The disruption caused by Covid-19 to CEE’s M&A market was short-lived as dealmaking returned to the fore in the second half of the year, according to a new report published by Mazars in association with Mergermarket.
The report, Investing in CEE: Inbound M&A Report 2020/2021, offers an overview of inbound M&A activity in the CEE region throughout 2020 and looks ahead to the challenges and opportunities in the coming months.
Deal value in the CEE region rose by 11% to €49.2bn, compared to 2019, even as volume dropped by 16% to a total of 648 transactions. This rise in deal value, in spite of the global pandemic, highlights the enduring appeal of the region for investors interested in big-ticket deals. When not including Russia, the region’s largest economy, recorded deal value figures in 2020 saw a 28% year-on-year increase.
International buyers continue to be attracted to the region, accounting for 49% of total deal value – investing €23.9bn – in line with previous years. Fabrice Demarigny, Global Head of Financial Advisory Services, Mazars, highlights how “on a global level, the CEE picture is one of stability. The region continues to attract a strong and steady flow of inbound investment from around the world.”
Private equity remained extremely active in 2020, with total disclosed buyouts in the region seeing a 40% year-on-year rise to €3.9bn. Private equity exits also fared well, with total disclosed value coming to €8.1bn, a 11% rise on 2019.
Covid-19 is actually creating more opportunities for private equity and financial investors, because they generally have sufficient liquidity and HR resources to carry out acquisitions.
As Covid-19 vaccines continue to be rolled out, it is hoped that the second half of 2021 will offer a more stable dealmaking environment. However, risks from new waves of the virus, international disputes, and unexpected economic shocks are ever-present.
Nonetheless, Michel Kiviatkowski, CEE Leader of Financial Advisory Services, Mazars points to a positive year for the region, “having weathered 2020 so well, and with its competitive advantages coming ever more to the fore, CEE is well-placed to be one of the global centres for M&A.”
“The M&A market, just like the real and financial economy, goes through structural changes regarding the appetite for risk of some investors and access to finances, the general (average) decrease in valuation and increased consolidation activity in fields heavily affected by COVID-19,” anticipates Lukas Hrubon, Head of M&A at Mazars Czech Republic.
Further key findings from the report include:
- Four countries continue to dominate the market. The top four countries in deal value terms remained the same as in 2019 – Russia, Poland, the Czech Republic, and Austria. The region’s biggest market, 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.
- The tech sector flourishes amidst 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. In terms of inbound deal value, energy and utilities remained in the top spot, accounting for €9.1bn – a 20% rise year on year.
- Intraregional deals are on the rise. 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.
The full report can be downloaded HERE