Investing in CEE: Inbound M&A report 2022/2023

Meanwhile, the imposition of economic sanctions against Russia further complicated the dealmaking landscape. Against this backdrop, supply-chain bottlenecks and labour shortages, a legacy of the pandemic, continued to dampen growth.

Dealmaking conditions could scarcely have been more challenging. Yet, as our report reveals, the impact on M&A activity in the CEE region was much less pronounced than many initially feared. In fact – and with the exception of 2021, a somewhat anomalous record-year for M&A – deal volumes and aggregate deal value in 2022 both reached new highs in CEE.

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Key findings

• Overall, CEE registred 846 transactions worth €39.2bn in aggregate.
• The number of transactions recorded in CEE in 2022 is higher than any annual total besides that posted in 2021, just eclipsing 2016’s €38.6bn.
• CEE was not alone in facing M&A headwinds – all parts of the world, without exception, were affected, even 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 on recent record dating back to 2015.
• The private equity space activity softened after 2021’s record-breaking dealmaking deluge, with buyout volume down 31% year on year. Value fell even further, by 66%, with buyouts totalling €3.4bn in 2022 compared to €9.9bn the year before.
• Buyout volume in 2022 held up remarkably well by historical standards. 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.

Key findings for Slovakia

• Slovakia recorded 21 M&A transactions in 2022, two more than in 2021. Only two of these deals had a disclosed value.
• The total value of M&A transactions increased by approximately 73% from 76 million euros in 2021 to 132 million. euros in 2022.
• In common with other CEE countries, Slovakia relies heavily on imported natural gas for industry and domestic heating.
• Slovakia stands out as having one of the CEE region’s least gas-dependent electricity grids: four-fifths of Slovakia’s electricity is generated from nuclear and renewables, adding to resilience.
• Slovakia’s GDP is projected to grow by 1.5% in 2023 and by 3.4% in 2024.

Non-cyclical sectors remained resilient in 2022. “IT is doing well – businesses of all types need IT expertise, so this sector is quite hot,” says Igor Mišík, Senior Manager at Mazars in Slovakia. “Food production and logistics for fast-moving consumer goods also continue to generate activity. Healthcare is an increasing area of interest because more people are opting to go private. The sector is going through major changes and the strongest privately-owned players are likely to gain in strength.”

One risk for Slovakia is the threat to car manufacturing, the country’s biggest industry. “There are a number of headwinds, including increasing regulation, tougher rules on emissions and the tighter economic climate,” says Mišík. “On the positive side, Volvo is investing in a new plant in Košice that will produce parts of electric vehicles only. This will reduce dependency on traditional petrol and diesel fuelled cars, so it’s good news.”

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Outlook for the coming months

The region continues to offer unprecedented consolidation opportunities in the mid-market space in industries ranging from healthcare and tourism (sometimes together) to manufacturing and technology.

2023 will for sure be a challenging year. But set against this are the quality of the region’s businesses, the creativity of dealmakers and the continuing support of the EU’s Resilience and Recovery Facility, which is worth more than €100bn to the 12 CEE countries that are EU members. This, and the CEE region’s sound fundamentals, suggests there are good reasons to be relatively optimistic about the year ahead.