SEE poised for slowdown in M&A activity after record-high 2018

By Julian Gikov, Konstantin Ivanov, Richard Golden, Helena Simicevic and Simona Ciubotariu

Julian Gikov, M&A Director – SEE Region, RBI

Mergers and acquisitions (M&A) activity in Southeast Europe (SEE) accelerated in 2018 for the fourth consecutive year, as total transactions value exceeded 13 billion euro, but the first half of 2019 showed signs of a slowdown. Robust GDP growth and privatisation initiatives put Serbia and Slovenia in a steady growth mode and they are catching up with the market leaders Bulgaria and Romania, contributing to a far more balanced regional M&A market. In Croatia, the negative impact of political volatility and the ongoing restructuring of the Agrokor conglomerate declines and overall investment climate is improving. In terms of industries, the fast-moving consumer goods (FMCG), the technology, media and telecom (TMT), the financial sector, infrastructure and real estate attracted highest investor interest and will remain on the investors’ radar in 2019. M&A activity in most SEE countries over the last year and a half reflects positive sentiment on the part of global and regional investors, their excessive cash positions, and easy financing availability. Going forward, strategic international investors with solid cash positions are screening the SEE market for consolidation opportunities, as their interest is primarily directed to national sector champions or high value-added niche product companies. At the same time improving consumer confidence is making domestic players increasingly active. In addition, with around 10.5 billion euro allocated for investments in Central and Southeast Europe (CSEE) by private equity firms, bolstered by strong Chinese interest, the region is set to benefit from increasing fund raising. Furthermore, increased demand has resulted in financial sponsors facing a shortage of investment targets. The key deal drivers for the SEE region will remain regional and national consolidation processes, privatisation, and restructurings.


After M&A activity in Bulgaria peaked in 2017, the following year and a half saw a drop in the number of deals. Their average value, however, was higher, supported by accelerating GDP growth (expected to reach 3.3% in 2019) and shrinking unemployment (4.8% in 2018). The average transaction value in 2018 and the first half of 2019 was close to 60 million euro. The upward trend is expected to continue, as a number of major transactions are due to close by the end of the year.

The list of big M&A deals in Bulgaria during the past 18 months includes the purchase of Telenor Bulgaria, the country’s third largest telecom operator, by Czech fund PPF and the sale of Nova Broadcasting Group to Advance Properties for a reported 176 million euro. The most interesting developments expected later in 2019 are the long-delayed concession of Sofia Airport and the rumoured sale of telecom operator Vivacom. The financial sector, energy, TMT and real estate attracted the highest investor interest.

However, following Societe Generale’s sale of its local business to Hungary’s OTP for a reported 500 million euro in 2018, we have not seen much activity in the financial sector so far in 2019. Other noteworthy deals in 2018 were the sale of Piraeus Bank Bulgaria to Eurobank Bulgaria, and the sale of Municipal Bank to local private investors.
Investors’ strong sentiment for real estate materialised in several deals for commercial real estate over the past 18 months, including the acquisition of Mall Sofia by Europa Capital and Megapark Offices by a consortium led by Universale International Realitaten and CA Immo for 100 million euro. Compared to 2017, the last 18 months saw a drop in transactions in the sector.

The TMT sector continues to be perceived as highly attractive by foreign investors in Bulgaria. The acquisition of Telenor by PPF Group set the tone in 2018, as opportunities for consolidation and convergence continue to drive the market. Later in the year Nova Broadcasting Group was acquired by Advance Properties for a reported 176 million euro. The last 18 months also saw a series of small transactions, as the most notable one was the acquisition of Imperia Online by Stillfront Group, a global group of gaming studios. The list of major deals rumoured to happen by the end of 2019 includes the sale of Vivacom, the largest integrated telecom in Bulgaria, and the potential change in the ownership of BTV as part of CME’s package sale of assets in CEE. A number of small to mid-sized transactions are expected to be wrapped up in the software and fintech solutions segments.

The potential acquisition of Czech group CEZ’s assets in Bulgaria by Eurohold, one of the largest regional financial groups, promises to be one of the most interesting developments on the energy and industrial segments, alongside the Belene nuclear power plant project, which the government recently decided to restart. The renewables sector continues to attract interest on the secondary market as 2018 saw the largest brownfield transaction in Bulgaria todate, advised by Raiffeisen Bank – Samsung’s disposal of its 43 MW PV portfolio to a consortium of German fund KGAL and Czech developer and operator Micronix. The reforms in the sector are expected to further boost investment activity.


