M&A activities in Central, Eastern and Southeastern Europe showing a slight recovery

Russian investors on the rise

• New study by Roland Berger shows: number and value of M&A transactions are increasing again for the first time since 2007
• Russia is involved as a purchaser in 79% of all transactions in the CEE region
• In contrast to the CEE region, M&A activities are stagnating in Southeastern Europe (SEE) and are subject to major fluctuations
• The most interesting target sectors in 2010 were the media and entertainment industry and the manufacture of consumer staples

M&A activities have been stagnating since 2007. In 2010, global M&A value recovered slightly with overall growth of 2.5%, reaching USD 1,894 billion in overall transaction value. There was a clear shift toward emerging markets within this period – while the M&A value decreased in Europe by 15% and in North America by 8%, it grew by 48% in the rest of the world. These are the main findings of the annual M&A study conducted by Roland Berger Strategy Consultants, entitled "M&A activities in CEE/SEE in 2010".

Since 2007, the volume of M&A in Europe has decreased by two thirds and is now at EUR 369 billion. CEE (Central and Eastern Europe incl. Russia and Turkey) accounts for about 10% of total European M&A value, which is the highest percentage ever. "The data show that after a decline from 2007 to 2009, the CEE's M&A value grew by 16% in 2010," says Vladimir Preveden, Managing Partner at Roland Berger in Zagreb.

The average deal size of M&A contracts in CEE peaked at EUR 166.5 million in 2007. However, this increase was followed by a sharp decline from which the market still has not recovered. In 2010, the average deal size represented only about one third of its 2007 value. Only one of the deals closed in 2010, Vimpelkom's takeover of Kyivstar GSM, was classified among the CEE's top 15 deals of the past decade.

Russian investors on the rise
Russia has been able to maintain its dominant position within CEE. Between 2000 and 2010, Russia accounted for 57% of total CEE deal value as a target destination and for 79% as an acquirer country. According to the Roland Berger study, most investments (43%) went to the energy and power sector. The study also identified considerable growth in the telecommunications sector: 20% of acquisitions in CEE countries in 2010 were in that area.

Weak situation in Southeastern Europe
In contrast to CEE, M&A activities in Southeastern Europe (SEE) are still highly volatile. In general, this region has weak acquisition power, reflected in a very low average deal value (approx. EUR 19 million in 2010 vs. EUR 58 million in CEE in 2010). Despite the low average value, SEE saw larger acquisition deals in 2010 than CEE. Two of these were classified among the top 15 SEE deals of the last decade: Atlantic Grupa's takeover of Droga Kolinska and Alfa Finance Holding's acquisition of Alfa Telecom Turkey. Slovenia was the most active SEE acquirer between 2000 and 2010, followed closely by Serbia. Bulgaria was by far the most favored target country.

Study author Vladmir Preveden also commented on the major differences among sectors in SEE: "The most attractive target sectors in SEE in 2010 were media and entertainment as well as consumer staples, such as agriculture, food & beverages, prescription drugs, household products and textiles." In contrast, the telecommunications and financial sectors lost the dominant position they held in 2000. Most investors were also to be found in consumer staples, followed by the financial sector.