The findings of this report are based on historical 2015-2020 data, analysed by Mazars in association with Mergermarket data.
CEE continues to attract strong inbound investment
International buyers continued to be attracted to the region, accounting for 49% of total deal value – investing €23.9bn – in line with previous years. Meanwhile, cross-border transactions within the region grew to account for 13% of overall value, up from 6% in 2019 – the highest level in the past five years.
A skilled multilingual workforce that still offers lower (if rising) wage costs than the rest of Europe, combined with access to the huge EU market and a growing middle class, makes the CEE region attractive to investors.
Four countries dominate the market
The top four countries in deal value terms remained the same as 2019: Russia, Poland, the Czech Republic and Austria. The region’s largest economy, Russia, accounted for four of the year’s ten largest transactions. Meanwhile, the biggest deal of the year took place in Austria, the most affluent of the CEE markets. This deal saw Austrian oil company OMV increase its stake in petrochemicals company Borealis from 36% to 75% for €5.712bn.
Private equity activity saw 40% rise
Private equity remained extremely active in 2020: total disclosed buyout value in the region saw a 40% year-on-year rise to €3.9bn. PE exits also fared well, with total disclosed value coming to €8.1bn, an 11% rise on 2019.
Lukáš Hruboň, Head of the Transaction Advisory Department at Mazars in the Czech Republic, says “Covid-19 is actually creating more opportunities for private equity and financial investors, because they have generally sufficient liquidity and HR resources to carry out acquisitions”.
Economic liberalisation has led to M&A opportunities
Teit Gjini, Managing Partner at Mazars in Albania, says “The majority of businesses in the region are a maximum of 30 years old. The generation who built up these businesses now are coming up to 55 to 65 of age and their natural exit time is coming over the next decade, which should increase M&A over the next decade.”
Examples of recent succession-driven M&A include Poland-based Enterprise Investor’s investments in Anwim, the country’s largest independent operator of petrol stations, founded in 1992. Enterprise Investor first invested in Anwim in 2018 and increased its stake in November 2020.
Tech sector flourished amid the pandemic
The highest number of inbound deals to the CEE region were technology-based, hitting a total of 57 deals worth €2.5bn – a year-on-year rise of 12% by volume, and 34% by value. The biggest inbound deal of the year saw Polish telco PLAY, under its new ownership, sell a 60% stake in its 7000 tower sites to Spain’s Cellnex.
Positive perspectives for coming months
The IMF forecasts the GDP of Eastern Europe to grow at a rate of 3.7% in 2021, after contracting by 4.6% in 2020, supported by roll-out of vaccines and continued government support for economies. Some of the region’s economies are expected to grow at higher rates – the Czech Republic is expected to grow at a rate of 5.1%, and Poland at 4.6%.
Zoltán Benedek, Partner at Mazars in Hungary, sees a positive year ahead for the region: “We take the view that as vaccination comes and life returns to normal, if financing is affordable, it’s natural that M&A will grow and return to the levels of 2018-2019. And the positivity is based on a boom we’ve seen in early 2021.”
To read the full report ‘Investing in CEE: Inbound M&A 2020/2021' go here.