The value of the global mergers and acquisitions market last year totaled USD 3.17 trillion, a 9.3% jump over the USD 2.9 trillion in 2023, the Budapest office of A&O Shearman announced on Feb. 20, citing the global law firm’s M&A Insights 2024 Report.
But while Balázs Sahin-Tóth, head of A&O Shearman Budapest’s M&A practice, was cautious about future hopes, saying in a presentation that “hopefully, [we can] show you some light at the end of the tunnel,” the law firm’s press release highlighted the seemingly fantastic performance of the local market in 2024.
The value of M&A transactions in Hungary last year amounted to USD 4.75 billion. This is barely a drop in the vast ocean of big-ticket deals globally, but it is an astonishing 30 times the USD 157 million sum of all deals recorded within Hungary in 2023. What’s behind this astonishing surge?
The answer, as Sahin-Tóth explained to the media, is almost entirely down to one deal: the joint acquisition in June 2024 of Budapest Ferenc Liszt International Airport’s operating concession by Hungarian state investment fund Corvinus and international airports operator Vinci Airports.
The deal was for a USD 3.2 bln payment plus USD 1.23 bln in net debt taken on by the buyer. In other words, the airport transaction was worth a total of USD 4.43 bln, or a staggering 93% of the year’s M&A total in the country.
As Sahin-Tóth emphasized, the airport sale wildly skewed the overall market result and represented “one of the largest Hungary M&A transactions in years.”
It also left a total of USD 320 mln spread across 56 deals to make up the remaining 7% of the total, although Sahin-Tóth pointed out this was still double the USD 156.7 mln total chalked up in 2023.
That year saw 73 transactions across Hungary, meaning the average deal value was a mere USD 2.15 mln, easily trumped by last year’s average (again, not counting the airport sale) of USD 5.7 mln.
In terms of its regional peers, however, Hungary’s market action is relatively modest. Last year, Central and East Europe registered a transaction total of USD 23.1 bln from 1,474 deals. This results in an average deal value (once again stripping out the Budapest airport deal) of USD 12.7 mln, more than double the Hungarian figure.
But what is the basis for the law firm’s cautious optimism, particularly in a world of increasing regulatory vigilance? The short answer is private equity (PE) and its typical investment cycle.
“Private equity needs to do deals because that’s their business. Typically, they invest for five years, then they want to sell the company at a profit,” Sahin-Tóth argues.
However, fund managers have been frustrated in recent years by low-price offers in sluggish economies, leaving them “sitting on a lot of money, dozens of portfolio companies, waiting for the right moment to sell,” he adds. The prevailing lower interest rates will also encourage borrowing and enable buyers to invest, further boosting demand.
At least, that’s the theory. At the same time, global uncertainty has increased. The election of Donald Trump as U.S. President, initially viewed as positive, given his promises to reduce market regulation, has already faded.
“These slides were prepared a month ago, and at the time, it was suggested that we should say Trump is more business-friendly, de-regulating and so on, so business is happy and the pipeline is good,” Sahin-Tóth said in his business presentation.
“Now, I think we have more of a mixed picture because uncertainty and market volatility doesn’t help the industry as a whole, so I will not look into the crystal ball because your guess will be as good as mine,” he admitted.
However, in Sahin-Tóth’s assessment, one elephant in the M&A regional room could be removed if Trump’s moves to bring peace to Ukraine bear fruit.
“The war has put Hungary and the region off the map of investors. It’s why we have not seen big-ticket M&A coming from the U.S. or Western Europe. When the decision-makers decide to invest, the fact that there’s a war in the background doesn’t look good,” he told the Budapest Business Journal in an interview. If or when the war ends, this would likely lead to a premium for the local market.
“Trump seems really keen to agree with Putin, which is probably good from a geopolitical, global security risk perspective. And from a deal-making perspective, without regard to the morality [question], any type of peace is good for deal-making,” he concluded.
Mario Draghi, the former governor of the European Central Bank, has proposed a package of measures aimed to enhance EU competitiveness which, if enacted, should lift M&A activity, argues Attila Kőmíves, counsel and head of A&O Shearman Budapest’s EU and Competition law practice.
“One of the key issues that Draghi identifies for Europe is the lack of innovative companies. We have large, established players, but very few, really innovative, globally competitive players,” he says. One exception is Airbus, Kőmíves points out, but Europe has very few Airbuses.
“And that’s a problem. He [Draghi] wants more Airbuses!” he chuckles. One major issue is the size of European companies, which are frequently smaller than their U.S. and Asian rivals and, therefore, less competitive globally.
One cause of this has been European Commission policy: it has frequently blocked mergers between two innovative companies over fears that the resulting single operation will reduce overall innovation.
“The Draghi report says, ‘Let’s change that approach and allow the combination because that could be more competitive globally.’ But, to ensure no loss in innovation, we must have these companies commit to R&D spending in Europe,” says Kőmíves.
The trick, he admits, is to ensure that spending ensues. Another proposal is to fine-tune competition rules to facilitate cross-border consolidation in the fragmented European telecoms and military and defense sectors.
“The Draghi Report says two things, and everybody reads into it what they want to read. The telco sector reads it as support for consolidation, which is indeed there. But the way I read it, there is also another section which states that that cannot be at the expense of allowing anti-competitive mergers,” Kőmíves argues.
In his view, the way to resolve the seeming contradiction is to understand the report as encouraging cross-border mergers.
“If [say] Deutsche Telekom grows big in Europe but still faces at least two competitors in every market, which is possible, then we have a scale which is large enough [for global competition], but we still preserve competition in every market,” he says. “That’s how I read the Draghi Report; others might read it differently. It’s a very controversial topic.”
This article was first published in the Budapest Business Journal print issue of March 7, 2025.
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