The report, M&A Spotlight: CEE, polled 150 senior-level executives from both corporates and private equity (PE) firms about their experiences of M&A in CEE/SEE and their expectations for the future.
Respondents’ outlook for 2020 remains optimistic. Over two-thirds of corporates (68%) and 78% of PEs surveyed say they expect to make an acquisition in the region in the next two years.
This may in part be due to the steady rate of deal volume in the region (481 deals in both 2018 and 2019) against the background of a global drop-off. And while overall value for CEE/SEE M&A fell 17% in 2019 to €19.6bn, this was less steep than the 23% drop in M&A value in Western Europe over the same period.
Horst Ebhardt, partner at Wolf Theiss Austria, explains how this trend is likely to continue as new markets are continually discovered in the region: “The CEE/SEE region’s economic growth has outstripped that of Western Europe for several years, and many markets remain under-penetrated and underdeveloped in sectors ranging from infrastructure to healthcare, from modern retail to tourism.”
A new destination takes the top spot
The rise of Poland as a gateway to the region has seen the country overtake Austria as the leading investment destination by deal value in 2019, with deals worth €11.6bn in total.
As both the largest economy in CEE/SEE and its most populous country, Poland has seen unbroken economic growth for almost three decades and is expected to see continued robust growth in 2020. “Most of our clients see Poland as a safe harbour in the event of a general slowdown,” says Tomasz Stasiak, the co-managing partner of Wolf Theiss Poland. “We are perceived as a stable and developed economy.”
Most attractive sector
The consumer and leisure sector saw the most activity in 2019 in terms of deal volume, accounting for 22%. Meanwhile TMT matched the expectations from last year’s report by proving itself as best-performing sector by value. The TMT sector had an exceptional year, registering the highest total annual value for the sector in the CEE/SEE region on record (since 1998).
Entering 2020, these sectors continue to attract the most attention: both were cited by 38% of respondents as sectors in which they are likely to invest, closely followed by industrials and chemicals (34%) and PMB (33%).
PE interest continues to rise
The growth of PE interest in the region has been a noticeable trend in recent years. Nearly eight in ten (78%) of PEs surveyed said they were expecting to make an acquisition in the CEE/SEE region in the coming two years. There are more companies of size to attract private equities than there were a decade ago and it seems likely that dealmaking momentum will continue.