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Investing in CEE: Inbound M&A report 2021/2022

Investing in CEE: Inbound M&A Report 2021/2022, published in association with Mazars, the international audit, tax and advisory firm, offers an overview of inbound M&A activity in the CEE region throughout 2021 and looks ahead to the challenges and opportunities in the coming months.

Deal volume and value both increased in 2021. The number of M&A deals in the CEE region rose to 872 in 2021, up 30% on the previous year. Total deal value was also higher, with transactions totalling €66.5bn. This represents an increase of 37% compared with 2020 and it is the highest total transaction value since 2016.

Michel Kiviatkowski, CEE Financial Advisory Leader and Managing Partner of Mazars in Poland, comments: “Our study shows that, while challenges lie ahead, acquirers are taking all of this in their stride as they look to expand their businesses and tap into the region’s compelling growth story. The region boasts a diversified economy – from strong IT capabilities to a growing class of middle-income consumers and large levels of natural resources – providing an attractive area of investment and expansion as businesses seek to reshape their supply chains in the wake of the upheaval caused by the pandemic.”

CEE continues to be an attractive destination for international investors. There were notable rises in both the volume and value of cross-border M&A transactions, with the value of disclosed inbound transactions (including Russia) jumping 34% to reach €32bn – the highest annual deal value since 2016. Deal volume was also significantly higher – a total of 367 inbound M&A transactions an increase of 33% compared with 2020 and the highest level of dealmaking by volume since 2015.

Another notable area of strength was private equity (PE) activity. Fuelled by record financial reserves in both domestic and international markets, the overall deal value for PE buyouts leapt 62% to reach a total of €10.3bn – the highest level on record since 2016. Volume also rose sharply, up 44% with 124 deals in 2021 versus 70 in the previous year.

A key feature in this resurgence of PE activity was the prominence of US-based funds. US bidders were involved in four of the top ten PE transactions, including the acquisition of a 71.76% stake in Austrian commercial real estate specialist, CA Immobilien Anlagen AG, by Starwood Capital Group for €4.3bn – the biggest private equity deal of 2021.

Further key findings from the report include:

  • Four countries continue to dominate. The top four countries in terms of M&A deal volume in 2021 were Poland (with a total of 185 deals), Russia (143), Austria (119) and the Czech Republic (86). These are the same four countries that took the top spots for volume in 2020. Turning to total deal value, Russia came in first with disclosed transactions totalling €20bn, up 13% versus 2020. Poland, Austria and the Czech Republic took second, third and fourth places respectively. The Czech Republic stands out, with total deal value up nearly fourfold year on year to €10.3bn, largely on the strength of a single tech deal.
  • Tech the star performer. Tech stands out as the CEE region’s biggest inbound deal generator in 2021. Performance was spectacular, with value nearly quadrupling year-on-year to €9.9bn and volume jumping up by 83%. Activity has been driven up by the accelerating digitalisation trend, as well as the growth in demand for IT nearshoring as a result of the Covid-19 pandemic.
  • High valuations in CEE. Mergermarket data shows that the median valuation multiple for the CEE region across all sectors was 11x in the 2020-21 period, slightly ahead of Western Europe with 9.69x. One of the downsides of this high valuations climate is that it can foster unrealistic expectations on the part of sellers – particularly when family-owned businesses are put on the market.