Cautious optimism for M&A in CEE/SEE with PE firms poised to profit

In the wake of the Covid-19 pandemic, dealmakers are broadly positive about the prospects for M&A in Central, Eastern, and South-Eastern Europe (CEE/SEE), according to a new survey from Wolf Theiss and Mergermarket. Just over half (52 percent) of respondents said that the health crisis will increase their appetite for deals in the next 12 months.

This follows a year where M&A value in CEE/SEE was up 29 percent compared to 2019, reaching €28.5bn – a stark contrast to the 7 percent drop in global deal value during the same period. However, a 22 percent y/y decrease in the volume of transactions, down to 406 deals, meant that CEE/SEE did not emerge from 2020 wholly unscathed.

The Wolf Theiss/Mergermarket study, M&A Spotlight: CEE, polled 150 senior-level executives from both corporates and private equity (PE) firms about their experiences of M&A in CEE/SEE and their expectations for the future.

More than two-thirds (69 percent) of respondents said that they are likely to invest in CEE/SEE based on past experience, and 65 percent also said they are likely to invest again on the back of satisfaction with their most recent deal.

Tellingly, when it comes to the post-Covid outlook, PE respondents were far more bullish about future prospects than their corporate counterparts. While 43 percent of strategic buyers reported having less appetite for deals, only 16 percent of PEs agreed; meanwhile, just 10 percent of corporates said they were eager to pursue significantly more deals versus 26 percent of fund managers who said the same.

“PE is in a strong position in part because of its attitude towards risk-taking in terms of participating in an upside cycle of the economy. As an asset class, it has also accumulated a significant amount of cash that it needs to deploy and now there are many different deployment strategies. PE can offer a wide range of fund vehicles, depending on the sector or the level of envisaged corporate control. For example, we now increasingly see major PE funds taking minority positions in fast-growing companies,” Horst Ebhardt, a partner in Wolf Theiss' Vienna office, said.

(WBJ)