According to a report by Bureau van Dijk in Central and Southeast Europe (CSE) value for the three months under review was supported by three deals each worth more than USD2,000m and which together accounted for over a third of the quarter’s total value. However, despite this, the decline still appeared particularly stark as the value of deals recorded in Q4’17 was the highest since Q4’16’s impressive result of USD76,260m.
Growth was stripped away from volume, which not only fell by 19 per cent q/q, but was also at its lowest recorded level since Q1’07, when just 1,666 deals were announced.
Companies based in Russia featured in 12 of the top 20 CSE deals by value for Q1’18, and accounted for two of the three largest deals announced during the three months under review: VTB Bank’s purchase of a minority stake in supermarket chain operator Magnit for USD2,624m, and the USD2,378m merger of Anadolu Efes and Anheuser-Busch InBev’s Russian and Ukrainian businesses.
While Russia dominated the top 20 by value, the quarter’s most valuable deal instead targeted companies located in Hungary, Bulgaria, Serbia and Montenegro, as private equity firm PPF Group shelled out USD3,429m for Telenor’s CSE assets in a sale that will see the Dutch mobile telecommunications services provider exiting the region to focus on its Scandinavian and Asian interests. PE and VC investment in CSE increases in Q1’18.
The value of PE and VC deals targeting companies based in the region jumped 49 per cent from USD2,810m in Q4 ‘17 to USD4,196m in Q1’18. This represents one of the highest results recorded in recent years, surpassed only by Q1’17 (USD5,867m), Q4’15 (USD7,664m) and Q4’13 (USD10,141m).
PE and VC volume during the Q1’18 under review also improved, though only marginally, as deal making rose to 108 in Q1’18 (Q4’17: 101). At USD3,429m, the aforementioned acquisition of Telenor’s CSE telecommunications assets by PPF Group was the only deal in Q1’18 that was worth more than USD360m.
This purchase represented 82 per cent of total PE and VC investment in the region for the three months under review. It was also a significant factor in why Bulgaria and Hungary topped the country rankings in terms of PE and VC value after being targeted in deals worth a total USD3,658m and USD3,468m, respectively. Russian companies were the most prolific targets after signing off on 64 deals over the three months, but were sixth by value (USD90m), suggesting investors opted for lower aggregate valuations over individual high-value deals. Russia top by value, Poland leads by volume.
Russian companies were the main targets by value in Q1’18 after being targeted in USD14,682m-worth of deals, or 59 per cent of the total M&A value recorded for the CSE over the three months (USD24,789m). This represented a decline both q/q (Q4’17: USD27,427m) and y/y (Q1’17: USD19,697m). However, value was not completely stripped away as Q1 was nearly double the USD7,977m recorded in Q2’17 and triples that of Q1’15 (USD4,767m). While Russia led by value, Polish companies were the most prolific dealmakers in Q1’18, with 539 deals worth an aggregate USD2,906m, though this was also down from 668 deals in Q4’17. Russia was second by volume with 428 deals, while the Ukraine was third with 227 deals.
Central and Southeast Europe remains a key target for international investors, whether they want to tap its markets directly or use them to produce goods for export, a report by law firm CMS on merger and acquisition (M&A) deals in the region shows. „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 activity in the region,” the authors of the report commented. Buoyant economic activity and GDP growth across core markets in CSE spurred a stellar level of deal flow in the region, up 6 per cent on 2016, they noted.
Romania saw a healthy uptick in M&A activity, with a 13 per cent increase in deal volume and 64 per cent increase in value, according to the report.
China became the largest foreign investor in emerging Europe in 2017, increasing the value of its investments into the region by 78 per cent, after a 96 per cent rise in 2016. „The 2017 figures are skewed by the CEFC China Energy-Rosneft deal, but there is no doubt that CSE is firmly on the radar of Chinese investors and will play an important role in its One Belt One Road initiative to improve infrastructure within key trading partners,” the authors of CMS report commented.
Real estate and construction topped the table by number of deals, whereas mining, including oil and gas, was the dominant sector by value in 2017, according to the report. You can read the full report
Poland tops the list
The highest number of mergers and acquisitions was recorded in Poland among eleven countries of Central and Southeast Europe, including Bulgaria, Croatia, the Czech Republic, Greece, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia and Turkey, according to the latest M&A Barometer report by EY.
The total number of transactions came to 1,132 across the region, a 2.8 per cent decrease compared with 2016; however, the total value of the CSE M&A market increased to USD50.9bn, up by 6.6 per cent on the previous year. Poland came first with an estimated USD13.8bn, followed by the Czech Republic (USD11.5bn) and Turkey (USD7.7bn). The transactions go across all sectors including real estate, manufacturing, IT, food and beverages, energy and mining, however real estate took the largest share both in terms of the number of transactions and in terms of their total value (14 per cent). Real Estate was followed by manufacturing (12 per cent) and IT (11 per cent).
The largest transaction in the RE sector was the acquisition of 28 retail properties, consisting of retail centers, Power Park centers, hypermarkets and DIY stores by the Netherlands-based Chariot Top Group for USD1,189m. Other large transactions in 2017 included the acquisition of eleven shopping centers in the Czech Republic, Hungary, Poland and Romania by CPI Property Group for USD690m and the acquisition of Magnolia Park shopping center in Poland by the German real estate investor Union Investment Real Estate for USD447m. The average value of those deals with a disclosed value in this sector was USD98m in 2017.
