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Transaction trends: Covid-19 made for a cautious 2020, but there was no lockdown in M&A

Twenty-twenty was a year when overall dealflow dropped in the wake of the crisis caused by Covid-19 pandemic. After the initial shock, dealmakers adapted to the “new normal” and pushed on with M&A work, although at a slower pace and with fewer megadeals than previously. Some countries and sectors saw robust activity, but it was a difficult year for most, rounded off by hopes that the rollout of vaccines would signal a recovery in 2021.

Dealmakers started 2020 cautiously optimistic about global economic growth, the easing of trade tensions between the US and China, and a more sanguine view of Brexit. The Covid-19 pandemic was unexpected and its consequences were devastating not just on people’s health but on economic activity, which was almost brought to a halt by the restrictions put in place to combat the crisis.

Horea Popescu, corporate partner in CEE at CMS, said: “Overall, the region responded quickly and firmly, and the economic effects were not as severe as they might have been previously. Many deals did not happen, but since the autumn we have seen a pipeline of activity that is a good sign for 2021.

The impact on overall M&A in emerging Europe was clear. Deal volumes fell by 12.9% over the year and values were down 16%, bolstered by 11 megadeals worth more than EUR 1bn, up from 10 in the previous year. The final figures were lifted by a bounce back in the fourth quarter with EUR 24.3bn of deals, the strongest quarter since the spring of 2019, contributing to the strongest second half since 2017.

The impact of Covid-19

Helen Rodwell, corporate partner in CEE at CMS, said: “The surprise was not so much that dealflow dropped in the wake of the pandemic, but how well it held up and how confidence started to return as the year went on. There were a lot of transactions in the pipeline at the end of the year, which points to a wave of pent-up activity to be unleashed during 2021.”

Equity markets fluctuated and oil prices dived. For some sectors, such as hospitality and travel, the pandemic was calamitous. For others, such as retailing and financial services, it accelerated a move to digitalisation that was already under way, providing a boost for companies in the IT sector and digital infrastructure providers.

Along with millions of others, those in the M&A world had to get used to working from home. Their most valued tool was no longer their frequent flyer card, but a quiet corner of the home to work undisturbed at their laptop. Negotiations were conducted by phone and in cyberspace instead of face-to-face as sellers, buyers and advisers worked around the challenges of travel restrictions.

For some types of investment, such as windfarms and solar arrays where deals involved assets rather than management teams, it was not so much of a setback. For more complex transactions where site visits and the opportunity to assess culture are an important part of decision making, it was an added layer of complexity.

Confidence vs uncertainty

Economic uncertainty made reaching valuations more difficult, particularly during the early phase of the pandemic when financial markets were hit by a wave of volatility. Helen Rodwell said vendors in particular were unnerved, adding: “My experience is that sellers’ behaviour was erratic and unpredictable. Reaching commercial alignment became more difficult than it was previously and closing deals took longer.

Although government support schemes varied, such as furlough payments, loan moratoria and tax breaks, the combination of government support and business self-help calmed the turbulence. Graham Conlon, corporate partner in CEE at CMS, said: “Before Covid-19 there was some hesitation because of uncertainty about the global economy. After the initial shock of Covid-19, there was more clarity about its impact and the outlook, such as which areas would be hardest hit and which might benefit.


The acceleration of the trend towards digitalisation has cut across all aspects of business. It has focused attention on the benefits of being able to switch to the digital world and the realisation that in many areas of life, this will be a permanent change.

Those trends were responsible for driving telecoms and IT to the top of deals table by volume with 333 transactions, up from 300 in the previous year, and second by value at EUR 12.97bn. The sector accounted for six of the 20 largest deals in region, including the third largest, the EUR 3.69bn purchase of Play Communications in Poland by Iliad of France. Significantly, that transaction also resulted in Cellnex of Spain joining Iliad in purchasing Play’s mobile tower network, illustrating the huge potential in digital infrastructure. In terms of e-commerce, the listing of Allegro, Poland’s equivalent of eBay, saw it become the biggest company on the Warsaw exchange.

Mining (incl. oil&gas) was the top sector by value at EUR 14.1bn, despite falling deal volumes. Although real estate and construction was pushed into second place by volume and third by value, it remained a stalwart of M&A activity across the region and enjoyed a record start to the year across Europe. One area of intense activity has been logistics and warehousing, to support the growth in e-commerce, which was the only sub-sector to see increased activity, up from 39 to 54 deals during the year. The financial sector enjoyed 12 additional deals and a 39% rise in values, lifted by some of the region’s largest transactions, including the purchase of the regional businesses of AXA by Uniqa Insurance of Austria and those of Aegon by Vienna Insurance Group. Partially driven by consolidation in the sector in emerging Europe, financial services deal activity also benefitted from the strong global interest in payment services, resulting in transactions such as Nets’ acquisition of Polskie ePlatnosci and Innova Capital’s acquisition of the Romanian operations of PayPoint Services. The sale of the Romanian business of the insolvent Wirecard also saw payment service provider SIBS enter the regional market.

