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Chinese M&A Investment into CEE/SEE Cools Following Record 2016

  • Chinese M&A activity into the region reached record heights during 2016, but has only seen two such deals during 2017 due to greater scrutiny.
  • 2017 M&A activity in the region has increased 5.6% by value compared to the same period 2016.
  • Private Equity buyouts reached record figures during 2016 with a strong 2017 pipeline indicated.

Belgrade, Serbia, 6 June 2017: Mergermarket, the leading provider of M&A data and intelligence, has reported that Chinese inbound M&A activity into the CEE/SEE region reached record figures during 2016 accounting for 15 deals worth €1.3bn. However, following the introduction of greater scrutiny to deals made by Chinese dealmakers, just two such deals have been announced so far this year. The data was announced at Mergermarket’s Balkans M&A and Private Equity Forum 2017, taking place on 6th June 2017 at the Hyatt Regency in Belgrade, Serbia where the future outlook for Chinese investment in the region was among the discussions.

“Considering China’s rapidly growing interests in the CEE region, portfolio of Chinese big-ticket infrastructure and developmental projects, equity investments and acquisitions and growing trade, it is evident that the scope and depth of China-CEE engagement is steadily growing. Facilitating cooperation between China and CEE will both enable physical connectivity and promote economic integration between China and CEE, but also the economic integration between CEE countries themselves and also with the EU.” said Boris Milosevic, Head of Advisory at KPMG in Serbia.

Rob Irving, Partner at Dentons and co-chair of the firm’s Global Private Equity Group commented:

“Chinese interest and investment in CEE/SEE is growing apace, with 2016 seeing the highest value of China-led deals in the region for some years. With Chinese investment funds already active in the region, and CEE/SEE countries embracing the Chinese government's "One Belt One Road" initiative, this is likely to be a strong source of deal flow in the near and medium term."

Year-to-date 2017 M&A activity in the region has seen an increase in deal value by 5.6% representing a global trend of fewer, larger deals taking place as a result of greater consolidation in the market. Average deal value has increased to €106.4m in 2017 compared to €70.9m in the same period 2016.

“The CEE/SEE region has seen strong deal activity lately, with the 2016 seeing 528 deals worth €34.5bn. Private equity investment has been especially strong, with Mergermarket quoting €8.5 billion of deals for the region during 2016, the highest total recorded so far. The tempo of dealmaking remains strong as 2017 unfolds, and we foresee both further investments and exits pending." added Edward Keller, Partner at the Dentons global M&A and Private Equity Practice groups.

Private Equity buyouts also reached record figures during 2016 reaching €8.5bn across 51 deals representing a 177.5% increase compared to 2015. The pipeline for 2017 remains strong with 32 buyouts worth €2.3bn already announced.

James Thornley, Senior Partner at KPMG in Serbia commented:

“When we think about CEE/SEE we must first think about how to define it. Partly in NATO, partly not, partly in the EU and partly not. Partly looking east, partly west. Nearly always post transition and often post conflict. A region which often struggles with the rule of law and corruption and one where politics plays a big part in day to day life. When we think about current business and investment trends all of the above factors play a part as this region continues to develop and evolve. Looking at the situation today we have our concerns and risks, but also genuine reason to be optimistic about the future. Macro-economic trends are nearly all positive, with some indicators at levels we haven't seen for a long time. Investor interest is high and transactions are happening across the sectors. This is a good time to be thinking and talking about the region.”

“Right now the ex-Yu region is seeing a lot of mid-size PE activity, increase in investments and a steady flow of add-on acquisitions from the existing players,” said Rastko Petaković, Managing Partner at Karanović & Nikolić. “In a way, the landscape looks much as it did during 2012-2013 when the markets had seen a series of mid-sized deals culminating with record breaking transactions in 2014-2015.

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