The M&A Landscape in CEE
The mergers and acquisitions (M&A) landscape in Central and Eastern Europe (CEE) began 2024 with caution as investors navigated a challenging geopolitical and economic climate.
Executive Summary
M&A activities in CEE experienced a slowdown in the first quarter of 2024, with both the number and value of deals decreasing on a quarterly and annual basis.
Poland was at the forefront in terms of the number of deals, while Czech Republic led in deal value during this period.
The technology sector continued to lead in deal activity, followed closely by consumer products and retail, along with power and utilities.
At the start of 2024, the CEE region saw 224 transactions amounting to a total of US$5.4 billion, marking a significant reduction of 58% in deal value and 27% in deal count from the previous year. The first quarter included only one major transaction valued over US$1 billion, in contrast to five in the same period of 2023.
Regional M&A Dynamics
Despite a general downtrend, Poland led in transaction volume and Czech Republic in transaction value within the CEE market during the first quarter.
In Poland, M&A activities decreased significantly, with a 28% drop year-over-year and 39% quarter-over-quarter, totaling 59 deals worth US$262 million, primarily in technology and consumer sectors.
One significant transaction in the technology sector involved a Polish company acquiring a local provider of a Sales Force Automation (SFA) suite, aimed at bolstering its IT offerings across public and private sectors in Poland and beyond.
Czech Republic saw significant activity, especially in the energy sector, with one of the largest deals involving a utility company's acquisition of a gas distribution network operator. This transaction is pivotal for enhancing Czechia's energy market, particularly in transitioning to sustainable energy sources.
Sectoral M&A Insights in CEE
The technology sector was prominent, recording 54 deals worth US$612 million, though this was a decrease from the previous year.
Poland and Turkey were leaders in the number of technology deals, with Greece leading in value. Expansion and market share were the main drivers in this sector, with software investments appealing due to predictable revenues from subscription-based models.
The energy sector also performed robustly, reflecting global shifts towards sustainable energy solutions, recording 41 deals worth US$1.2 billion.
Energy Infrastructure Initiatives
The CEE region is intensively upgrading its energy infrastructure to enhance reliability and efficiency. This initiative, driven by the need to reduce dependency on Russian energy imports and to integrate more renewable sources, is crucial for the region's economic stability and growth.
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Sector Performance
The consumer sector, despite a downturn in activity, led in deal value in the first quarter, with 39 transactions totaling US$1.2 billion, driven by consolidation and market expansion strategies.
Deal Trends in M&A Sector
Domestic transactions dominated, though there was a notable increase in outbound deal values, reflecting a strategic shift towards international expansion for capability enhancement.
Outlook for the second half of 2024
Despite geopolitical uncertainties, the economic outlook for 2024 is stabilizing, which could invigorate M&A activities in the CEE region. Anticipated fiscal policies and decreasing inflation and interest rates are expected to lower borrowing costs and stimulate growth, enhancing the M&A landscape.
Emerging global trends like climate change and technological advancements such as generative AI are pushing companies to rapidly transform their business models. This urgency is driving M&A as a critical strategy for aligning with contemporary market demands.
Additionally, private equity firms, with substantial capital reserves, are poised to execute new acquisitions and strategic ventures to deploy their available funds effectively.
