Dealmaking in CEE remained resilient in 2022 despite unprecedented regional and global headwinds

• M&A in Central and Eastern Europe (CEE) is down on stellar 2021 but remains at a higher level than any other year on Mergermarket record
• The number of transactions in the region equals 846
• The total value of M&A activity reaches €39.2bn, according to the reported data and taking into account the criteria set out in the methodology
• Despite the global challenges, CEE has strong fundamentals and should remain attractive for international investors in 2023
• The Romanian M&A market has shown significant resilience in 2022, registering an increase of 17% in the number of deals, compared to the previous year

The annual study, Investing in CEE: Inbound M&A report 2022/2023, offers an overview of M&A activity in the region in 2022 and looks ahead to the challenges and opportunities in the coming months.

Overall, CEE saw 846 transactions worth €39.2bn in aggregate, according to the reported data and taking into account the criteria set out in the methodology. While these figures represent year-on-year declines for the region, volume and disclosed value were down 5% and 21%, respectively, from 2021, there are two key points to bear in mind.

First, 2021 was always going to be a hard year to beat, or even match, thanks to the then-low interest rates and surge in dealmaking post-pandemic. The number of transactions recorded in CEE in 2022, while down, is nonetheless higher than for any full-year period on record except 2021. The aggregate value of those deals is also higher than any annual total besides that posted in 2021, just eclipsing 2016’s €38.6bn.

Second, CEE was not alone in facing M&A headwinds – all parts of the world, without exception, were affected. Notably, the year-on-year declines in volume and value recorded in CEE were considerably less pronounced than those seen globally. Indeed, the advanced economies of Western Europe and North America both suffered sharper year-on-year declines in volume and value.

CEE also remained a strong draw for international investment. The overall proportion of M&A transactions in the region involving cross-border sponsors rose to 64% in 2022, up four percentage points from the year before and easily the highest proportion in recent records dating back to 2015.

Meanwhile, in the private equity space, activity softened after 2021’s record-breaking dealmaking deluge, with buyout volume down 31% year on year. The value fell even further, by 66%, with buyouts totalling €3.4bn in 2022 compared to €9.9bn the year before.

That said, the buyout volume in 2022 held up remarkably well by historical standards. Indeed, the number of private equity buyouts in 2022 remains one of the highest on record for CEE, with a total of 97 deals, easily eclipsing any annual sum between 2015-2020.

Further key findings from the report include:

• Regional hotspots. The top four countries for M&A deal volume in CEE in 2022 were Poland (with 235 deals), Austria (120), the Czech Republic (81), and Romania (76). In terms of aggregate deal value, Poland and Austria likewise took the top two spots, followed by Hungary and then Croatia.
• Tech is still the star performer. Technology stands out as the primary generator, in volume terms, of inbound CEE deals involving bidders from outside the region in 2022. While the number of deals recorded (108) was down 13% from the exceptional levels reached in 2021 (124), it is nonetheless one of the highest annual deal totals yet seen for the tech sector, with the next closest being the 60 transactions logged in 2020.
• Narrowing valuation gap. The median EV/EBITDA multiple for CEE across all sectors was 8.5x in 2021-22, Mergermarket data shows. This is only marginally lower than the median multiple for Western Europe, which was 8.9x for the same period. This convergence is significant. The data shows that the median multiple for CEE has risen (by more than half a turn of EBITDA compared to 2019-20’s 7.8x), while Western Europe multiple has fallen (from 10.7x in 2019-20).

The Romanian M&A market remained buoyant during 2022

Despite the unfolding events that occurred in the past year, the Romanian M&A landscape has shown significant resilience in 2022, registering an increase in reported deal volume to 76 transactions, up 17% from 2021. The disclosed value of transactions reached  €1.4bn, from €2.7bn recorded in 2021, when one transaction accounted for almost half of the total value of the year, namely ExxonMobil’s sale of a 50% stake in the offshore XIX Neptun Deep Block concession, located in the Black Sea, to natural gas firm Romgaz for €914m. But because only 13 of the 76 transactions disclosed the deal value, the total actual M&A market value is certainly much higher for 2022.

Romania ranks among the top 5 M&A markets in the region, both in terms of value and volume of transactions, gaining more and more visibility to international investors as well as developing a strong local investor base.

In Romania, the M&A activity was strong, especially in the second and third quarters of the year. If we had had more predictability and a clear strategy for the expected energy crisis towards the end of 2022, the positive trend could have continued in the last quarter of the year as well.

Răzvan Butucaru Partner, Financial Services & Advisory Leader

The largest transactions were signed by:

• Turkey-based Ford Otomotiv Sanayi and Ford Otosan Netherlands of €715m for the Ford Romania entity;
• Ameropa AG for an additional 30% stake in Promat Comimpex and Agroind Cauaceu worth €180m;
• Energias de Portugal acquired the 151 MW Wind Power Station wind park for €120m.

Romanian entities were the most active buyers in terms of the number of deals (with 21 reported transactions), followed by UK, Austrian, and German bidders. When it comes to the most active sectors by number of deals in 2022, energy takes the first place, followed by IT and medical.

Given the amount of capital targeting the local private sector, with a focus on energy, sustainability, and digitalisation, we can expect a positive trend in 2023 as well.

There are already more than 100 announced opportunities on the local market, which places Romania second after Poland in CEE, with sectors such as technology and industrials topping the list of investors’ interest. It will be interesting to see what dealmakers will break the ice after this short wait-and-see period.

Adrian Mihalcea Director, Deal Advisory

The full report can be downloaded at: Investing in CEE: Inbound M&A report 2022/2023.

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