21 January 2021
Emerging Europe M&A Report 2020/2021
In 2020 we counted 1,705 deals with a total value of EUR 60,80bn in emerging Europe, respective year-on-year decreases of 12.9% and 16%. It will not come as a surprise that this is the lowest number of deals for the region in the ten editions of this report that we have published. Then again, after a year characterised by the COVID-19 pandemic, in which deals were protracted, postponed or simply abandoned, it is probably not as bad as many of us may have imagined.While deal numbers in Q4 remained subdued, we experienced the highest deal value for the final quarter of the year since 2016.After many years of decline, in recent years the annual dealflow in emerging Europe had started to steadily settle around the 2,000 mark. In last year’s report, we predicted that the region would maintain its attractiveness to investors and we had great confidence in the deal pipeline. We felt that uncertainties around China-US trade relations, Brexit and the US presidential elections would have little impact on the region’s dealflow. As the year showed, global political uncertainties are no competition for a pandemic when it comes to slowing down M&A activity.However, deals did continue and compared to other global emerging markets, such as Emerging Asia and Latin America, the region performed quite well.The Emerging Europe M&A Report takes a closer look at the trends and data on a country-by-country and on a sector basis. The impact of the economic slowdown was relatively evenly spread across the region, but there are always some countries that buck the trend. Poland experienced a year-on-year increase in deal volume while witnessing the highest deal value compared to 2019.South-eastern Europe was quite stable overall with markets such as Romania, Bulgaria and Croatia all seeing only modest drops in deal volumes. From the usual top performers, Czech Republic was probably the hardest hit with a 24,7% decrease in transactions; however, these are still better numbers than the country posted in 2012 in the slipstream of the financial crisis and as reported in the CMS Emerging Europe M&A Report at the time.A great deal has been written about winners and losers in terms of sectors, rather than focusing on some of these unforeseen developments, the articles in the report focus on some of the trends that had set in before the pandemic hit. In fact, some of these developments were accelerated by it: the advance of Telecoms & IT in terms of deal volume—taking the top spot from Real Estate & Construction—and continued investment in renewable energy, driven by climate goals, the demand of clean energy by technology giants, and the overall drive for sustainability.Two articles provide a more detailed look into how specific companies are faring, a close-up on the Croatian conglomerate Fortenova and where it stands two years after its restructuring, and a fireside chat with Tereza Ber, general counsel at Zentiva, about the company’s takeover of the CEE business of Alvogen.We also take a look at the region’s IPO activity. The Warsaw-listing of Allegro is a testimony not only to the success of ecommerce in these new times, but also to the increased interest in an exit through the stock exchange. After seeing only 14 IPOs in 2019, this rebounded to 26 in 2020. Through dual-track sales processes sellers want to make the most of the competition between a trade sale and IPO, and with new records set on stock exchanges throughout the world towards the end of 2020, it will likely remain an attractive prospect.One development that we noted in 2019 did reverse last year. While cross-border investment into the region decreased by 34.3%, domestic deal activity picked up by 18.4%, reaching a total of 764 and 941 transactions respectively. Overall, investors based closer to the region remained more active than those further away, and in particular investors from the US, China and Japan made fewer acquisitions in emerging Europe. We look at what keeps attracting western European investors to the region.The restrictions on our freedom forced us to live differently: we work from home, shop online and meet friends virtually. Although a vaccine may soon allow us to return to “normal”, the last year is likely to have a lasting impact on our behaviour. As businesses that benefit from this new economy grow, so does interest from investors. On the flip side, those companies that have had to count their losses may become interesting targets too. While some companies will see the need for a capital injection to survive, others will be looking for investment to help it capitalise on their success.