M&A in Emerging Europe fell 17% in 2017 to €71.5bn, according to CMS/EMIS report

M&A in Emerging Europe fell 17% in 2017 to €71.5bn, according to CMS/EMIS report
Law firm CMS once again claimed top spot for the number of deals it advised on, with 57 transactions.
By bne IntelliNews January 24, 2018

Merger and acquisition deals in Emerging Europe fell by 17% to €71.5bn in 2017, with China becoming the largest external player for the first time, according to the annual survey by CMS and EMIS.

The report pointed to a pick-up of confidence in the second half of last year and predicts a strong 2018 for dealmaking. “We are already witnessing a healthy pipeline of activity at the start of 2018 with all signs pointing to another good year for M&A in the region,” said CMS partner Radivoje Petrikivic.

There was a 6.4% increase in the number of deals in 2017 to 2,113 but deal value fell because there were fewer megadeals, with only one transaction reaching €2bn compared to eight in 2016: the €7.5bn acquisition of a 14% stake in Rosneft by China’s CEFC.

That single transaction dominated China’s €7.7bn M&A in the region, which was 78% up on 2016’s figure, but slightly down on that record year in the number of transactions. Excluding Russia, almost half the Chinese deals in 2017 were in Poland.

US companies were the busiest foreign investors with 99 deals, with the value almost doubling to €2.96bn. UK dealmaking fell 58% to €2.19bn, which the report put down to Brexit and the fall in the value of the pound.

Within the region, dealmaking in Russia rose by nearly 5% to 671 in volume but fell by 15% to €36.7bn in value, though it was still just over half the region’s total. Of the region’s 20 largest deals, 12 were in Russia and eight involved Russian buyers, which all bought into other Russian-based companies, demonstrating Russian business’ narrowed focus amid international sanctions and a struggling home market. Overall, Russian companies made 603 acquisitions worth €22.5bn in Emerging Europe, 31% of the region’s total.

In Poland, the second most active market, the number of deals rose by 3% to 288, with the value falling by 5% to €10.6bn. Polish investors made 166 deals in the region worth €4.3bn, up 12%. The country remained the standout for initial public offerings, with eight issues, the highest since 2013, totalling almost €1.8bn.

The report says more big deals are in the pipeline in Poland, which could show that fears over the damage to the investment climate caused by the country’s rightwing populist government are exaggerated, or at least that this is causing some investors to leave and others to double down.

Turkey was up 11.5% in deal volume and 46% in value to €7.6bn but was still well below the pre-coup levels of 2012-13. In fourth place, Czech dealmaking fell 13% in volume and more than halved to €4.35bn after 2016’s record year.

Among the rising markets, dealmaking in Romania rose 13% by volume and 64% by value to €3.26bn as the country’s economy booms. Hungary had the biggest increase in the value of deals, up 126% to €2.7bn.

Real estate and construction was the most active sector in terms of the number of deals, followed by manufacturing, and then telecoms and IT. By value, mining (which includes oil and gas) was again the biggest, driven by a slew of large Russian deals, followed by real estate and construction, with manufacturing rising to third.

Private equity investment (which the report classifies very widely as any deal made by a non-strategic investor) was flat in terms of the number of deals but down 25% in value to €21.4bn.

Law firm CMS once again claimed top spot for the number of deals it advised on (57), with Dentons once again in second place with 44.