Investing in CEE: Inbound M&A report 2019/2020

"Location is a clear competitive advantage, with the more developed economies of Western Europe on one side, and the fast-growing markets of Asia and the Middle East on the other. For many investors, the region brings some of the benefits of both."

- Michel Kiviatkowski, CEE Leader of Financial Advisory Services at Mazars

KEY FINDINGS

• The region is attractive for investors thanks to its unique combination of competitive advantages: a strategic location bridging western Europe with Asia and the Middle-East, a strong pool of talent, relatively low costs compared to more developed markets, and high levels of economic growth in many regional markets along with a growing middle class.
• Going into 2020, the CEE will face economic headwinds from the global outbreak of Covid-19, as will all regions. However, GDP in CEE was projected to grow at a faster pace than in the G7 or the European Union prior to the start of the outbreak, and the region’s strong fundamental – including its highly educated population, relatively low costs, and stable political environment – will ensure that it is primed for recovery once the crisis passes.
• CEE’s economy continued to move forward at a healthy pace in 2019, despite global economic headwinds such as the trade war between the US and China, an inversion in the US bond yield curve and a slowdown in Germany’s economy.
• The four main factors influencing transactional activity in the region are: the strong international appetite from strategic buyers to invest in CEE, the increasing Private Equity interest for the region, succession planning and the ongoing market consolidation in a few sectors.
• The performance and attractiveness of M&A in the region remains robust. The total value of the M&A market registered in 2019 amounted €42.3 billion, with a total number of 726 deals.
• Meanwhile, median EV/EBITDA multiples rose from 6.74x in 2018 to 7.81x in 2019 (compared to 10.91x in Western Europe).
• Private Equity activity in CEE continues to develop, with a total of 69 PE buyouts deals in 2019 (€2.9 billion). PE exits were registered at 59 in 2019, with a disclosed total transaction value amounting €6.5 billion. International PE players are mainly involved in larger transactions, whereas local PE firms tend to focus more on small and mid-sized transactions.
• Inbound M&A deals involving strategic and financial investors coming from outside the CEE count for 40% of CEE M&A deal volume and 51% of CEE M&A deal value.
• International buyers are coming mainly from western Europe, the USA and Asia.

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