Investing in CEE: Inbound M&A report 2023/2024

The past year has been tough for dealmakers everywhere, elevated interest rates, enduring inflation and ongoing geopolitical upheaval made for a markedly challenging dealmaking environment in 2023. Unsurprisingly, M&A activity was notably lower in most global regions.

Despite this, our report reveals a picture of robust dealmaking in CEE. While overall volume and aggregate disclosed deal value were down year-on-year, the declines registered in the CEE region in 2023 were less severe than those seen in many other parts of the world.

Download the report

Key findings

• Globally, deal volume was down 16% year-on-year in 2023, and disclosed value also slid by 16% with all regions registering notable declines.
• Overall, the CEE region saw 1,097 transactions, amounting to a combined value of €37.3bn.
• Volume and disclosed value were each down 15% from 2022.
• Widely-anticipated distressed M&A activity failed to materialise at scale in 2023.
• Telecom took centre stage in 2023 and accounted for two of CEE’s top-10 transactions.
• Private equity activity held up well in 2023, despite brisk headwinds. Total disclosed buyout value rose to €5.4bn, an increase of 33% year-on-year, despite the volume of buyouts falling by 11% over the same period.
• Poland, Austria, Romania, and the Czech Republic stand out as the busiest M&A markets in terms of deal volume in the CEE region in 2023.
• Once again, the technology sector registered the highest number of inbound deals to the CEE region, with a total of 114 transactions, and was the top sector in terms of cross-border disclosed deal value in 2023, rising sharply by 36% year-on-year to €4.5bn.

2023 M&A activity in the Czech Republic

Based on the Mergermarket study, the Czech Republic recorded 100 deal announcements in 2023, 22% down from the year prior. The following sectors showed the highest level of activity: B2B manufacturing, IT/technology, consumer, B2B services, energy, and construction.

"The explanation for the decline in dealmaking is rather straigrforward: M&A activity tends to proliferate in times of (i) economic prosperity, (ii) low levels of uncertainty, and (iii) low interest rates. However, neither of these key factors showed a positive trait in 2023," said Lukáš Hruboň, Head of M&A at Mazars in the Czech Republic.

Alongside the published study, we have observed the following selected trends in the Czech M&A market:

• The dealmaking has slightly shifted to intercountry deals, i.e. both a seller and a buyer from the Czech Republic.
• PE funds and Family Offices have been still quite active looking for suitable targets and making deals. Secondary PE buyouts continued to proliferate.
• After a long period, significant acquisitions by the public sector have returned (gas transmission; gas storage infrastructure; network of petrol stations).
• Number of distressed assets analysed by our team slightly increased. Problematic FCFF (Free Cash Flow to Firm) profiles are reported namely in segments subjected to increased energy prices (e.g. industrial production) and/or falling consumer demand (especially on-line retailers). In addition, we have observed FCFF healthy targets with excessive debt including “impressively” leveraged past acquisition situations.
• Number of deals requiring earn-out / staged acquisitions / asset deal approach has generally increased.

Note on 2024 outlook

Looking ahead, geopolitical uncertainties seem to bring an element of unpredictability to 2024. Despite this, the macroeconomic outlook is considerably brighter than it was 12 months ago. Inflation shall fall sharply followed by interest rate cuts. This might, along with legislation changes in Czech citizens personal capital gains taxation as of 2025, lead to the Czech M&A market recovery.