Private Equity in Central and Eastern Europe: The Early Years

Abstract

The decade after the fall of the Berlin Wall saw several Central and Eastern European countries begin the process of transforming their societies and economies. Their private sectors, now unfettered, took off, fueled by the unprecedented expansion of existing businesses, the formation of new companies and the privatization of state-owned enterprises. The private equity (PE) investment model, developed in the USA and spreading around the world, which brings to private businesses that are seeking capital not only the money but also value-adding support for their management, looked to be a useful tool for the Emerging Markets. PE’s smooth functioning, however, depends on the experience of the various parties involved in the investment transactions and in a functioning infrastructure of laws, capital markets, and supporting services. These were all in short supply in the Emerging Markets. PE in the region worked through its start-up challenges to make its contribution to the new economies.