M&A in SEE – Pick-up in investment activity continues

by Julian Gikov, Konstantin Ivanov, Octavian Goga, Helena Simicevic, Raiffeisen Bank International

Growth on the mergers and acquisitions (M&A) market in Southeast Europe (SEE) continued to accelerate in 2017 and 2018. M&A activity in most SEE countries was influenced by political headwinds, global economic investment sentiment, as well as excessive funding availability. Nevertheless, local specifics rather than common features tended to shape the market in each country. Romania kept its lead as the hands-down market leader in the region, supported by sound economic performance and sector maturity. M&A activity in Bulgaria is set to outperform on the basis of robust GDP growth and political stability, whereas in Croatia political volatility and Agrokor’s restructuring affected the deal flow. Despite the slow recovery of the Serbian economy, starting from a low, the M&A landscape largely improved in the last twelve months with privatisation playing a key role. Following a multi-year climb on the back of improving economic outlook, Slovenia saw a slow- down in M&A activity as some major manufacturing and financial deals failed to materialise. From sector perspective, SEE sees a surge in interest in fast-moving consumer goods (FMCG), the technology, media and telecom (TMT), the financial sector and infrastructure. Interest remains dominantly limited to sector national champions or high value-add niche product companies, but improving consumer confidence already serves to bring purely domestic players into focus. In addition, with around 10.5 billion euro allocated for investments in Central and Southeast Europe (CSEE) by private equity firms, complemented by strong Chinese interest, the region is set to benefit from increasing fundraising. At the same time, having sufficient funding, financial sponsors seem to be facing a shortage of robust targets to invest in. Key deal drivers for the SEE region will remain regional and national consolidation processes, privatisation, and restructurings.


The stable growth in M&A activity in Bulgaria gained significant momentum, to reach a five-year high in 2017 and further outperformed in the first half of 2018. The average transaction value in 2017 significantly increased to levels of around 49 million euro with an upward trend in 2018.

Noteworthy M&A deals in Bulgaria in the last 18 months included the sale of NBG’s local subsidiary bank UBB to the KBC Group, the Belgium financial group, for a consideration of 610 million euro and the purchase of Telenor Bulgaria, the third largest telecom operator by PPF. The most scalable pending transaction for 2018 is the long- anticipated con-cession of Sofia Airport. Key sectors for M&A continued to be the financial services, commercial real estate, consumer goods, TMT, as well as energy and industrials.

The financial services sector in 2018 is to be further impacted by the exit of Societe Generale from the region and the acquisition of its Bulgarian bank by OTP for 500 million euro. This is the second major acquisition over the past two years which closes at P/B ratio of above 1.0x, testifying to the improved macroeconomic and political standing of the country.

Strong investor sentiment for real estate materialised in a number of deals for commercial real estate over the past 18 months. The most significant of those were the acquisitions of Mall Serdika and Paradise Mall by the South-African fund NEPI for 207 million euro and 253 million euro, respectively. Another of the trade-mark real estate commercial spaces in the capital city, The Mall, was acquired by Hyprop Investments, another South-African fund, for a reported 156 million euro. Other commercial real estate assets changed ownership as Galleria Varna mall was acquired by Delta Holding for 60 million euro, while Galleria Stara Zag-ora and Burgas were acquired by Prime Capital and MAS Real Estate for 62 million euro. Low-interest rate environment and the improved consumer sentiment remain the key growth drivers.

Another indication of strengthening foreign investors’ confidence are the acquisitions of the largest bottled water producer Devin by Belgium’s Spadel from Advent International for 120 million euro, as well as the purchase of the exclusive Pepsi beverages and Prisun juices producer and distributor by the leading CEE water and beverage player KMV. In addition, British American Tabaco (BAT) acquired the most popular cigarettes brands from Bulgartabak for a price of 105 million euro.

