The CEE deal-market landscape is absolutely dominated by PE/VC funds that have been gaining momentum while some major corporate dealmakers have taken a rather wait-and-see approach, as political confidence in the region weakens - said Paweł Osowski for Director M&A Magazine.
M&A activity in Central and Eastern Europe (CEE) has been fairly steady so far this year, with slightly lower deal numbers more than offset by the volume of larger transactions. Inbound interest by corporate and financial investors continues, coming increasingly from far-away locations such as China, South Africa, India, Japan or South Korea, attracted by quality local assets, positive economic outlook and a relative political stability across much of the region.
According to Krzysztof Urbański, Director M&A Orange Polska economic indicators for the CEE region are good, unemployment is falling and continued growth in Western Europe is giving the region an additional boost. - Thus M&A activity follows, with transactions in FMCG (such as Allegro, Żabka, and Profi) reaching new heights, based on the growing spending power of the region’s population and the application of modern business models - Urbański said. The largest economies of the region lead the table, with Poland firmly in the first place, the Czech Republic is resurging, while Romania has started to occupy the place is deserves based on the size of the country. The key sectors remain real estate, TMT and FMCG. Due to the scattered nature of the region, and lack of dominance by specific investors (be it from specific countries or business), there is a good mix of potential investors for various transactions, which translates into healthy a M&A market.
“"The CEE deal-market landscape is absolutely dominated by PE/VC funds that have been gaining momentum while some major corporate dealmakers have taken a rather wait-and-see approach, as political confidence in the region weakens. On this note, we are monitoring the mega-trends of growing Corporate Venture Funds, with Polish Funds such as Enea Innovation, PGNiG InnVento, Poczta Polska, PZU and Witelo topping the list, having a combined budget of PLN 1 billion at their disposal" - Paweł Osowski, CEO Onex Capital said to "Director M&A Magazine"
The inclination of a funds focus is definitely moving from the start-up environment towards buying out growing businesses. There are some US-based investors currently looking at CEE markets. PRBI, the US centric network of 36 strategic communications firms is about to start their Accelerator Program. The aim of the program is to mentor and advise entrepreneurs, with major activity focused on creating a deal flow of potential targets for acquisitions for US-mid market corporate clients in technology, health & beauty, and manufacturing sectors.
We have already received more warranties & indemnities insurance (W&I) enquiries relating to CEE assets in 2017 year-to-date than during the whole of 2016. This would suggest that the proportion of deals insured is increasing and that there is generally more deal activity in the CEE region. The real estate sector remains very strong, accounting for more than 60% of all enquiries. - Our impression is that the CEE market remains seller-friendly with significant buyer competition for quality assets. We see many sellers facilitating the use of buy-side W&I policies in auction processes as a means of minimising recourse against them under the sale documentation - said Stephanie Wang – Emerging Markets Manager, Pembroke/Ironshore. Buyers are more familiar with the W&I product and are starting to use the product in jurisdictions which have not previously been typical in the W&I market, for example, Bulgaria, Croatia and Serbia. With Q4 quickly approaching, we are confident of further deal flow to come this year.
According to last year’s survey conducted by KPMG among PE funds operating in Poland, the most attractive investment sectors in the coming years will include consumer goods, business services, industrial manufacturing, as well as technology and media. The trend continues this year and we see that these sectors are most appealing to investors. The country’s stable economic situation and growing internal consumption is attracting capital from many markets including the major ones. This is also due to the fact that Polish companies have already reached a certain level of growth and size are on the lookout for foreign investors. The investment mood is positive and virtually every month brings the completion of new transactions. It is worth noting that companies listed on the Warsaw Stock Exchange have also become an attractive target to private equity. Many private equity indicate that fundraising has recently become more challenging - said Rafał Wiza – Partner, Head of Private Equity, KPMG Poland