Investing in CEE: Inbound M&A Report 2019/2020

The M&A market in Central and Eastern Europe (CEE) had a robust 2019 year, displaying resilience in the face of global economic headwinds, according to new research from Mazars in association with Mergermarket. The report, Investing in CEE: Inbound M&A Report 2019/2020, offers an overview of inbound M&A activity in the CEE region throughout 2019 and looks ahead to the opportunities and challenges in the coming months, notably in the context of the ongoing Covid-19 outbreak.

"Location is a clear competitive advantage, with the more developed economies of Western Europe on one side, and the fast-growing markets of Asia and the Middle East on the other. For many investors, the region brings some of the benefits of both."

- Michel Kiviatkowski, CEE Leader of Financial Advisory Services at Mazars

KEY FINDINGS

  • The region is attractive for investors thanks to its unique combination of competitive advantages: a strategic location bridging western Europe with Asia and the Middle-East, a strong pool of talent, relatively low costs compared to more developed markets and a growing middle class. 
  • CEE’s economy continued to move forward at a healthy pace in 2019, despite global economic headwinds such as the trade war between the US and China, an inversion in the US bond yield curve and a slowdown in Eurozone’s economies. 
  • The four main factors influencing transactional activity in the region were: the strong international appetite from strategic buyers to invest in CEE, the increasing Private Equity interest for the region, succession planning and market consolidation in a few sectors.
  • The total value of the M&A market registered in 2019 amounted €42.3 billion, with a total number of 726 deals. 
  • Meanwhile, median EV/EBITDA multiples rose from 6.74x in 2018 to 7.81x in 2019 (compared to 10.91x in Western Europe).
  • Private Equity activity in CEE continued to develop, with a total of 69 PE buyouts deals in 2019 (€2.9 billion). PE exits were registered at 59 in 2019, with a disclosed total transaction value amounting €6.5 billion. International PE players were mainly involved in larger transactions, whereas local PE firms tended to focus more on small and mid-sized transactions.
  • Inbound M&A deals involving strategic and financial investors coming from outside the CEE counted for 40% of CEE M&A deal volume and 51% of CEE M&A deal value.
  • International buyers were coming mainly from Western Europe, the USA and Asia.
  • The external shock of the ongoing Covid-19 outbreak is highly likely to have a substantial impact on CEE’s economies and its M&A market in 2020, as it will across the world. An economic slowdown was already expected in Europe, even before the current crisis exacerbated the matter. Nonetheless, the M&A market in the CEE is relatively well-positioned to weather the crisis, in comparison to other emerging market regions. 
  • Once a semblance of normalcy returns, the CEE’s strong fundamentals will contribute to ensure that Central & Eastern Europe will remain attractive to investors.

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