Polish M&A transactions lead the region

(©Allegro)

The South Africa-based global internet and entertainment group bought Allegro in 2008 for about EUR1.75bn. The global internet and entertainment group hired Morgan Stanley to advise on the transaction.

„Its ability to grow while adapting to a changing market environment has ensured its success and it’s a business that continues to perform. We are extremely proud of Allegro’s team and success, and we are delighted that Cinven, Permira and Mid Europa will lead its next chapter. Our decision to sell Allegro is consistent with our strategy to find and realize value for our shareholders,” Naspers CEO Bob van Dijk said.

The proceeds from the sale of the businesses will be used to repay debt, fund the continued scaling of e-commerce businesses and finance new acquisitions.

Cape Town-based Naspers sought the sale of Allegro after receiving interest from potential buyers and was seen selling because the unit isn’t growing as fast as some of its other businesses. Naspers says Allegro has achieved substantial growth in revenue and profit, generating EUR654m in cash flow.

Unlike in many Western European countries, international platforms such as eBay or Amazon don’t hold a significant position in Poland. The largest online marketplace in this country is Allegro, which has over 14 million customers of which 90 per cent regularly shop on Allegro.pl.

Allegro is a part of Allegro Group, a major eCommerce company which also owns online payment system PayU, price comparison website Ceneo and other popular services such as OtoMoto and Bankier.

eBay plays a very minor role in the Polish ecommerce and Amazon had not been active there. Amazon has three large and ultra-modern logistics center in Wroclaw. Despite the failure of eBay in Poland, combined with the huge market dominance by Allegro, Amazon, right after the sale of Allegro, added a Polish version to its German website.  

The dominant position and popularity of Allegro in Poland are the result of the early market launch in 1999. Since then, it continued to expand its business and eventually became the undisputed market leader in Poland. Since 2006, the company expanded its business to other countries: Aukro.cz in the Czech Republic, TeszVesh.hu in Hungary, Molotok.ru in Russia and Aukro.ua in Ukraine.

Allegro was founded in 1999 and provides an online marketplace for companies and private sellers to sell their products to consumers, resulting in total sales of more than 850,000 items per day. Ceneo is the most popular online comparison shopping business in Poland.

The Cape Town-based group says it remains committed to its remaining assets in Poland − OLX, PayU, Otomoto and Otodom − and will continue to develop them with a goal to generate good returns in the future. PayU will also continue to provide payment processing services to Allegro under a multi-year agreement.

„Leveraging the Allegro platform, Naspers was able to build fast-growing businesses like OLX.pl and PayU.pl, which are valuable and contributing to enhanced returns.”

The transaction is subject to approval by anti-trust authorities, with closing expected before the end of the 2017 fiscal year. Until then, it is business as usual at Allegro and the team „remains focused on delivering the best e-commerce experience to its customers”.

„Allegro is a great business. It is a clear market leader and extremely well positioned to benefit from structural e-commerce drivers with a strong technology platform and strong reputation with its users,” says Cinven partner David Barker.

Richard Sanders, partner at Permira, says the firm believes Allegro is „ideally positioned to capture the next wave of growth in online and mobile commerce”.

Polish M&A transactions lead the region

Polish M&A will likely continue to spur in the real estate, telco, IT and health care sectors in 2016, industry insiders said. “You can also expect a reshuffle in the financial sector,” says Marta Kotwis, Key Account Director at Fordata, a Poznań-based Virtual Data Room (VDR) provider.

“We believe that the sharing economy, IT industry and solutions related to energy efficiency as well as cloud-based solutions with a strong focus on information security/data protection, for example Virtual Data Room, are the areas that will gain popularity. The use of VDR technology in transactions in Poland has already been increasing month on month,” adds Piotr Jankowski, Senior Account Executive at Fordata.

Meanwhile, domestic IPO issuance is projected to rise from EUR329m in 2014 to EUR411.1m in 2015, before peaking at EUR1.6bn in 2018.

“Investors are ceasing to consider the CEE as a homogeneous market, pointing their attention to selected markets such as Poland, the Czech Republic or Slovakia. Poland, in particular appeared to be a very active market throughout the last six months,” according to Andrew Kozlowski, CMS Warsaw office partner.

He pointed to sectors such as new technologies, media and communications, industrial-chemical, pharmaceuticals and the medical market, finance services, commodities, BPO and energy market were also active when it comes to M&A transactions.

Who’s selling

In 2015, the most active vendors on the Polish market were private persons and, on the other side, the most active buyers were PE/VC funds. This may indicate the increasingly common practice of the sale of businesses by their founders, who are faced with the problem of succession.

“One of the key factor contributing to the increase in the number of M&A in Poland is certainly a growing maturity in many sectors of the economy, forcing the consolidation of operating companies,” Kospin says.

“The first half of the year looked saw investors active in almost all industries: media, finance, real estate, banking, FMCG. The private equity, Polish private companies and the state were all active,“ Slawomir Janiszewski, managing partner of boutique investment Equinox Capital, said.

In the shadow of the larger transactions were also other deals. Paying EUR312.3m a Chinese firm bought a package of Polish wind power from EDF, while Amrest sold to a Mexican fund for EUR270.8m. TPG Capital has bought TriGranit for both of EUR300m and PKN Orlen was shopping overseas, acquiring 100 per cent of the Canadian company Kicking Horse Energy for more than PLN840m.

Over 20 per cent of transactions were in the manufacturing sector and more than 18 per cent in real estate. Many of ownership changes took place also in the last year in the telecommunications industry and IT (almost 16 per cent) and services (more than 10 per cent).

(©Allegro)

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