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Emerging Europe M&A Report 2019/2020


Regarding M&A deal activity in emerging Europe, 2019 seems to have been a year of mixed sentiments. While both the overall value and volume of M&A deals in the region were down year-on-year, many M&A professionals claim anecdotally that it was a more buoyant year than the previous one. There are also predictions that investment activity in emerging Europe will  increase even further in the next 12 months. 

2019 M&A deal volume was the lowest in the decade, with only 1958 transactions on record (down 6.5%), with a combined value of EUR 72.34bn (down 10.1%). However, looking at the five-year average, the region remains relatively stable and, if 2019 was not much more than a “rough” patch, as some market commentators have suggested, there is little reason for concern.

The 2020 edition of the emerging Europe M&A Report takes a closer look at some of the key drivers behind current deal making: which markets have been particularly hot, which sectors generate most the opportunities, and where investments are originating. 

On a country-by-country basis there are numerous positive signs. The region’s largest markets, Russia and Turkiye, produced an almost similar number of deals as in 2018, while both Ukraine and Romania saw a substantial uptick in activity. In some of the more mature markets in the region where deal volume declined, mainly the Czech Republic and Poland, overall deal value was up compared to 2018, indicating a growth in average deal size. 

Despite a drop in transactions, real estate and construction maintained its top spot by both volume and value. Demand for logistic centres and warehouses increased rapidly, partially driven by a need for distribution and return centres for online retailers. Interest in commercial real estate came from a healthy mix of investors including German open-ended funds, global infrastructure and real estate investors, sovereign wealth funds, local investors and increasingly South Korean pension funds. 

Another constant has been private equity. Succession, corporate carve-outs and secondary sales continue to provide fertile grounds for investment. Regional funds have seen record levels of fundraising in recent years and the region remains on the radar for global funds competing at the top-end of the market for new investments and bolt-on acquisitions. In fact, most of the region’s top 20 deals outside Russia involved non-strategic buyers. With valuations expected to become more realistic, plenty of funds available to be deployed and some sizeable disposals in the pipeline, private equity activity in the region is set to continue on its upward trend.  

Telecoms & IT has taken over from manufacturing as the second busiest sector behind real estate. Seven of the top 20 deals in 2019 took place in the sector, but activity was not limited to mega deals. In addition to venture capital funds, dedicated vehicles established by corporates were scouting the region in search for start-ups with new technologies or market share. 

Investment from Asia seems to have diversified, both in terms of origination and assets acquired. Although not yet on a par with China or Japan, South Korean and Singapore investment is rapidly increasing with investors from those countries particularly visible in commercial real estate deals. Investment from Asia now makes up one-sixth of total transaction value. 

Market pressures and competition from new players are leading to an increase in business transformations and corporate restructurings, including the disposal of non-core assets. A review of foreign participations is leading to opportunities across a number of industries including energy, the financial sector, telecommunication and pharmaceuticals.  

Compared to western Europe, GDP growth in the region is predicated to remain above the European average and increasing local consumer demand should to an extent compensate for the effects of a slow-down in some of emerging Europe’s main export markets. 

The slight decline in deal activity can potentially be explained by several protracted or aborted deals which resulted from a combination of disappointing performance or outdated business models by the target asset (from the buyer’s perspective) or unsatisfactory valuations (from the seller’s perspective). As multiples appear to be gradually coming down, business owners looking to sell in the short to mid-term are perhaps likely to do so sooner than later. 

Over the next year, emerging Europe will live up to its reputation as a stable provider of investment opportunities, particularly in M&A. With a healthy pipeline, 2020 will show that the region is not running out of steam just yet.

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CMS Emerging Europe M&A Report 2019/2020
PDF 11.7 MB
신흥 유럽 M&A 보고서 2019/2020 (Korean)
PDF 7.2 MB

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