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Emerging Europe M&A 2020 activity dampened but far from snuffed out
CMS, Kyiv, Ukraine, Feb 02, Tue, 2020
CMS is a member of U.S.-Ukraine Business Council
- Deal volume in emerging Europe dropped by 12.9% (1,705 deals) and total value by 16% EUR 60.80bn) in 2020
- The highest Q4 deal value since 2016 at EUR 24.28bn
- Value of IPOs reached EUR 4.79bn – the second highest on record
- Private equity deals accounted for 18.7% of total volume of deals
- Telecoms & IT overtook Real Estate & Construction as the busiest sector by deal volume with 333 deals in 2020 (an increase of 11% from 2019)
- Finance & Insurance saw an increase in deals by 8.6%
- Poland was the sole country in the region to see growth in both deal volume (9.3%) and value (6.6%)
M&A activity in emerging Europe took a hit in 2020 as a result of the coronavirus pandemic with the volume of deals reaching its lowest levels in the past 10 years. There were 1,705 deals with a combined value of EUR 60.80bn, down by 12.9% and 16% respectively from 2019. In spite of the ongoing restrictions, the market showed signs of recovery towards the end of the year, producing the highest fourth-quarter deal value (EUR 24.28bn) since 2016.
These figures and other findings in the CMS Emerging Europe M&A 2020 report, published today in cooperation with EMIS, show that despite severe restrictions causing deep disruption across all aspects of business, deal-makers adapted swiftly and pushed on with M&A in 2020
Horea Popescu, CEE Corporate Practice, CMS, says: “Overall, the region responded quickly and firmly, and the economic effects were not as severe as they might have been previously. Many deals did not happen, but since the autumn we have seen a pipeline of activity that is a good sign for 2021.”
Echoing similar sentiment, Stefan Stoyanov, Head of M&A Database at EMIS, says: “Despite Covid-19’s devastating impact on 2020, the emerging Europe region proved to be very resilient and outperformed other places similarly affected by the pandemic. There were key strategic deals featuring foreign investors in many of the region’s countries we reviewed, and private equity activity remained robust.”
Capital markets bounce back, PE holds steady
In what mirrored a global trend, there was a revival of investor confidence in the capital markets with 26 companies from the emerging Europe region listing for the first time, reaching a total value of EUR 4.79bn. This was almost double the 14 IPOs in 2019 and represents the highest number of IPOs since 2015.
Private equity deal flow seemed to have withstood the difficult market conditions of 2020, and while cautious at times, held steady with 319 transactions (318 in 2019) and a decrease in value by 11.1% from 2019. The financial services sector saw the biggest jump in the number of private equity deals, up from 15 in 2019 to 33 in 2020. Since CMS first published the report, private equity funds have consistently grown their share of M&A in the region: in 2011, it accounted for 6% of the total volume of deals, rising to nearly one-fifth (18.7%) in 2020.
Graham Conlon, Head of Private Equity for CEE/CIS at CMS, says: “We haven’t seen any change in the appetite of private equity funds and anecdotally they were busier than ever in the second half of 2020. They have a life cycle and are committed to spending a certain amount from their funds over a period of time.”
Foreign investors cautious but regional ones defy the odds
Foreign investors were more cautious as reflected by cross-border M&A deal numbers decreasing by 34.3% to 764 and values falling by 31.5% to EUR 35bn. The US remained the largest foreign investor by volume, despite a 23% drop to 94 deals, while UK investors were the second most active with 72 deals, followed by Germany with 61 deals.
The opposite was true of domestic deal activity within countries in emerging Europe. Domestic deal numbers jumped 18.4% to 941 and 21.2% by value to EUR 25.8bn. Companies from Russia, Poland, Turkey and Czech Republic were the busiest dealmakers from within the region both in their own markets and abroad.
Outlook for 2021
Horea Popescu, CEE Head of Corporate at CMS, comments: “Towards the end of 2020, we saw people rushing to sign deals that they had been unable to complete earlier in the year. We saw this trend pick up in the autumn and there is a decent pipeline of activity in most countries which is a good sign for 2021.”
Radivoje Petrikić, CEE Corporate Practice, CMS: “The last quarter of 2020 has shown the first signs of recovery of M&A deals in the SEE region. I expect this trend to continue in 2021, most notably in the advance of M&A deals in new technology and telecoms, followed by investments into real estate and construction projects, healthcare industry, renewable and clean energy, and sustainable projects.”
Market leaders will look to strengthen their position, while M&A targets will come from among distressed businesses, turnaround opportunities, private investors exiting the market or selling temporarily held assets, and companies reassessing strategies to part with non-core assets. Privatisation trends will accelerate in transition economies as they are moving along the EU accession path. Financial markets will face greater concentration, particularly in the banking sector, due to capital market fluctuations and an increase in non-performing loans and bad debts.”
The CMS Emerging Europe M&A 2020 report can be found here.
For further information, please contact:
CMS Cameron McKenna Nabarro Olswang
E: email@example.com/+38044 3913377
Notes to editors:
Founded in 1999, CMS is an integrated, multi-jurisdictional organisation of law firms that offers full-service legal and tax advice. With more than 70 offices in over 40 countries across the world and more than 4,800 lawyers, CMS has long-standing expertise both in advising in its local jurisdictions and across borders. From major multinationals and mid-caps to enterprising start-ups, CMS provides the technical rigour, strategic excellence and long-term partnership to keep each client ahead in its chosen markets.
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