TMT remained a hot sector for foreign investors in Bulgaria. The acquisition of Telenor by PPF Group set the tone in a sector where opportunities for consolidation and convergence continue to drive the deal landscape. The Czech group is also looking to close on the acquisition of Nova Broadcasting Group from MTG, a deal in the vicinity of 185 million euro. A number of small transactions mark the software and technology scene, where the local pool of talent continues to attract investors while in addition to the now standard interest from international venture capital funds, we see strong strategic interest from the likes of SEGA, LINK Mobility Group, and Thunder Software Technology indicating a certain comfort with the market that was not as evident previously.

Energy and industrial segments were marked by the acquisition of Energoremont Holding by Dietsmann for 50 million euro, as well as the acquisition of TPP Varna from CEZ by local investors for 50 million euro. The renewable energy sector continues to attract interest in the secondary market from local as well as international infrastructure and energy focused groups.

Healthcare is another strong segment where deals in 2017 were predominantly done in the retail and wholesale pharmaceuticals. The sector is set to attract further interest due to demographic factors impacting local demand in conjunction with the excellent position for expanding on healthcare tourism.

The most notable public sector investment opportunities are select pending concessions with the key highlight being the tender process for Sofia Airport launched in July 2018, which is expected to attract major international strategic players, whilst the concession for Plov-div Airport seems less certain after acquisition talks with China’s HNA Group were discontinued.


Following a year of high transaction volumes, Croatia’s M&A activity slowed down in 2017. It was a difficult year for the Croatian economy mostly due to the negative effects experienced as a result of the massive restructuring of the country’s biggest concern Agrokor. The structural importance of this company to the country’s economy translated further into political instability. Nevertheless, despite the economic slowdown, the Croatian GDP growth remained stable at 2.9%. Tourism sector assets showed exceptional resilience to the overall trend and dominated the M&A market in 2017. The list of recent deals in the industry includes Hotel Kempisnki acquisition by Serbia’s MK Group, the TUI Blu Jadran hotel acquisition by TUI AG for 31.5 million euro, the Hotel Marijan acquisition by Adris Group.

KKR’s regional consolidation strategy generated the country’s largest transaction – the acquisition of CME’s broadcast operations for a consideration of 135 million euro.

The investment activity in the energy sector is slowing down due to adverse regulatory changes. During 2016, these changes resulted in a number of distressed asset sales and significantly halted the development of renewable energy projects. 2017 saw limited number of energy deals such as the Chinese Norinco International 76% stake purchase of Energija Projekt wind park for 32 million euro.

The industrial sector highlighted the Chinese batteries producer Camel Group’s investment in the electric supercar companies Rimac Automobili and Greyp Bicycles.

In line with its privatisation strategy, the government continues to explore options for companies such as Petrokemija, Croatia Airlines, as well as for a number of tourism-related highly depreciated real estate assets. The announced intentions for the repurchase of MOL’s stake in the oil and gas company INA by the Croatian government as well as the potential sale of a 25% stake in HEP are currently on hold. The announced potential sale of the so-called “non-strategic” companies is expected to attract investor interest for targets such as the food producer Podravka, electrical equipment producer Koncar and the port operator ACI and Croatia Banka.

Going forward, the M&A activity observed in 2017 is expected to rebound, stepping on the stable GDP development. Furthermore, Croatia’s accession to the EU had a positive overall impact by increasing investor confidence and providing access to long-term EU funding. Whilst the ongoing sector consolidation and the privatisation in the tourism and hospitality sector will be a key driver of M&A activity, Agrokor’s restructuring may bring a number of attractive assets to the market in the course of 2019.


The country remained the leader in M&A activity in the SEE achieving deals value increase of 15%. The country’s market size naturally draws significant inbound foreign strategic and private equity interest representing 67% of the total transaction value. Whilst domestic transactions constitute a 30% share, the outbound transactions remain low at 3%, which indicates the early- stage of local capital development. Out of close to 150 transactions for 2017, over 15 were more sizable, with value in excess of 100 million euro evenly distributed among the key sectors.

