MF PE Investing in Eastern Europe/Baltic States
Hi all,
Curious to gauge the room on if anyone has any information regarding MFs that have investing arms in Eastern Europe, namely the Baltic States (primarily Lithuania) and Poland. Any information welcome here as I understand this is a relatively small niche. Fund sizes? Office Locations? Any US based funds deploying here? Classified in emerging markets funds? Growth oriented? Industries? Return profiles? Which IBs do sponsors work with? Is English fluency enough to work at a shop that deploys in these regions or would Swedish/Polish/German/Lithuanian be a must? Etc.
Thanks everyone and apologies if I'm being a bit broad.
bump, would be very interested to find out myself. I know some of larger banks have a couple energy deals in the area (e.g. Macquarie's GIG bought a wind farm earlier this year from EnerCap), but unsure about other banking/PE activity.
I came across this PDF today. Nothing here really on any MF activity. Perhaps there isn't any?
https://www2.deloitte.com/content/dam/Deloitte/lv/Documents/about-deloi…
Often tough as you have to deal with Local currencies, overall size of the market, corruption/importance of government ties etc. Now if you look into it here are few deals that come into mind: Allegro (Poland), Avast (Czech), Olympic Entertainment (Baltics), United Group (Bulgaria I think). But broadly MF funds don’t really look into these regionds - would be a bit of a waste of time to focus on this when you have a large opportunity set to deploy your capital very well in Western European countries
You would think that the insane multiples GPs are paying to deploy capital these days in Western Europe/US would incentivize them to start looking east. I specifically mention the Baltic States because although their populations are small they all:
1) Have access to the broader EU market as all are EU members
2) All 3 have relatively cheap labor (Lithuania, Latvia)
3) All 3 are now part of the Eurozone
4) All 3 have relatively low corruption compared to the rest of Eastern Europe and especially the Balkans.
5) All 3's GDP has grown rapidly over the past decade, especially Lithuania.
6) Exploding scene of tech startups (Tallinn) and fintech and marketing startups (Vilnius) could create a ripe acquisition market for potentially highly leverageable SaaS companies at lower multiples compared to peers in "more favorable" geographies. (Maybe 8-13x instead of 15-25x in the States?)
Seems like a great opportunity to acquire at low multiples and/or add on to existing platforms in an underinvested market.
But GPs who are from the Eastern Europe region / wish to deploy they capital there have a really hard time explaining this to their LPs, who might be across the ocean in the US / Canada.
It is a pretty tough sale to convince someone that investing in Lithuania, Poland or Czech Republic carries no more significant risks than acquiring a business in Germany / France, especially if that is someone from another continent.
Nobody said that the risks wouldn't be substantially higher than in Germany/France, hence why the return profile may be multiples more attractive because of potentially far superior entry multiples.
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