.3ReachableNot reachableReachable withstructural changesThe worst performanceThe best performanceFigure 41:Countries with more mature VC ecosystems still
253、outperform CEE on several technology advancement-related metrics,but the region is likely to gradually catch upFor more information,visit PFR VenturesPFR Ventures is a company managing funds of funds thattogether with private investors,business angels,and corporationsinvests in venture capital and p
254、rivate equity.The objective of PFR Ventures is to use this capital to support Polish innovative companies at various stages of development.PFR Ventures currently holds a portfolio of 60 funds that have made over 550 investments.pfrventures.pl/en/Polish Private Equity and Venture Capital Association(
255、PSIK)PSIK gathers private equity/venture capital investors active in Poland.Its mission is to promote and develop the private equity and venture capital industry in Poland and to represent the interests of the Polish PE/VC community in Poland and abroad.PSIK comprises 137 institutions:43 private equ
256、ity and venture capital management firms(full members)and 94 associate memberslaw and consulting companies,investors,and banks cooperating with the private equity and venture capital industry.psik.org.pl/en/Bold ideas.Bold teams.Extraordinary results.Bain&Company is a global consultancy that helps t
257、he worlds most ambitious change makers define the future.Across 65 offices in 40 countries,we work alongside our clients as one team with a shared ambition to achieve extraordinary results,outperform the competition,and redefine industries.We complement our tailored,integrated expertise with a vibra
258、nt ecosystem of digital innovators to deliver better,faster,and more enduring outcomes.Our 10-year commitment to invest more than$1 billion in pro bono services brings our talent,expertise,and insight to organizations tackling todays urgent challenges in education,racial equity,social justice,economic development,and the environment.Inwestorw KapitaowychPolskie Stowarzyszenie