The Baltic states have the largest percentage of private equity and venture capital penetration in the 27-country European Union and the UK, according to private company data from S&P Global Market Intelligence.
The data measures what percentage of the total private companies in a country have private equity or venture capital investments. A higher percentage implies conditions that support business growth, such as level of entrepreneurship and innovation, GDP growth and commercial maturity.
Latvia, Lithuania and Estonia had the highest percentages in their respective private business sectors, with Latvia at 3.54%, Lithuania at 2.24% and Estonia at 1.34%, the data shows.
For comparison, the EU-27 combined has a private equity penetration rate of 0.49%, while the UK has a penetration rate of 0.35%. France has the most private equity-invested companies in the EU at 11,633 but has a penetration rate of 0.77%.
Venture funds active
The data also shows that the Baltic states have mainly smaller venture funding rounds, with the median deal size from January 2020 to July 21, 2023, at $1.3 million.
Measuring the monetary value of private equity investment as a percentage of GDP would rank the Baltic states below the EU average, said Rustam Kurmakaev, principal at Mid Europa Partners LLP in the UK. However, the Baltic states have structural drivers that make them attractive for private equity, according to Kurmakaev.
"You have very good economic growth, historically and projected, and also have the stability and transparency of EU institutions and single currency. Second, similar to other parts of Central Europe, [Baltic nations] do benefit from a well-educated workforce," Kurmakaev said.
Private equity buyouts have also been maturing in central Europe, including the Baltics, over the last 10 years, Kurmakaev said.
"There is a good availability of credit players locally who are quite sophisticated. So it's becoming more and more easy to basically come in there and do more sizable deals," Kurmakaev said.
MidEuropa made two recent investments involving central Europe. In late 2022, it bought a majority stake in ophthalmology business Optegra UK Ltd. which operates in the UK, Poland and Czechia, and in 2021, it acquired UAB Pigu, the largest regional online marketplace operating across the three Baltic countries — a deal Kurmakaev worked on.
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Technology, media and telecommunications is most attractive sector
Technology, media and telecommunications (TMT) is the most invested-in sector across the EU, and that trend continues in 2023.
In the first half, 42% of all private equity investments were in the TMT sector, Market Intelligence data shows.
The largest TMT deal in the EU-27 so far in 2023 was Silver Lake Technology Management LLC's March acquisition of Germany-based software developer Software AG for about $2.87 billion.
