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Though sharing a geographic region, the direction in which mergers and acquisitions are trending in CEE and Russia is very different.
The common theme between Russia and its Central and Eastern European counterparts is an increase in value per deal. M&A throughout the region is featuring larger and larger deals. That is where the similarities come to an end. The two different parts to the CEE region, went in two different directions over the last few years, and 2016 wasn’t terribly different.
CEE (excluding Russia)
Total value in 2016 rose 53.5%, which is a large increase for such a large region, particularly considering that total deal count only rose 1.5%. This resulted in an average value-per-deal increase of 52.8%, a massive increase once it’s considered that European value-per-deal went down by 5.2% as a whole. Additionally, CEE is becoming a larger contributor to total European M&A, going from a 2.6% contributor to 4.4%.
Another interesting part of the investments in the CEE region was how strong Q4 was. The region posted a total of €18bn in Q4 alone, over half of the total value for the year. On country-by-country basis, the Czech Republic became the highest value contributor after an increase in M&A of 160.2%. However, Poland remained the most targeted with 129 of CEE’s 479 total deals. Poland drove the region’s strong Q4 with a total of €7bn in deals during the quarter.
Altogether, the CEE region is growing a steady pace, with growth predicted in most of their sectors. For 2017, Mergermarket intelligence suggests to keep a close watch to the Czech medical diagnostics chain Alpha Medical as well as their sister Polish company, Diagnostyka, both owned by Mid Europa Partners, who are expected to sell the companies soon.
As mentioned in the beginning, Russia also improved greatly on their value-per-deal in 2016. Overall M&A value went up by 19% even though deal count actually went down from 2015. That being said, Russia’s apparent M&A success in 2016 is vastly inflated by an astronomical Q4. Total dealmaking in Q4 reached €24.4bn over 43 deals. However, even those great Q4 numbers are carried by one deal in particular, Qatar Investment Authority’s purchase of 19.5% stake in the Russian petroleum company Rosneft. This single deal was announced in Q4 and was worth €10.5bn. That’s about 43% of all Q4 M&A value, and just shy of 1/3 of all deals in Russia over the year. Ultimately, that deal alone is responsible for all the gains that Russian M&A have shown when looking at the yearly totals. Without it, 2016 M&A value overall would have been down €5.1bn from 2015. In conclusion, Russian M&A may not be as strong as it seems judging by face value alone.
All countries considered, CEE M&A is going up, and the strong Q4 could be seen as a good sign going forward into 2017. To get a more in-depth insight into CEE deal making in 2017, consider attending the CEE M&A and Corporate Finance Forum in Vienna on 6 April. Visit the event website for more information.
To get even more CEE analysis, you can get your hands on a copy of the M&A Spotlight: CEE next week at the breakfast launch in London. In H2 2016. Mergermarket surveyed 150 senior executives about their experiences and outlook on M&A in the CEE region. Respondents were based in corporate companies and private equity firms, both in CEE and outside the region.
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