The rise of strategic buyers over private equity in CEE markets

In recent years, the M&A landscape in CEE has witnessed a notable shift as strategic buyers have increasingly outpaced private equity (PE) firms in deal-making activities. This reflects broader changes in market dynamics and investment strategies within the region. Typically operating in the same industry or sector as the target company, strategic buyers may be defined as companies that seek to acquire businesses which complement their existing operations and align with their strategic goals to create long-term value.

Several factors are behind this recent trend. Contrasted with the typically shorter-term focus of private equity firms, strategic buyers usually have a longer-term vision, looking to create synergies with their existing operations. Many strategic buyers have robust balance sheets and access to capital that allows them to pursue acquisitions more aggressively, whereas PE firms may face fundraising and capital constraints.

Strategic buyers invariably have deep sector expertise, which therefore enables them to capitalize on growth opportunities more effectively. This is particularly valuable in sectors such as technology, healthcare, and manufacturing, which are very active in the CEE region, and where they can leverage their existing capabilities and market knowledge. For example, the technology sector in CEE is home to numerous startups and innovation hubs attracting attention from global tech giants.

According to Sławomir Czerwiński, Partner at CMS in Poland, “Strategic buyers are increasingly targeting sectors such as technology, manufacturing, and energy in the CEE region. This is due to strong regional growth potential, opportunities for market consolidation, and the ability to create operational synergies. These buyers often aim for vertical or horizontal integration, a strategy that is more challenging for PE firms to justify without operational synergies. In addition, strategic buyers in CEE often target mid-sized firms where competition from private equity is lower.”

Rodica Manea, Partner at CMS in Romania, says: “The CEE region has demonstrated strong economic growth and increasing stability, making it an attractive destination for strategic investments. In particular, countries such as Poland, the Czech Republic, Romania and Hungary have become M&A hotspots due to their favourable business environments and growth prospects. The region has also seen a surge in FDI, with strategic buyers from Western Europe, the US and Asia looking to expand their footprint. This influx of international capital is pushing up valuations, making the market both more competitive and more dynamic.”

There are various challenges facing strategic buyers in CEE that may impact their ability to successfully execute M&A transactions. These include: navigating the different regulatory frameworks across multiple countries in the region; a notable shortage of skilled labour, particularly in sectors undergoing digital transformation; economic volatility and, in some CEE countries, political instability; cultural integration and operational differences when acquiring businesses which may impact post-integration; and some logistics and supply chain challenges which persist, despite the huge strides made in improving infrastructure across the region.  

“Addressing these challenges requires strategic buyers to adopt a well-rounded approach, combining thorough due diligence, effective risk management, and a deep understanding of the local market dynamics,” notes Rodica Manea.

Despite the growing influence of strategic buyers, private equity firms remain active and competitive in the CEE market. Competition between these investor groups can drive up valuations, making acquisitions more expensive.

According to Velizar Velikov, Head of M&A Database at EMIS, “There was less investment from international private equity, but local private equity firms are investing in the CEE region, building platforms and consolidating. They are focused more on mid-market, whereas large private equity deals usually involve international investors who focus on big targets.”

Although PE firms remain active in the CEE markets, strategic buyers can still gain a competitive edge. They often have the advantage of being able to move quickly and provide greater certainty of execution. This appeals to sellers who want a swift and reliable transaction process. Typically, strategic buyers are better positioned to integrate acquired businesses into their existing operations, creating immediate value through synergies, which can be a decisive factor in competitive bidding situations. They also combine local market knowledge with international expertise, allowing them to navigate complex regulatory environments and cultural nuances more effectively than PE firms.

Sławomir Czerwiński notes: “It appears that structural factors favour strategic buyers over PE investors. The CEE region may no longer be as attractive to international PE firms as it once was, with many shifting their focus elsewhere. During times of economic uncertainty, strategic buyers, particularly multinationals with strong financial resources, are better equipped to absorb short-term volatility compared to PE funds, which face pressure from limited partners. Many corporations have deleveraged their balance sheets and are now seeking to deploy cash through investments rather than keeping it on deposit in their banks.”

The rise of strategic buyers in the CEE M&A market will continue to reshape the competitive landscape. Their long-term vision, access to capital, and sector expertise are driving increased activity and competition, positioning them as formidable players in the region. As the market continues to evolve, it will be interesting to see how private equity firms adapt their strategies to remain competitive.