M&A deals totaled EUR 2.7 bln in Hungary last year

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China became the largest outside investor in the Central, Southeast and East European countries in 2017, according to a report published by consulting companies CMS and EMIS. China increased the value of its investments in the region by 78% to EUR 7.7 billion. The U.S. remained the busiest investor in terms of the number of deals.

The “Emerging Europe M&A Report 2017/18” shows trends in 15 emerging CEE/SEE countries - Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey and Ukraine - based on EMIS merger and acquisition data for 2012-2017, combined with commentary, insights and forecasts for 2018 provided by CMS, according to a press release sent to the Budapest Business Journal.

China increased the value of its investments in the region by 78% to EUR 7.7 billion, following a 96% rise in 2016. The U.S. remained the busiest investor in terms of the number of deals, with 92 transactions in 2017. The report notes that these results may be a sign of things to come for the region as domestic investment continued to dominate activity: Russian investors clocked up 603 deals worth a total of EUR 22.5 bln, while Polish investors negotiated 166 deals worth a combined EUR 4.3 bln.

A number of star performers emerged in 2017, according to the report. There was a welcome sign of revival in Ukraine, despite tensions in the east of the country, reflected in its 67% increase in M&A activity, while Hungary experienced the highest growth (126%) in total deal value, to EUR 2.7 bln.

As the largest country in the region, Russia experienced the highest levels of M&A activity in 2017, with 671 deals worth EUR 36.7 bln. Romania saw a healthy uptick in M&A activity, with a 13% increase in deal volume and 64% increase in value. Robust economic growth in Poland resulted in a strong transactions market, with a 3% increase in deal volume to 288.

Overall, emerging Europe enjoyed another solid year for M&A activity and closed 2017 with 2,113 deals across the region - up 6% compared to 2016. Deal value came in at EUR 71.5 bln, a modest decline from 2016 but well ahead of 2014 and 2015 levels.

“With economic growth outpacing all major economies, a favorable environment for foreign investment and EU financing, and an increasingly affluent population of more than 100 million people, CEE is an attractive market in its own right,” commented Radivoje Petrikić, partner at CMS. “The flow of deals shows that CEE remains a key target for international investors, whether they want to tap its markets directly or use them to produce goods for export,” he added.

Across the region, the most active sector was Real Estate & Construction, with a total of 390 deals worth EUR 16.9 bln, followed by Manufacturing, and then Technology. Poland was the most active market for new stock exchange listings, with IPOs worth close to EUR 1.8 bln in total. The report also noted that the CEE region remains an attractive location for greenfield investors and existing manufacturers looking to expand their operations in the region.

“We are generally optimistic that 2018 will be better for M&A,” said Stefan Stoyanov, Head of M&A Database at EMIS. “Economic growth in CEE/SEE, coupled with still cheap financing, make it a desirable investment destination, also given the fewer unknowns at the start of the year as compared to 2017.”

“We expect that tax and regulatory uncertainty overseas in the U.S. will force companies there to be more cautious about domestic deals and to take a closer look at Europe instead,” Stoyanov added. “Lastly, China’s ranking as a top investor in CEE/SEE last year could hint at future things to come.”

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