Stefan Stoyanov, Head of Global M&A Database, EMIS
Twenty-twenty was all about turning challenges into opportunities. The COVID-19 pandemic upended daily routines and emptied public spaces. As people veered away from almost all physicality and embraced the digital life, developing online habits became essential for humans to survive mentally, while acquiring online capabilities became a must for businesses to survive financially. Going down the M&A path was a logical choice for many firms and triggered a long-awaited digital transformation in the CEE region.
A particular area of note was digital finance. Global lockdowns and social distancing measures catalysed the use of financial services, even among the more sceptical and less tech-savvy users. To react fast to the instant demand for digital payments—rent, loans, utility bills, subscriptions, remittances—many international companies already operating or interested in CEE took the non-organic path to growth and targeted acquisitions of payment solution providers across the region. In fact, among all fintech deals on record in EMIS’ 2020 database, 56% targeted providers of payment services. The total value of the 34 fintech M&As in the region last year stood at EUR 672m, nearly doubling from the 19 deals worth EUR 357m in 2019. As part of the largest fintech deal of 2020, Danish payments major Nets acquired its Polish peer Polskie ePlatnosci (PeP) for an enterprise value of EUR 405m, thus gaining access to some 125,000 point-of-sale terminals across Poland. Other notable transactions included the divestment of UK-based PayPoint’s Romanian business to CEE-focused private equity firm Innova Capital for EUR 51m, the EUR 41m acquisition of payment systems company Token Finansal Teknolojiler by local conglomerate Koc Holding, and the EUR 18.5m funding round of German banking platform with Serbian roots Penta. One takeaway is that crisis-driven fintech M&A allowed businesses to make a foray into a highly technical field and take advantage of the surge in payment demand without spending years to develop in-house solutions. At the same time, the COVID-19 pandemic clearly demonstrated the vast potential of fintech, turning the heads of PE funds and other financial buyers alike.
During the lockdowns, most daily shopping was done from home. The e-commerce industry burgeoned, at first overwhelming grocery stores and pharmacies with orders. Requiring far less technical capabilities than developing a payment network, online stores thrived. But as easy as it is to launch an online store, M&A deal-making in the CEE e-commerce field also saw an uptick with both strategic and financial buyers involved. According to EMIS data, companies carried out 20 deals worth a combined EUR 532m, compared to 14 transactions totalling EUR 298m in 2019. The largest transaction was the disposal of the Polish business of British groceries retailer Tesco to Danish competitor Salling for EUR 202m. Tesco Poland, while being predominantly a traditional brick-and-mortar chain, was nevertheless the most recognised online food store in the country in 2020, meaning the acquisition was in line with the Salling’s strategy to enhance its own online growth. On the PE front, Turkish private equity firm Actera bet USD 130m on domestic online furniture retailer Vivense in order to support its fast growth and accelerate its global expansion. Other notable transactions included investments in Russian online retailer Ozon and online pharmacy Eapteka, Polish online appliance store Rotopino.pl, Ukranian online beauty supplies retailer MAKEUP, and Slovak nutritional supplement platform GymBeam, among others.
Consumer-centric businesses big and small would have barely withstood the crisis if it hadn’t been for delivery services. M&A in the sector remained largely unchanged: there was one less transaction in 2020 compared to the prior year’s 12 deals, while value increased by one third to EUR 231m. Despite the somewhat lacklustre deal activity, a vivid scope of companies was targeted, ranging from ultrafast delivery start-ups in Turkey to delivery of food sets in Russia. Recognising the opportunity, Russian state-run lender Sberbank decided to invest EUR 132m in exchange for a majority stake in local groceries delivery service SberMarket. The bank targets a top-three spot in Russia’s e-commerce industry by 2023 and is increasingly becoming more technology-centric. The second-biggest acquisition in the field of deliveries involved Austrian Post on the buy side and its EUR 51m bid to purchase an additional 55% interest in Turkish parcel services operator Aras Kargo. Another Turkish company, the ultrafast delivery start-up Getir, raised USD 34m from a group of investors led by Silicon Valley venture capitalist Michael Moritz.
The COVID-19 pandemic set in motion a special kind of digital transformation that was much-needed, one that pushed businesses over the technology tipping point to make people’s everyday lives easier. At the same time, M&A—both strategic and financial in nature—allowed CEE companies to get ahead of the game quickly, setting them on a journey to rival their counterparts across the Atlantic.