Mazars presents the CEE View: Inbound M&A report 2018/2019

23/ 04/ 2019

The Central and Eastern Europe (CEE) M&A market delivered exceptional value and opportunity for dealmakers in 2018. Compared to other emerging regions of the world, the CEE proves to be generally a stable region for international investments. Kyiv, 16 April 2019. Mazars in collaboration with Mergermarket has developed the CEE View: Inbound M&A report 2018/2019. This new expert publication on the deal landscape offers an overview of the mergers and acquisitions activity in 2018 within and into the CEE region, and looks ahead to the challenges and opportunities for the next couple of months. Strong deal fundamentals in a generally stable CEE M&A market The total value of the M&A market registered in 2018 amounted €46.9 billion, with a total number of 701 deals (figures based on transactions above €5 million). The robust performance and attractiveness of M&A in the region is evident, notably when speaking about countries like Austria, Poland, the Czech Republic, Romania, Hungary, Slovakia or the Adriatic region. Russia still remains the largest M&A market in the region despite geopolitical sanctions. The stability of the CEE M&A market is even more pronounced when compared to other emerging markets such as Africa, Latin America and South-East Asia, which have all seen year-on-year deal value fall by more than 20% (while overall CEE deal value is relatively steady, being down by just 1%). In addition, and as opposed to most mature Western European markets, the region continues to offer interesting opportunities for off-market deals as well as reasonable pricing in economies that are developing at an average of more than 3% GDP yearly growth. This provides compelling risk/reward dynamics for any M&A investor – a fact borne out by the significant international inbound investment into the region. Private equity’s increasing appetite for growth opportunities in CEE Across the CEE, the private equity (PE) industry is maturing, buyouts have increased in value as sponsors eye high-quality assets in the region. PE funds deal value was up 83% in 2018 to €7.5 billion (81 deals registered above €5 million). International buyout firms have noted the attractive economic fundamentals and pricing in the region and stepped up to make sizeable investments, demonstrating PE confidence in CEE’s growth and stability. Promising sectors for M&A deals While the industrials and energy sectors stand out, the region has a diversified economy and has generated deals across a range of industries. Industrials, technology, professional services, retail & consumer goods, food & beverage and energy & utilities have performed particularly well in 2018. The financial services sector is generally robust, with consolidation in the banking sector underway. The CEE has also been an open testing ground for new fintech solutions, as consumer uptake of banking technology in the region is high. The region’s tech scene is on the cusp of a huge growth phase as investment in technology skills and digital infrastructure starts to pay off. An attractive destination for international investors looking for good returns on investments In 2018, money has poured into most parts of the CEE, with inbound deal value from outside the region more than doubling compared to the previous year, to just under €27 billion. Inbound investments represented 58% of the overall CEE M&A market value. “The Central and Eastern Europe M&A market generally delivers exceptional value and opportunity for international dealmakers, coming from Western Europe, the USA, China or even South Africa” – says Michel Kiviatkowski, CEE Leader of Financial Advisory Services, Managing Partner at Mazars in Poland. In addition to faster economic growth than the so-called ‘Old Europe’ which allowed for an economic catch-up, CEE also has lower wage costs and a skilled, multilingual workforce. Economies are diversified, with opportunities available in everything from industrials and energy through to financial services, consumer and leisure. Large multinationals, SMEs, as well as PE firms investing in CEE can generally expect good returns on investments with satisfactory margins. Traditionally considered as a subcontracting geographical area, CEE now has a growing middle class, which allows international groups to maximise their profits within the region. Positive M&A outlook for 2019 The CEE region is obviously not without a few challenges: the consequences of the Brexit uncertainty, the US trade wars with the EU and China, the impact of sanctions on Russia or the tensions between the European Union and some CEE governments. However, despite these threats, the region has proven to be a credible and growing market for international and domestic players. “Our region has performed strongly in 2018 and is well-placed to continue doing the same in 2019. As a global advisory firm belonging to the leading deal advisory services providers, Mazars is actively contributing to that trend, successfully bridging the CEE with the rest of the world.” – notes Michel Kiviatkowski. The full report is available online and should you have any questions please do get in touch. About Mazars worldwide Mazars is an international, integrated and independent firm, specialising in audit, accountancy, advisory, tax and legal services. Operating in 89 countries and territories, as of 1 January 2019 the firm draws on the expertise of 23,000 professionals to assist major international groups, privately owned businesses, private investors and public bodies at every stage in their development. About Mazars in Financial Advisory Services Mazars’ Financial Advisory Services teams offer vendors, purchasers and financiers all the necessary skills and expertise to serve every aspect of their M&A transactions and projects worldwide. This includes: Transaction Services, Valuation, Corporate Finance, Forensic & Investigations and Global Infrastructure Finance. Mazars is ranked among the top 5 leading CEE transaction advisory services providers by number of successful deals based on Mergermarket CEE Accountants League Table 2018. www.mazars.ua | LinkedIn| Facebook

Kyiv, 16 April 2019. Mazars in collaboration with Mergermarket has developed the CEE View: Inbound M&A report 2018/2019. This new expert publication on the deal landscape offers an overview of the mergers and acquisitions activity in 2018 within and into the CEE region, and looks ahead to the challenges and opportunities for the next couple of months.

