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Emerging Europe deal value reached EUR 80.5bn in 2018 fuelled by string of “megadeals”, according to CMS/EMIS report

• Deal value across emerging Europe grew 12.5% in 2018
• Telecoms & IT sector claimed four of the region’s ten largest deals and topped deal table by value
• Real Estate was region’s most active sector (432 deals), up 10.8% from 2017
• Private equity flourished in 2018 with total number of deals rising by 15%. Sector claimed five deals at or above EUR 1bn
• Russia enjoyed largest number of deals (605), followed by Poland (323) and Turkey (193)
• Albania achieved the highest year-to-year growth, up 1054.5% on deal value and 300% on deal volume, followed by Serbia up 737% on deal value and 40% on deal volume

The latest CMS Emerging Europe M&A report, published in cooperation with EMIS, shows that the UK was the largest foreign investor in emerging Europe by value (EUR 9.77bn), and the USA by volume (89 deals), in 2018.

This marks a shift from 2017, when China dominated the table by value, owing in large part to the $9bn CEFC China Energy-Rosneft deal. Without the presence of Chinese megadeal, China slipped down the table to fifth place by foreign investors in 2018. Overall, cross-border deals were up 20.1% by value to EUR 53.4bn while domestic deals remained stable at EUR 27.1bn.

Helen Rodwell, Partner in the CEE Corporate Practice, CMS, comments: “M&A activity has been surprisingly buoyant. Markets have reached a size and level of sophistication that makes them more aligned to western European expectations and standards and that is reflected in interest from international investors including private equity funds and corporates.”

The Czech Republic enjoyed another strong year in M&A investment, with an increase in deal activity (up 6.8%), and total deal value in excess of 5.4bn (up 25.1%). Domestic and cross-border deals was up by 13% to 148 and the value of deals by 68% to EUR 4.29bn. The Real Estate, Manufacturing and the Telecoms & IT remained the dominant sectors as in 2017. Most notably, the sale of pharmaceuticals company Zentiva to private equity firm Advent International for EUR 1.9bn stood out as a particular highlight.

Another solid year for emerging Europe

Strong economic growth across emerging Europe combined with a stable international economy for most of the year created a conducive environment for deal making in 2018. While overall deal numbers were slightly lower than 2017 (down 0.9%), a handful of megadeals such as Vodafone’s EUR 6.07bn purchase of Liberty Global’s CEE operations, pushed values to EUR 80.5bn, the second highest level in the past five years.

Radivoje Petrikić, Partner, CEE Corporate Practice, CMS: “There is a lot of potential for growth and development in the Balkans which is why it is attracting interest from international investors. The challenge for them is the availability of the right targets.”

As the largest economy, Russia enjoyed the biggest number of deals (605), but that was 10% down on the previous year and the lowest since this report was first published in 2012, reflecting sluggish growth, estimated at 1.7% by the IMF.

Stefan Stoyanov, Global Head of M&A Database, EMIS: “Once the uncertainty around Brexit is resolved, there could be some uptick in M&A as investment plans put on hold are likely to resume. Free capital at PE and pension funds will not sit idle for long and although the general feeling is that the region might be turning a bit more volatile than before, the challenges will surely also create opportunities for those quick to adapt and with deep pockets.”

Local developments

Poland was the second most active country in the region, with 323 deals in 2018. Almost a quarter of those were in the Real Estate & Construction sector, with Poland claiming seven of the 20 biggest property deals in the region including the Wars Sawa Junior shopping centre, bought by Atrium European Real Estate of Austria for EUR 301.5m. Despite a cooling down from the boom years, Romania remains one of the fastest growing economies according to recent IMF data. It experienced a significant rise in M&A deal value (73%) in 2018, thanks to a surge in telecoms sector activity, as did Hungary which saw a 70.5% rise in deal value. This is despite deal volumes dipping in both countries in 2018.

Elsewhere, Serbia, Slovakia and Slovenia were seen as the region’s rising stars, enjoying strong growth and a busy period for M&A. Notably, Serbia saw deal numbers and values jump to record highs, claiming such deals as the sale of a stake in RTB mining to Zijn of China for EUR 1.3bn and the privatisation of Nikola Tesla airport.

Sectors

Growing demand for mobile communications, broadband and cable, combined with a wave of consolidation across Europe, saw the telecoms and IT sector catapult to the top of the table by deal valuation at EUR 18.18bn. The most active sector was once again real estate and construction, which saw the number of deals rise by 10.8%. The private equity sector base in emerging Europe has continued to grow as international firms take an increasing interest. This was reflected in a year of intense activity in 2018 as the number of deals rose by 15% to 307.

Outlook for 2019

One of the questions in 2019, given some of the uncertainty around global trade and growth, is whether current levels of activity can be sustained. The report found growth rates in many countries in CEE left Western Europe, USA and Japan lagging behind, and provided a backdrop that has given companies and investors’ confidence to look at opportunities in emerging Europe.

Perhaps the biggest threat to continued growth and the healthy M&A market in emerging Europe is what happens outside its borders. Provided the global economy remains on track, emerging Europe’s strong growth, expanding domestic markets and evolving legal and professional services ecosystems should provide investors with the confidence that they can do business in the region and maintain momentum in M&A activity.

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NOTES TO EDITORS

About the report

The “Emerging Europe M&A Report 2018” shows trends in 15 emerging CEE/SEE countries based on EMIS M&A data for 2012-2018, combined with commentary, insights and forecasts for 2019 provided by CMS. To download your copy of the report, please visit https://cms.law/en/CZE/Publication/Emerging-Europe-M-A-Report-2018-19

Press contact:

Erik Werkman

Head of Business Development, Prague and Bratislava 
Erik.werkman@cms-cmno.com
+420 296 798 701
 
About CMS
CMS provides clients with specialist, business-focused advice in law and tax matters. With our 4,500 legal professionals across the world, working in sector-based teams and expert in project management, our focus is on our clients and fulfilling their objectives.
CMS is a full-service top 10 global law firm, based on the number of lawyers (Am Law 2017 Global 100). With 70+ offices in 40+ countries across the world, revenues totalled €1.3bn in 2017. CMS acts for the majority of the DAX 30, a large number of the FT European 500 and a number of Fortune 500 companies.
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About EMIS
EMIS operates in and reports on countries where high reward goes hand-in-hand with high risk. The EMIS platform provides time-sensitive, hard-to-get, relevant news, research and analytical data, peer comparisons and more for over 120 emerging markets. EMIS licenses content from the cream of the world‘s macroeconomic experts, the most renowned industry research firms and the most authoritative news providers. This is combined with proprietary company and M&A research to offer a multi-faceted view of each emerging market. Formed over 20 years ago, EMIS employs nearly 300 people in 13 countries around the world, providing intelligence to nearly 2,000 clients. EMIS is part of the ISI Emerging Markets Group.
For more information, please visit emis.com