CMS: Emerging Europe continues to show resilience amid challenges

Findings from the CMS Emerging Europe M&A 2023/24 report, published today in cooperation with EMIS, demonstrate the resilience of the Emerging Europe deals market as activity holds firm against a backdrop of geopolitical tensions and strong inflationary pressures.

The latest report reveals a modest slowdown in total deal flow across Emerging Europe, with 1,187 deals recorded compared to 1,229 deals in 2022. However, these were up from the 2021 total of 1,164 deals. Despite lower valuations and fewer large transactions, deal value stayed on par with 2022 values, at EUR 32.48bn in 2023 compared with EUR 32.93bn in 2022.

Notably, with inflation trends showing signs of improvement during the summer, investor confidence experienced a revival in the latter part of the year. The deal value for each quarter demonstrated improvement, resulting in a significant overall increase for H2 2023 (EUR 19bn), representing a 41% increase on H1 2023 (EUR 13.5bn).

Cross-border deal activity, meanwhile, remained strong, with total value increasing to EUR 30.8bn in 2023, despite attracting 69 fewer deals than the previous year. The United States maintained its top position by deal count (96), while the United Arab Emirates emerged as the leader by deal value (EUR 3.16bn), fuelled by mega deals in the telecoms sector, including the EUR 2.5bn acquisition of PPF Telecom Group’s assets in Bulgaria, Hungary, Serbia, and Slovakia by UAE-based e&.

Horea Popescu, Partner, CMS Romania, comments: “Investment from the Middle East into Central and Eastern Europe has been fairly consistent over many years, but this year we have seen a number of large transactions from Gulf investors. As a result of resurgent oil and gas prices, we expect further interest in the region as investors from across the Middle East seek to make strategic investments. The CEE remains attractive to investors worldwide, offering good economic fundamentals that will not change because of short term difficulties: a skilled labour force, proximity to Western Europe, low transportation and labour costs, and an increasingly developed infrastructure.”

Sector diversity

The report shows remarkable diversity across Emerging Europe’s sectors, with no one sector dominating the deal landscape. Telecoms & IT secured the largest share of deals (266) across the region, accounting for 22.4% of all deals, followed by Manufacturing at 15.2%, and Real Estate & Construction at 13.3%. While overall deal count in the Telecoms & IT sector decreased by 70 deals in 2023, deal value surged by 140.3% to EUR 9.1bn. Manufacturing came in at second place by deal value at EUR 6.57bn, with Nippon Steel Corp’s EUR 2.75bn acquisition of the Slovakian business of U.S. Steel claiming the region’s largest deal of 2023.

Meanwhile, renewable energy deals featured heavily across the Energy & Utilities sector, with a significant number of wind and solar deals completed across 2023, including UGT Renewables’ agreement with Montenegro-based EPCG for the development of a new large-scale solar plant in Montenegro. With CEE generating just 25% of its electricity from renewables, compared to 55% from fossil fuels, the potential for further activity in this sector remains ripe.

Rodica Manea, Partner at CMS Romania, comments: “In the face of challenging conditions, the deals market across CEE has shown remarkable resilience, as investors actively pursue opportunities throughout the region. In Romania, we witnessed a remarkable 91% surge in total deal value, propelled by two significant multi-billion EUR transactions within the energy and retail sectors. As we look to the year ahead, we are already seeing a strong flow of activity, with green technology and renewable energy taking a prominent role as Romania strives to fulfil its ambitious commitments to the energy transition.”

Emerging Europe comprises the following countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, North Macedonia, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, and Ukraine.