After a slowdown in 2017 due to the Agrokor crisis, 2018 saw a significant increase in M&A activity in the country, as 53 deals with a total value close to 1 billion euro were concluded. Political stability and the government’s positive intervention in Agrokor’s restructuring impacted favourably the market.

M&A activity in the Adriatic country is historically driven by the private sector and regional investors who remained wary until the Agrokor situation showed signs of being resolved. On the positive side, the country recorded stable GDP growth of 2.6% in 2018, albeit lower than the 3% – 4% posted by its regional peers.

The real estate sector dominated the country’s M&A market in 2018. The list of recent deals includes the acquisition of hotel chain HUP by Adris Group for 223 million euro, and Hyprop Investments’ 129 million euro deal for City Center One trade centres in Zagreb. In addition, Immofinanz bought two retails parks in Croatia for a total of 18 million euro, and Jadran Plc. was acquired by Croatian pension funds PBZ Croatia Osiguranje and Erste Plavi.

The retail segment has also been active in terms of M&A, although the deals’ price tags tend to be lower. One of the largest Polish private equity funds, Enterprise Investors, acquired Studenac, the second largest retail chain in Dalmatia and eighth largest domestic player. The fund also bought sport gear chain Intersport and the Pan Pek bakeries. In 2019 Enterprise Investors continued its expansion and bought the Istarske supermarkets to further consolidate the position of Studenac on the Croatian coast.
Electric car company Rimac Automobili too continues to attract investor interest, as Germany’s Porsche acquired a 10% stake in the company in 2018. In 2019, Hyundai Motor Group invested additional 80 million euro in the company.

Even though the majority of deals involve foreign investors, Croatian companies too are expanding their business through acquisitions. FMCG distributor Orbico Group, which is active in Poland and Belarus, bought Romanian Interbrands and became one of the top FMCG distributors in Europe, and AD Plastik, the largest Croatian manufacturer of plastic components for the automotive industry, acquired Hungary-based Tisza Automotive.

At the same time in line with its privatisation strategy, the government disposed of a stake in Petrokemija, selling it to local group Prvo Plinarsko Drustvo (PPD) and state-owned INA. For a number of other stateowned companies the government is exploring privatisation options, as this should further boost M&A activity in 2019. The list includes troubled Croatia Airlines, which is highly dependent on government support, food producer Podravka, electrical equipment producer Koncar, port operator ACI, and Croatia Banka.


Although GDP growth eased in 2018, Romania remains one of the fastest growing economies in the EU, as its economy expanded by 4.1% in 2018, driven by private consumption. Investment and net exports, however, had a negative impact on growth, which is forecast to slow down to 3.5% in 2019 and further to 3.0% in 2020.

In 2018 Romania continued to be an attractive market for private equity and strategic investors alike with landmark transactions taking place in TMT, real estate, the financial sector, healthcare and agriculture. M&A deal value amounted to around 5 billion euro last year, generated in around 150 transactions.

Liberty Global Group’s divestment strategy in the region generated one of the largest transactions in the country – the sale of cable operator UPC Romania to Vodafone estimated at around 2.9 billion euro.

In the IT sector, a major deal was the acquisition of Softvision, a digital engineering and consulting company, by U.S.-based Cognizant Technology Solutions in a deal worth almost 500 million euro. Meanwhile, UiPath, a provider of enterprise robotic process automation, became the first Romanian unicorn with an enterprise value exceeding 1 billion euro. In 2018 the second round of venture financing raised 234 million euro for a 9% stake, bringing the company’s valuation in excess of 2 billion euro.

One of the biggest transactions in 2018 was the acquisition of Agricost Braila, the largest agricultural producer in Romania, by UAE-based investment fund Al Dahra Holding in a deal worth 200-225 million euro.

Two large transactions took place in the banking sector. Erste Group bought a 6.3% stake in Banca Comerciala Romana (BCR) from SIF Oltenia for 140.5 million euro, while UKbased Agro Group acquired Bank Leumi for around 100 million euro.
In the pharmaceutical sector, the largest transaction was the acquisition of Farmexim and Help Net by German group Phoenix for an estimated 100 million euro. Another landmark transaction was the sale of Sanofi’s European generics business Zentiva, including its Romanian operations, to private equity firm Advent International as part of its restructuring strategy.

In real estate, the owners of DIY retailer Dedeman acquired The Bridge office project from local real estate developers Forte Partners for an estimated 150-200 million euro.

Other major real estate transactions were the takeover of the Oregon Park project by Lion’s Head Investment from Portland for around 140 million euro, and the sale of 100% of Militari Shopping Center to South-African fund MAS Real Estate for 95 million euro.
Other high profile transactions driven by private equity funds were the sale of brick producer Brikstone by CEECAT Capital to Austria’s Leier Group, and the sale of courier company Urgent Cargus by Abris Capital Partners to Mid Europa Partners.