Two of the top ten transactions were in the energy and utilities sector, both constituting large minority buyouts. Enel paid 401 million euro to the Romanian state for 13.6% stakes in E- Distributie Muntenia and Enel Energie Muntenia. The deal materialised after a long period of negotiations and legal disputes. On the other hand, Electrica SA concluded a deal with Fondul Proprietatea fund to purchase its 21.9% stakes in its subsidiaries SDEE Muntenia Nord, SDEE Transilvania Nord, SDEE Transilvania Sud and Electrica Furnizare for a price of around 165 million euro.

Penta Investments- backed international pharmacy chain Dr. Max took over A&D Pharma wholesale and retail pharmacy businesses in a deal valued at around 350 million euro. This consolidation has turned Dr. Max into the largest player in the pharmaceutical market.

The banking sector consolidation has produced the third largest deal – Banca Transilvania’s takeover of the local structures of Greece’s Eurobank in a transaction estimated at 240 million euro. Eurobank’s exit from Romania has been driven by an EC-approved restructuring programme.

Another high profile transaction with a value in excess of 200 million euro was the acquisition of integrated containerboard and corrugated packaging manufacturers EcoPack and EcoPaper by DS Smith, a global leader in corrugated packaging for the FCMG sector. The transaction followed the buyer’s regional expansion strategy.

More than 25 deals were in the real estate sector, with Radisson Blue Hotel change of ownership from Elbit to the UK-based private equity fund Revetas Capital for 170 million euro being the most notable deal. Looking at the top ten transactions, it is worth noting the entry of the two private- equity funds Vitruvian Partners (UK) and Polaris Private Equity (Denmark) which acquired stakes in two local businesses developed by both local (BitDefender – IT) and foreign investors (Premium Porc Group – Agribusiness), respectively. In addition, Key Safety Systems backed by the Chinese company Ningbo Joyson EC purchased Takata Corp operations in a transaction valued at some 150 million euro.

In 2018 Romania continues to be an attractive market for both private equity and strategic investors. In the first half of the year, more than 50 transactions have been reported amounting to some 2 billion euro.

The two largest transactions occurred in the banking sector. Erste Group bought a 6.3% stake from SIF Oltenia in Banca Comerciala for 140.5 million euro, whilst the UK-based Agro Group announced plans to acquire Bank Leumi.

With an estimated value of 100 million euro, the acquisition of Farmexim and Help Net by the German group Phoenix was the largest transaction in the pharmaceutical sector, while the forestry sector witnessed the transaction for Cascade Empire forest assets between Schweighofer group to the Swedish GreenGold valued at 90 million euro.

Also, the real estate sector delivered numerous transactions, the most relevant ones being the takeover of the Oregon Park project by Lion’s Head Investment from Portland for around. 140 million euro, the sale of 100% of Militari Shopping Center to the South -African fund MAS Real Estate for 95 million euro 100% of Campus 6.1 to the Austrian CA Immo for 53 million euro and Sibiu Shopping Mall to the South-African fund NEPI Rockcastle for 21millio euro.


M&A activity in Serbia has seen a sharp increase compared to previous years where it traditionally lacked the volumes and depths of neighboring countries. In 2017 and the first half of 2018 we have seen a number of large-scale deals.

A landmark deal for the past year was for the Belgrade Airport where the French Vinci Airports won the tender for the 25-year concession with an up-front concession fee of 501 million euro along with investment programme commitment for above 732 million euro. The exit of Telenor from the CSEE region was the most notable deal of the first half of 2018 where PPF Group purchased the local subsidiary as part of the package deal for the southeast business of the Norwegian telecom group.

The financial industry dynamics also shaped the M&A sector in 2017 – mainly international players exits satisfying consolidation drives of existing local competitors. Examples include the sale of the Piraeus Bank to Direktna Banka, the take-over of Jubanka by the local MK Group, and the acquisition of the Vojvodjanska Banka by OTP. The trend continued in 2018 with the acquisition of Telenor Banka by PPF Group and the takeover of VTB Group by Andrej Sljahov, a Russia-based private investor.