Horea Popescu said: “I think two areas will be the stars for 2021. Technology and e-commerce are very exciting and we’ve already seen how they can create so-called unicorns worth more than EUR 1bn. The other is renewable energy. Money is being poured into green and clean energy. This trend isn’t unique to Central and Eastern Europe and it’s not limited to any particular countries because of the commitments to increase the share of renewables.

Although most sectors saw a decrease in deal activity, the burden was not spread equally among them. While real estate, manufacturing, wholesale and retail and energy were particularly hit hard, general services, food & beverage and education and healthcare saw much smaller decreases in deal numbers.


The International Monetary Fund forecast in October that the global economy would shrink by 4.4% in 2020 and rebound by 5.2% in 2021, in what it called a “long, uneven and uncertain ascent”.

In CEE, Poland was the standout market in terms of deal numbers and values. Volumes climbed by 9.3% to 282 deals and values by 6.6% to EUR 11.7bn. If there were concerns among investors about the country’s political direction, it was not reflected in the enthusiasm of foreign investors to do business in Poland, nor in domestic deal activity. Add to that the activity on the Warsaw Stock Exchange, and particularly the IPO of e-commerce platform Allegro, and Poland has seen the third highest deal values we have recorded in the past decade after 2011 and 2013.

Russia saw deal numbers drop 12.6% to 526 and values by 16.2% to EUR 30bn. Five deals came in above EUR 1bn, including two oil deals worth a combined EUR 9.8bn, against six in the previous year. M&A activity in Russia was almost paralysed by uncertainty because of Covid-19, but the market showed it was capable of adapting and operating in the “new normal”, according to Moscow-based CMS partner Vladimir Zenin. Despite that, it remains the largest market for dealmaking in the region.

He said: “Russian businesses continue to take the lead in big mergers and acquisitions, more than in any year since the introduction of sanctions. The share of foreign investors has drastically decreased, but a notable exception was Chinese funds and companies which will likely continue searching for lucrative investment opportunities in line with the Chinese government's policy to focus investment along the Belt & Road Initiative.

In Ukraine, hopes of further growth on the back of reforms under the new president, after a surge in activity in 2019, failed to materialise. There was a 31.1% drop in deals and values fell by 55.3%.

Maria Orlyk, CMS partner, Ukraine, said: “Ukraine followed the global decline in M&A. Despite the interruption of the growth trend of previous years, we remain optimistic about the revival of investors’ activity. Telecoms and IT remains among the sectors with the highest transaction values and we see plenty of potential for years to come.

In Hungary, deal values fell 41.9% to EUR 960m despite being lifted by the EUR 549m purchase of Aegon’s Hungarian business by Vienna Insurance Group. Deal numbers were down 57.1%.

In the Czech Republic, which usually produces a stable flow of deals, volumes fell 24.7%, while a 51.7% drop in values reflected the lack of any deal in excess of EUR 1bn, even though such sizeable transactions had become common in previous years. In Slovakia, following a record 2019, volumes dropped 49.2% to 30 deals and values fell by 75.6%.

Interest in Romania remained robust with transaction numbers down less than 5% and values just 6.9% lower, supported by the EUR 1.2bn purchase of the assets of CEZ by Australia’s Macquarie Infrastructure and Real Assets.

Deal numbers in Bulgaria were down by 10%, while values fell by 78.1%, as only two transactions managed to reach the EUR 100m threshold, against five in the previous year.

Croatia’s transaction values fell by 37.8%, despite a EUR 170m investment in Infobip by One Equity Partners of the US, as deal volumes remained steady, down just 2.3%. In Slovenia, volumes dropped 22.5% and values fell by 48.1%.

Serbia’s deal numbers dropped 23.4% and values by 24.7%, despite the EUR 386m purchase of a majority stake in Komercijalna Banka by NLB of Slovenia. Bosnia & Herzegovina’s year-on-year volumes were down 7.1%, but values rose by 7.2%. Albania enjoyed a 42% increase in deal values, despite a drop in volumes, while there was little activity in Montenegro.

Despite fewer transactions, Turkiye’s deal values surged by 80.4% to EUR 7.9bn, lifted by the EUR 1.6bn acquisition of Istanbul-based Peak Games by Zynga of the US. Founded in 2010, Peak had become one of the world’s leading mobile games companies behind franchises such as Toon Blast and Toy Blast.

Private equity

Private equity funds have consistently grown their share of M&A in the region and emerged from 2020 in strong financial shape. Like other investors, they may have been cautious at times as they assessed the outlook, but it did not hamper dealflow, steady at 319 transactions, with only a modest impact on values, down just 11.1%. The impact of private equity can be illustrated by the fact that it now accounts for nearly one-fifth of the total volume of deals in emerging Europe. When this report was first published in 2011, the corresponding figure was just 6%. Real estate saw the most PE investment by deal numbers, while telecoms and IT enjoyed increased transaction levels and was number one by value. Finance and insurance was third by value after the number of PE deals in that sector more than doubled.

Graham Conlon said: “We haven’t seen any change in the appetite of private equity funds and anecdotally they were busier than ever in the second half of 2020. They have a life cycle and are committed to spending a certain amount from their funds over a period of time.

