CEE private equity: Volume up, deal value down

Although every significant nation in the CEE private equity market saw an increase in deal volume in 2007 over 2006, with the exception of Turkey, many saw a drop in overall deal value, according to ISI Emerging Markets’ Dealwatch. For example, the Czech Republic hosted 24 deals in 2007 and only 10 in 2006. But the value of those 10 deals was $2.3 billion, whereas only $775.9 million was spent on the 24 deals last year. Likewise, there were 31 deals for a total of $587.4 million last year in Romania, and only 12 deals in 2006, but for a total of $618.9 million.

The overall increase in deal value over the region was mainly attributable to a handful of large transactions in a few individual markets. Poland had 20 deals for $257.7 million in 2006, and 49 deals for $2.2 billion in 2007, the year that Mid-Europa bought Medycyna Rodzinna, Poland’s largest network of medical clinics. Similarly, Bulgaria’s overall deal value has increased from $178.2 million from 10 deals in 2006 to $2.9 billion from 14 deals in 2007. Last year, AIG secured Bulgaria’s dominant telecoms company BTC in a deal worth €1.66 billion.

The fact that many countries saw a smaller average deal value attached to a larger volume of deals is a sign that the driving force behind the CEE private equity market lies in the mid-market, especially in light of the credit crunch severely limiting the availability of leverage for larger deals.