Emerging Europe megadeals push M&A value up 62% in 2016

By bne IntelliNews January 26, 2017

Mergers and acquisitions in Central and Eastern Europe rose 62% year-on-year to €86.7bn, the highest figure since 2013, according to the Emerging Europe M&A report published by law firm CMS and research company EMIS.

A clutch of “megadeals” at the end of the year – the sale of a stake in Russian oil major Rosneft and Asahi’s acquisition of a portfolio of Central European breweries – helped break a series of four consecutive years of declines in activity. Volume, however, slipped for the fifth consecutive year, by 7% to 1,985 transactions.

The biggest trend of the year was the emergence of substantial Asian investment in the region, particularly from China. Chinese investment in the region doubled to €4.4bn, pushing the country up to third in the ranking. In second place, the UK also doubled spending to €5.2bn, while US investment dropped by two thirds.

Deal activity rose significantly in Russia and Poland, which retained their first and second positions respectively, despite drops in transaction numbers. The biggest gainers were the Czech Republic and Romania, while activity in Turkey fell significantly as the country experienced a turbulent year politically and economically.

“Dealmakers acted cautiously as global economic growth remained weak, amid uncertainty about election and referendum results,” said Helen Rodwell, CEE Corporate Practice partner at CMS, which retained its narrow lead over Dentons in terms of M&A mandates in 2016, by 47 to 45. “Confidence picked up towards the end of 2016, setting the scene for robust M&A activity in 2017.”

Private equity fund activity (including exits) more than doubled in value, though there was a modest decrease in the volume of deals.

One emerging trend is that many domestic companies and private equity firms have reached the size where they can conduct cross-border deals of their own. Local firms or companies from Russia (575), the Czech Republic (159), Poland (146) and Turkey (112) were among the most active.

Across the region, the most active sectors were real estate and construction, with 357 deals worth €17.8bn (89% increase in deal value), followed by manufacturing, telecommunications and IT.

“In 2017 we expect to see more deals in the banking sector. Low profits, the ongoing restructuring of Greek lenders, the billions in fees imposed on financial institutions, new sector regulations, and the Italian banking crisis are all certain to spur even more disposals of equity ownership and separate NPL portfolios across emerging europe,” said Stefan Stoyanov, Global Head of M&A Database, EMIS.

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