International interest picks up in Central & Eastern Europe

The highlight for Central & Eastern European private equity came at the tail end of the year when Mid Europa sold Polish healthcare provider Lux Med in a trade sale to Bupa, generating 2.5x money and 20% IRR for the GP. It marked the largest private equity exit in Poland since Mid Europa's €600m sale of Aster in 2010, and the largest private equity deal in the country in 2012. Crucially, it also highlighted the international allure Polish businesses can have - the first round of bidding attracted other trade buyers, as well as private equity houses.

Just days earlier, Arx announced the sale of another regional healthcare business, Czech Republic's Lexum, to British healthcare investor Moonray. And further east, Horizon Capital sold Ukranian life insurance company Fidem Life to Dutch asset management company Aegon.

Exits provide proof of profits
Now more than ever, exits are crucial to oil the investor relations machine. In fact, the past two years, despite the economic slump, have seen at least 80 exits across Europe that generated strong returns (IRR of 20% or more; multiple of at least 2x), according to unquote" data. Exits are extraordinarily difficult to secure in a tough backdrop, but GPs are desperate to ensure their investors are feeling fulfilled. As record numbers of GPs seek LP commitments, sufficient distributions are a key prerequisite. This is the case globally and the reinvigorated appetite of international buyers should go a way to convincing LPs of CEE's merits.

There are signs that this year will continue the momentum of 2012: in Turkey, BC Partners is eyeing up a sale of supermarket chain Migros, which could fetch a whopping $4bn from potential buyers Walmart and Carrefour, according to reports. And international appetite for hospital chains extends to Turkey, with two private equity-backed businesses on the block: ADM-, PGGM- and IFC-backed Universal Saglik Yatirimlari and Carlyle's Medical Park Saglik Hizmetleri both seeking buyers.

LPs are noting the exit momentum, with a rare fund announcement for CEE lifting spirits in January when Lodz-based SME investor Avallon hit a €60m first close for its second fund. The fund is targeting €107m and includes up to €27m from EBRD. Towards the end of last summer, Enterprise Investors hit a stealth close on its seventh fund, with market sources suggesting it has around €300m of commitments.

At long last, sentiment for private equity in Central & Eastern Europe is picking up.

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• Topics
• CEE
• Fundraising
• Exits
• Mid Europa Partners
• Top story
• Arx Equity Partners
• BC Partners