SEE countries should seek to inspire confidence among executives

Diana Nikolaeva, Partner in EY Bulgaria, leading the Transaction Advisory Services offering

Diana Nikolaeva,
Partner in EY Bulgaria,
leading the Transaction
Advisory Services offering

About EY

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What is the place of our region in the European and the global picture?

The latest EY European attractiveness survey based on interviews with 808 international decision-makers indicates that China is still perceived as the world’s most attractive investment region. Europe has improved its attractiveness in the eyes of investors, Western Europe being the second most attractive region after China. CEE has also strengthened its position as a preferred investment destination and remains among the top picks for investors. Southeast Europe is quite diverse in terms of investment climate – Turkey’s strong growth attracts investors; Greece’s privatization programme is expected to offer many opportunities for large-scale transactions; Bulgaria and Romania keep a low profile and Serbia is gaining momentum.

What are your expectations on the M&A deals activity in SEE in the short-term?

 EY has recently launched its bi-annual Capital confidence barometer. Positive sentiment about economic growth, corporate earnings and employment decreased remarkably because of the prolonged crisis in Europe and the sluggish to negative growth in Central and Southeast Europe. However, the positive global trend and the narrowed valuation gap create opportunity for first-mover advantage and the challenge for the SEE countries is to inspire confidence among executives looking for growth whenconfidence within their borders remains weak.

What are the key factors defining the M&A maturity of a country?

Regulatory, political, socio-economic, financial, infrastructure, technological factors are key M&A maturity factors. Without good awareness on them, risks can be left unmitigated and opportunities overlooked. Over the last few years when growth was weak, we saw that investors are paying much more attention to macroeconomic, regulatory and political factors. In my experience, though, deals happen when the target demonstrates strong business fundamentals.

What are the main challenges/advantages for the investors in this region?

The biggest challenge for most of the SEE countries is the sluggish or negative growth. Considering that emerging market economies are slowing down, my feeling is that foreign investors are for the most part confident that Europe will weather these hard times, and emerge stronger and different. When asked how Europe could strengthen its competitiveness, respondents to our Attractiveness Survey indicated improving business confidence and economic stability through reducing debt as key priorities. Cost differentials now matter less when assessing a region’s competitiveness, however, research and innovation now rank second among competitiveness factors.

Which are the sectors which are most likely to attract investor’s interest to the region?

In 2012 the automotive sector provided the biggest surprise: despite European car sales being at their lowest for almost two decades in 2012, the sector provided 28% of all new FDI jobs in Europe – most being component makers. The focus of car manufacturing is gradually moving from the heart of Europe to its periphery and companies are quickly reorganizing their assets to gain competitiveness and tap into growing markets.