Investors no longer regard Central and Eastern Europe as a coherent investment area as countries in the region present increasingly different risk profiles, according to CMS’s Emerging Europe M&A Report 2015/2016, published by in conjunction with EMIS.
The report reveals that while the CEE M&A market overall was down on 2014, a number of markets saw increases in 2015 in both deal value and volume.
Helen Rodwell, Partner, CMS Prague, says: “Political changes can be seen to have a direct, and often immediate, impact on the levels of new investment and the sustainability of investments. The net result for the region may be neutral, however, as investment is simply diverted to other CEE countries, rather than withdrawn”.
Stefan Stoyanov, Global head of M&A database, EMIS, adds: “Looking ahead to 2016, we expect a year of respite for emerging Europe M&A. Political risks remain, but many external shocks have been curbed or at least taken into account. On the private equity front, ripe portfolios and a flight to higher returns are likely to spur more deals in the region.”
While the 2015 global M&A market saw more deals with more value than any year since 2007, CEE was relatively flat with a 3 per cent decline in announced deals (2,138 transactions), but a sharper 15 per cent decline in total value (from EUR63 billion to EUR53,5 billion). Poland, Hungary, Serbia and Bosnia and Herzegovina saw an increase in deals – both value and volume – from 2014.
A total of 288 deals were announced (a 16 per cent increase), more than half of which constituted new PE entries. The largest transactions predominantly attracted US and UK investors.
Radivoje Petrikić, Partner, CMS Vienna, says: “Private equity funds are traditionally characterised by a greater risk appetite than corporate players. It should be expected that funds will to a large extent shape the situation on the M&A market in the region in the coming months”.
In 2015 US based investors increased their M&A activity in the region by 61 per cent in value and 9 per cent in volume with 127 deals valued at almost EUR4 billion.
Helen Rodwell, Partner, CMS Prague, says: “The most active foreign investors in CEE in 2015 were from the US. This is not surprising, given the strength of the dollar against the Euro, and is a consistent trend across the European M&A market. A new wave of investment from China and a developing interest from South Korea was also apparent.”
CEE also saw more interest from German (a 22 per cent increase in volume to 88 transactions) and UK investors (a 23 per cent increase in value of transactions closed by UK–based buyers to EUR2.5 billion).
Manufacturing was the most targeted sector with 343 deals for a total of EUR8.9 billion (14 per cent increase), followed by Telecoms & IT and Real Estate with 298 and 263 deals for EUR5.7 billion and EUR8.3 billion, respectively.