In the first half of 2019, the combined value of M&A deals in the country amounted to almost 2 billion euro, while transactions numbered 45, close to the levels achieved in the like period a year earlier. The list includes the acquisition of Banca Romaneasca by Eximbank from the National Bank of Greece; the acquisition of Interbrands Marketing & Distribution by Orbico Group; the acquisition by Blackstone of a minority stake worth 175 million euro in Superbet, the largest omni-channel sports betting and gaming operator in Romania; the acquisition of a portfolio of nine shopping centres across the country by MAS Real Estate in a deal worth 113 million euro; and the 50 million euro investment by Chinese private equity fund CEE Equity Partners in Brise Group, a Romanian grain trader.


Although a record-high number of deals were concluded in 2018, the country’s M&A profile was largely defined by only a few large transactions privatisations and market exits. The launch of EU accession talks and arrangements with IMF, as well as the structural reforms initiated in 2015, have given a boost to the M&A process in the country. The increased economic activity, with GDP growth accelerating to 4% in 2018, is also supportive of the market.

The successful privatisation of copper mining and smelting complex RTB
Bor and the tender for the Belgrade Airport concession were among the M&A highlights last year.

China’s Zijin Mining Group, the new owner of RTB Bor, is obliged to invest 1.23 billion dollars in the Serbian company and increase production threefour times within the next five years while maintaining the number of employees. Following the RTB deal, the Chinese group extended its presence on the Serbian market with the acquisition of the Timok copper and gold mine in 2019.

The Belgrade Airport concession was awarded to France’s Vinci Airports, which will manage the airport for the next 25 years. The deal included an up-front concession fee of 501 million euro along with investment commitments of 732 million euro.
Meanwhile, the financial sector is expecting the privatisation of the largest Serbian bank – Komercijalna Banka – which should become by the end of 2019.

The most notable deal in the private sector was Telenor’s exit from CSEE, which involved the sale of its assets in Serbia, Hungary, Bulgaria and Montenegro to the Czech PPF Group. The total price consideration of 2.8 billion euro makes this the largest telecom transaction in the region for the past few years. The TMT sector also saw Telekom Serbia’s acquisition of Kopernikus Technology for 200 million euro, and software developer Nutanix’s purchase of Frame, a Serbian-American startup, for 142 million euro.

In the industrial sector, Irelandbased corrugated packaging company Smurfit Kappa bought packaging producers Fabrika Hartija and Avala Ada for a total of 133 million euro. The consumers’ goods sector saw Mid Europa sell biscuits producer Bambi to Coca Cola HBC for a reported 260 million euro, and a joint venture between Karlovarske Mineralni Vody and PepsiCo buy Knjaz Milos, a major producer of mineral water and nonalcoholic beverages.

Some smaller state-owned companies were finally privatised after the first
sale attempts failed in 2017. Pharmaceutical company Galenika was sold to Brazilian pharmaceutical group EMS for 25 million euro, while bus producer Ikarbus is in a sale talks with China’s Yinlong and the deal expected to close in 2019.


The Slovenian market experienced a sharp rise in both deal volume and value in 2018, backed by strong economic activity.

The TMT sector saw a couple of landmark transactions in 2018. BC Partners bought the largest Pay TV provider, United Group, for a consideration of 661 million euro, while NXMH, a Belgium-based investment company, acquired one of the oldest cryptocurrency exchange desks in the world – Bitstamp – for 347 million euro.

In October 2018, China’s Hisense Group acquired Gorenje Group, the major European household appliance producer for close to 280 million euro. Shortly after, Hisense Group sold Gorenje’s waste processing subsidiary to its local peer Eko Surovina. As Hisense focuses on the core operations of Gorenje, i.e. household appliances production, more disposals of non-core assets are expected.

Slovenia’s financial industry consolidation, which began in 2016, slowed down in 2018, as M&A activity took place mostly in the insurance sector. Save Re bought KBM Infond from NKBM, one of the largest banks in Slovenia, for 25 million euro; Triglav Group acquired Alta Skladi for 21 million euro, and insurance provider Assicurazioni Generali bought insurance and asset management company Adriatic Slovenica for 245 million euro in early 2019.

In November 2018, Slovenia sold 59.1% of lender NLB’s issued share capital in an IPO on the Ljubljana Stock Exchange in line with its commitments to the European Commission taken in 2013 when the bank was recapitalised. In the real estate sector, Austria-based Supernova and Immofinanz acquired Mercator shopping centres for 117 million euro and bought three retail parks for 29 million euro.


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