Central and Southeast Europe’s M&A value up in 2017

(geralt, CC)

Poland was the third spot in the CSE region with USD774m, despite topping the volume rankings with 551 deals, in the Q3’17, according to a report by Zephyr. The first was Russia with 354 and the second was Czech Republic with 120.

However, Russian M&A targets featured in 16 of the top 20 deals by value announced. The largest was worth USD9,100m when CEFC China Energy agreed to acquire Neftyanaya Kompaniya Rosneft in September. This was followed by a USD6,838m capital increase by Bank Finansovaya Korporatsiya Otkrytie, in which Tsentralnyi Bank Rossiiskoi Federatsii participated.

The two deals combined accounted for 54 per cent of total deal making in the quarter. The third-placed transaction was some way behind and was also the largest with a non-Russian target as OTP Bank Romania bought Banca Romaneasca for USD756m.

Other countries in the region targeted in high value deals during Q3 included Hungary and Bulgaria.

“Deals involving companies located in the CSE region performed fairly well, as the M&A value was up on Q3’16 and Q2’17. Undoubtedly this quarter’s results are lower than Q2, but there are encouraging signs to suggest acquirers are prepared to pay high prices for the right targets in the run up to the end of the year,” Lisa Wright, Zephyr director, commented.

Private Equity and Venture Capital

In private equity and venture capital deal making both volume and value were down in Q3’17. In total, 47 deals worth an aggregate USD50m were announced over the course of the three months. In terms of volume this represented a 42 per cent decline on the 81 deals agreed in Q2’17 and 53 per cent from 99 deals in Q3’16. The drop was even steeper by value, which slid 93 per cent from USD721m in Q2’17 and 74 per cent from USD196m in Q3’16.

The lack of individual high value deals held results down in Q3; the region’s most valuable PE and VC deal was worth just USD17m when Konzum Befektetesi es Vagyonkezelo and Konzum PE Magantokealapot agreed to take their combined stake in Hungarian real estate firm Appeninn Vagyonkezelo Holding to 83 per cent. This deal accounted for 34 per cent of total PE and VC value in Q3.

“Private equity and venture capital played an important role in CEEʼs transition to a market economy, by improving corporate governance and efficiency, rebranding products, and so on,” said Anikó Kircsi, head of corporate, M&A and Private Equity at CMS quoted by Mergermarket.

Novatek accounted for the largest 2017 CEE deal by value after Volga increased its 14 per cent stake to 23 per cent for USD3,350m. Second place was taken by Yunaited Kepital Partners Edvaizori selling USD2,946m-worth of preferred shares in Transneft to Negosudarstvennyi Pensionnyi Fond Gazfond Pensionnye Nakopleniya, Gazprombank-Upravlenie Aktivami and Russia-China Investment Fund.

In the Q2’17 Polish companies were dominant both on the sell and the buy-side. Foreign investors accounted for 27 per cent and represented mainly European countries. However, we anticipate that in the second half of the year there will be several cross-border transactions worth noticing. Poland is a good bridgehead for Asian companies for further expansion. In addition, large transactions from 2016 put Poland “on the radar” of foreign funds. Poland is not yet their “must have,” but is definitely being closely watched.

M&A grows 10 per cent in CSE

According to the recent EY M&A Barometer, total estimated M&A deal value in CSE in 2016 was EUR42.6b (USD47.7bn), an increase of 10.7 per cent on the previous year. M&A activity in Central and Southeast Europe was strong, with 98 per cent of dealmakers in the region indicating they would continue to invest in the market, according to a report by Mergermarket and Wolf Theiss.

The Mergermarket “Corporate Monitor” report found that M&A activity in CSE was lively in 2016 amid global economic uncertainty, with deal value reaching EUR38.3bn, up 62 per cent from EUR23.6bn in 2015. “The CSE region is still offering better growth prospects than the rest of Europe, and PE investors have rewarded it with record deal value,” said Levente Zsembery, HVCA chairman and CEO of X-Ventures.

“Our latest M&A Barometer results show not only a strong M&A year in 2016 for the region as a whole, but also Hungary as a particularly attractive target for financial investors, with 32 per cent of all deals going to financial investors, a figure rivaled only by Slovakia,” said Margaret Dezse, leading partner of Transaction Advisory Service at EY.

Meantime, the volume and value of global M&A declined in the Q3’17. In total there were 19,916 deals worth a combined USD980,156m announced over the course of the three months. In terms of volume this represents an 84 per cent decline on the 24,972 deals announced in Q2, while value fell 18 per cent from USD1,2bn over the same timeframe.

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