Strong deal fundamentals in a generally stable CEE M&A market

The total value of the M&A market registered in 2018 amounted €46.9 billion, with a total number of 701 deals (figures based on transactions above €5 million). The robust performance and attractiveness of M&A in the region is evident, notably when speaking about countries like Austria, Poland, the Czech Republic, Romania, Hungary, Slovakia or the Adriatic region. Russia still remains the largest M&A market in the region despite geopolitical sanctions.

The stability of the CEE M&A market is even more pronounced when compared to other emerging markets such as Africa, Latin America and South-East Asia, which have all seen year-on-year deal value fall by more than 20% (while overall CEE deal value is relatively steady, being down by just 1%). In addition, and as opposed to most mature Western European markets, the region continues to offer interesting opportunities for off-market deals as well as reasonable pricing in economies that are developing at an average of more than 3% GDP yearly growth. This provides compelling risk/reward dynamics for any M&A investor – a fact borne out by the significant international inbound investment into the region.

Private equity’s increasing appetite for growth opportunities in CEE

Across the CEE, the private equity (PE) industry is maturing, buyouts have increased in value as sponsors eye high-quality assets in the region. PE funds deal value was up 83% in 2018 to €7.5 billion (81 deals registered above €5 million). International buyout firms have noted the attractive economic fundamentals and pricing in the region and stepped up to make sizeable investments, demonstrating PE confidence in CEE’s growth and stability.

Promising sectors for M&A deals

While the industrials and energy sectors stand out, the region has a diversified economy and has generated deals across a range of industries. Industrials, technology, professional services, retail & consumer goods, food & beverage and energy & utilities have performed particularly well in 2018. The financial services sector is generally robust, with consolidation in the banking sector underway. The CEE has also been an open testing ground for new fintech solutions, as consumer uptake of banking technology in the region is high. The region’s tech scene is on the cusp of a huge growth phase as investment in technology skills and digital infrastructure starts to pay off.

An attractive destination for international investors looking for good returns on investments

In 2018, money has poured into most parts of the CEE, with inbound deal value from outside the region more than doubling compared to the previous year, to just under €27 billion. Inbound investments represented 58% of the overall CEE M&A market value. “The Central and Eastern Europe M&A market generally delivers exceptional value and opportunity for international dealmakers, coming from Western Europe, the USA, China or even South Africa” – says Michel Kiviatkowski, CEE Leader of Financial Advisory Services, Managing Partner at Mazars in Poland. In addition to faster economic growth than the so-called ‘Old Europe’ which allowed for an economic catch-up, CEE also has lower wage costs and a skilled, multilingual workforce. Economies are diversified, with opportunities available in everything from industrials and energy through to financial services, consumer and leisure.

Large multinationals, SMEs, as well as PE firms investing in CEE can generally expect good returns on investments with satisfactory margins. Traditionally considered as a subcontracting geographical area, CEE now has a growing middle class, which allows international groups to maximise their profits within the region.

Positive M&A outlook for 2019

The CEE region is obviously not without a few challenges: the consequences of the Brexit uncertainty, the US trade wars with the EU and China, the impact of sanctions on Russia or the tensions between the European Union and some CEE governments. However, despite these threats, the region has proven to be a credible and growing market for international and domestic players.

“Our region has performed strongly in 2018 and is well-placed to continue doing the same in 2019. As a global advisory firm belonging to the leading deal advisory services providers, Mazars is actively contributing to that trend, successfully bridging the CEE with the rest of the world.” – notes Michel Kiviatkowski.

The full report is available online and should you have any questions please do get in touch.

About Mazars worldwide

Mazars is an international, integrated and independent firm, specialising in audit, accountancy, advisory, tax and legal services. Operating in 89 countries and territories, as of 1 January 2019 the firm draws on the expertise of 23,000 professionals to assist major international groups, privately owned businesses, private investors and public bodies at every stage in their development.

About Mazars in Financial Advisory Services

Mazars’ Financial Advisory Services teams offer vendors, purchasers and financiers all the necessary skills and expertise to serve every aspect of their M&A transactions and projects worldwide. This includes: Transaction Services, Valuation, Corporate Finance, Forensic & Investigations and Global Infrastructure Finance. Mazars is ranked among the top 5 leading CEE transaction advisory services providers by number of successful deals based on Mergermarket CEE Accountants League Table 2018.