Investment bank Lazard played a leading role in some of the region’s largest deals of 2020, including Allegro’s IPO in Poland and Iliad’s purchase of Play. According to Bozidar Djelic, Head of Central and Eastern Europe and former Soviet Union, and Christophe Gehen, director, at Lazard, secondary buyouts will continue to represent a significant share of private equity activity in the region, with an increase in succession-driven transactions.

They said: “In traditional sectors, for the first generation of entrepreneurs, parting with the result of heroic efforts of an entire lifetime proves to be a wrenching decision. On the other hand, young entrepreneurs in the technology and digital space have a much more transactional approach as they expect to launch several ventures during their career.

However, they cautioned that the IPO scene was polarised, with clear winners disproportionately rewarded and those with an unclear equity story lagging behind, adding: “Companies should not rush to the market, they should carefully prepare for it, as it is an unforgiving environment.

Foreign and regional

European investors underpinned international M&A activity in the region. Of the top ten foreign investors, by deal numbers nine came from Europe, and by value seven. Although numbers and values fell in total, some countries increased the number and value of deals. The UK overtook Germany to be the second largest origination market by volume despite a modest drop, though deal values were down significantly. Investors from the Netherlands topped the list by value as deals surged from EUR 296m to EUR 5.8bn on a 48% rise in deals, while the value of deals from France was 62% higher than the previous year. Austria, Spain and Denmark were among those to see values rise.

The US remained the largest foreign investor by volume, despite a 23% drop to 94 deals, although it was pushed into third place by value after a 31% fall. Investment from China and Japan—usually in the top five investment origination markets by value—dropped significantly and were overtaken by Singapore from where investment in emerging Europe rose by 88% to EUR 1.1bn.

If cross-border M&A reflected the bigger picture, with deal numbers down 34.3% to 764 and values down 31.5% at EUR 35bn, this was not the case for domestic deal activity within countries in emerging Europe. Domestic deal numbers jumped 18.4% to 941 and by 21.2% by value to EUR 25.8bn. Russia, Poland, Turkiye and the Czech Republic were the busiest dealmakers from within the region. 

Deal drivers

For those businesses kept alive by government support, 2021 may bring distressed disposals. But the main drivers of M&A are likely to remain the search for value creation and long-term trends in individual sectors. As Allegro’s listing has shown, corporates and private equity firms may have to compete with the stock markets as sellers examine their options. With global exchanges breaking records in December 2020, this continues to be an increasingly appealing alternative to a trade sale.

George Mucibabici, head of investment banking at Raiffeisen Bank Romania, which advised the sellers of Wirecard Romania on the sale to Portugal-based SIBS, said: “The underlying motives for M&A are the ‘usual suspects’ including the end-of-investment life cycle for funds, availability of dry powder, shifting corporate strategic priorities, owners’ desire to exit, limited growth prospects in some industries and high valuation multiples.

One of the drivers for private equity deals in the region was the potential for higher than average returns and the fragmented nature of many industries which left them ripe for consolidation. He added: “Some of the most active industries we’ve seen in terms of M&A activity include farming and agriculture, energy, industrials, healthcare, and financial services. There is some relation to the pandemic but in my view this is minimal.

A decade of change

Manufacturing has been the backbone of economic growth across the region. It remains a cost-effective place to locate factories, which is what initially drew investment from outside, but it is no longer just a hub from which to export.

Increased spending power has made it an attractive market in its own right, for e-commerce, financial services, health services and real estate. It has also developed its own eco-system for M&A work. Graham Conlon said: “It’s difficult to lump these countries together as they are all different. But many have already aligned with western countries in terms of country risk premium or are going in that direction. The market for M&A is much more sophisticated than it was a decade ago.

If the pandemic put the brakes on economic growth and M&A activity in the region last year, the impact was much less severe than it might have been at the turn of the century or even the start of the decade. Governments reacted quickly by closing down borders early and were less indebted than many western counterparts, giving them the financial firepower and flexibility to combat the economic fallout from Covid-19.

Horea Popescu said: “I think the region was able to respond much better than it would have done 10 or 15 years ago. Economically it is stronger and governments have more money to provide support where it is needed most. The region is more digital than it was, which means people were able to work from home almost seamlessly without any major impact on economic activity.


As governments and businesses responded to the crisis, confidence began to return as 2020 progressed, and hopes of a recovery were boosted by the prospect of mass vaccination in 2021.

Looking to the coming year, Horea Popescu added: “Towards the end of 2020, we saw people rushing to sign deals that they had been unable to complete earlier in the year. We saw this trend pick up in the autumn and there is a decent pipeline of activity in most countries which is a good sign for 2021.

It may be too early to assess the long-term impact of the pandemic, but as far as M&A goes, the underlying trends that were driving deals at the start of 2020 have not gone away and in many cases they have only gathered pent-up momentum.

Graham Conlon said: “Anecdotally, investors and advisers have remained busy during the crisis and are braced for activity to accelerate in the new year. The signs point to 2021 being significantly busier than 2020.

Key contacts

Bozidar Djelic
Head of Central and Eastern Europe and former Soviet Union, Lazard
George Mucibabici
Head of Investment Banking, Raiffeisen Bank Romania