The growth of family offices in CEE reflects the global rise in family wealth, which is expected to continue. Across the region, their numbers have swelled. The factors behind this increase are varied: greater wealth concentration, transfers of generational wealth, liquidity events arising from the sale of family businesses, and the move towards customized investment strategies. Typically, family offices invest through both direct and indirect investments with pockets of local capital around the CEE region now being deployed domestically and regionally, across western Europe and further afield.
We see an increasing number of partnering of private equity houses with family-owned offices or groups that operate together to become successful in co-investing.
Helen Rodwell
One prominent example is the Czech businessman Daniel Křetínský, who recently purchased Royal Mail in the UK, in addition to his shareholding in English football club, West Ham United. Previously, he acquired strategic stakes in Le Monde in France and Metro in Germany, as well as a range of energy assets. "That's really a growing phenomenon," explains Helen Rodwell, Partner at CMS in the Czech Republic. "It's not new, of course, but every year we see that our client base is more and more based on local clients who deploy capital in the region, or abroad, and in the process, build Central European champions."
Inevitably, investment flows by family offices work both ways. In terms of investment into CEE, family offices are also emerging as a growing class of investors which increasingly operate in the role of local partner, co-investing alongside international investors, often in the larger, more mature markets across the region.
"Many of them have become much more than family offices," explains Helen Rodwell. "They are large financial groups. We see an increasing number of partnering of private equity houses with family-owned offices or groups that operate together to become successful in co-investing."
They often originate as small, family-owned businesses that have evolved into investment conglomerates, serving as vehicles for channelling their wealth into other assets.
Velizar Velikov, Head of M&A Database at EMIS
"Such teaming up is a distinct trend in the M&A market in CEE, particularly in certain sectors where the asset sizes are too big for a single investor solution. PE houses can also benefit from the local network and expertise in a family office – so teaming up to buy and build makes good business sense. The trend is also a sign of the maturity of the CEE market."
Velizar Velikov, EMIS Head of M&A Database at EMIS, points to the evolution of family offices. "They often originate as small, family-owned businesses that have evolved into investment conglomerates, serving as vehicles for channelling their wealth into other assets," he says.
As examples, he identifies "the Paval brothers in Romania, who built a successful business which they have monetised and then invested in other areas, and it's a similar story with the richest family in Bulgaria, the Domuschiev brothers. We also have founders of technology companies, software startups, selling their business and then reinvesting the profits. In the case of Telerik in Bulgaria, there were several founders, who sold their business successfully and then invested as angel investors, as well as making larger investments on their own."
A lot of Polish families became wealthy and started to invest beyond their core businesses. They have a unique understanding of how to do business successfully and are much more flexible than traditional investors on the market.
Ryszard Manteuffel
In Poland, Ryszard Manteuffel, Partner at CMS says: "A lot of Polish families became wealthy and started to invest beyond their core businesses. They have unique understanding of how to do business successfully and are much more flexible than traditional investors on the market. They make decision quicker as usually they do not need formal committees or corporate approval. They operate their family offices alongside private equity, supplementing their investment, and sometimes coinvesting. These Polish family offices are also investing abroad."
Ryszard Manteuffel adds: "Clients first look cross border to the immediate neighbouring countries. Romania has become popular - a lot of people see big business opportunities there with the potential to grow. There is also investment into Poland from Lithuania, Romania, the Czech Republic, and Hungary, some of which is from family offices. We understand each other better, and we have a similar culture. Notably, there is also investment into western Europe, because some family offices want to expand their investments into more developed markets."
Legislative change has been a major influencing factor, according to Ryszard Manteuffel. "We had a Polish Family Foundation Act, which was founded on very favourable terms," he says. "As a consequence, many wealthy people created family foundations through which they choose to invest. There's a huge increase in these family offices investing in countries across the CEE region. The trend in Poland has certainly been clear: family office investments have increased, and they look set to continue."
The rise of investment by family offices in CEE signals a significant shift in the region's financial landscape. Reflecting the increased sophistication of CEE markets, they are able to invest both locally and internationally. In partnership with international investors and by leveraging their local networks, family offices are not only reshaping the regional M&A market, but also fostering cross-border collaboration and innovation.
As this trend continues to evolve, family offices are poised to play an even more prominent role in the region's economic growth. Underpinned by favourable legislative changes and increasing opportunities for regional cooperation, family offices will continue to act as a driving force in redefining the CEE investment ecosystem.
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