Last year’s transactional activity highlights the increase to a majority ownership of Napred razvoj in the country’s largest construction company Energoprojekt Holding. In addition, GTC acquired Bel-grade Business Center, whilst the Serbian food concern Swisslion acquired the winemaker Vrsacki Vinogradi. The data storage and imaging services company Data Outsourcing Centre d.o.o. was taken over by the leading US NYSE-listed data management player Iron Mountain – despite the relatively small size the trans-action highlights IT sector attractiveness in the inbound M&A radar.

Bor – the copper mining and smelting complex is expected to be another marquee deal for the metals and mining sector following the sale of the Zeleza Smederovo steel mill company.

Other state-owned enterprises for which privatization procedures are in preparation include the insurer Dunav Osiguranje and Serbia’s largest bank Komercijalna banka.

In addition, after a process of restructuring and debt-for-equity swaps, several other large state-owned companies now have good prospects to be more attractive to investors and may soon be on the privatization agenda – e.g. the pharmaceutical producer Galenika, agricultural company PKB the bus producer Ikarbus, the rubber manufacturer Tigar, the furniture producer Simpo and the bus company Lasta.

Among the reasons for the increased M&A activity in Serbia has been the initiation of the EU accession process. The structural reforms initiated in 2015 have also raised the government’s credibility. In the private sector, food and retail are expected to continue to drive M&A, joined by technology and software development which are increasingly attractive.


M&A activity in Slovenia experienced a considerable decrease in 2017 in both number and total value of transactions.

Key M&A drivers in Slovenia remain industrial sector, banking restructuring, private equity in-bound investment, and privatisation, while the private sector is generating an increasing number of smaller deals. Partially due to the very limited ability of local banks to offer acquisition finance at present, private M&A activity in Slovenia is primarily driven by international and regional investors.

Private equity investors and privatisation remained key deal drivers in the past 18 months. The top transactions on the Slovenian market have been backed by private equities across all industries – from banking to retail/wholesale and manufacturing. These include CME’s broadcast operations acquired by KKR for 95 million euro, the Merkur Group retail business acquired by the US-based fund HPS Investment Partners for a price of 77.6 million euro; Paloma’s paper hygiene products production acquired by the Slovakian PE Eco Invest.

In addition to this, 2016 and 2017 were active with respect to transactions in a fi-nancial industry with private equity capital driving the bulk of transactions. The American PE, Apollo global Management jointly with EBRD acquired the oldest and the largest Slovenian bank NKBM in 2015. Subsequent to this acquisition further consolidation of the market was driven through the acquisition of KBS banka and Raiffiesien unit in Slovenia making NKBM a second largest bank in Slovenia. Further consolidation of the market has continued in 2017 through Apollo Global acquisition of Summit Leasing from Sumitomo Corporation and acquisition of a stake in Gorenjska banka by Serbian AIK Banka.

Another PE-backed transaction was the Chinese AGIC Capital acquisition of Fo-tona – a medical lasers producer, for 80 million euro.

Despite the successful recent privatisation of, among others, the second largest Slovenian bank NKBM, Aerodrom Ljubljana, coatings producer Helios Domzale, automotive parts producer Letrika, medical lasers producer Fotona, ski equipment manufacturer Elan and household appliances maker Gorenje, state-owned sector still represents a significant area of interest and will generate significant activity in the short to midterm period. The government follows the announces in 2015 privatisation plan for 80 enterprises. However, it plans to retain significant influence (25% +1 of the shares) in 23 of these which are deemed as “strategic”. This category includes energy company Petrol, gas supplier Geoplin, holding company Sava, Steel group SIJ, gaming company Hit, national lottery company Loterija Slovenije, petrochemical company Nafta Lendava and reinsurer Pozavarovalnica Sava. Above 55 state-owned entities for which the strategy envisages complete disposal include the Central Securities Clearing Corporation (KDD), poultry producer Perutnina Ptuj, footwear manufacturer Peko, dairy Pomurske mlekarne.

A number of companies on the market, controlled by banks due to high levels of debt are also deemed for sale.

Positive macroeconomic outlook will further boost M&A activity which is already at high levels, if not booming, across many sectors.

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