Emerging Europe: The state of M&A in 2020

The CMS and EMIS Emerging Europe M&A 2020/2021 report takes a closer look at deal volume in the Central Eastern European region. Key findings show that, although the COVID-19 pandemic slowed down M&A activities, regional markets succeeded in curbing the impact of the economic crisis.

Emerging Europe at a glance

According to the CMS and EMIS report, the current landscape of M&A activities in Emerging Europe (see figure 1) appears to be quite diversified. The COVID-19 crisis certainly took its toll on deal values in this region. In fact, in 2020, CMS counted 1.705 deals with a total value of EUR 60.80 bln. Thus, Emerging Europe recorded a 12.9% drop in deals volume.

However, Emerging Europe’s markets also demonstrated a beyond-the-expectations resilience, which sets this region apart from other emerging but low-performing markets in Asia and Latin America. Some countries within the Emerging Europe area performed especially well. It is the case of Poland, which registered year-on-year growth in deal volume, as well as of Turkey and Bosnia-Herzegovina.

Countries in the Southern-Eastern part of the area, such as Bulgaria and Croatia, recorded higher but still contained a decrease in deal value. By contrast, Czech Republic suffered the highest loss recording a 24.7% drop in transactions.

map of emerging Europe countries highlighted

Figure 1. Emerging Europe countries

The top-performing sectors were Telecoms and IT, Real Estate and Construction, and Manufacturing. According to CMS, digitalization and the growing demand for digital communication imposed by lockdowns drove the expansion of the Telecoms and IT area. As a matter of fact, CMS data shows that this sector “accounted for six of the 20 largest deals in the region, including the third largest of all, the EUR 3.7bn purchase of Poland’s Play Communications by France’s Iliad”.

Then again, after a year characterised by the COVID-19 pandemic, in which deals were protracted, postponed or simply abandoned, it is probably not as bad as many of us may have imagined – Horea Popescu, CMS Romania, Radivoje Petrikić, CMS Austria.

Mining assessed itself as another competitive industry. As the report highlights, Mining was the “top sector by value at EUR 14.1bn despite falling deal volumes”. Real Estate recorded mixed results, as it dropped to second place by deal volume. On the other hand, as e-commerce boomed during the pandemic, the sub-sectors of logistics and warehouses recorded a positive 38.5% increase in deals.

Top sectors in M&A

Top 3 sectors in the Emerging Europe area according to CMS and EMIS analysis.

The impact of the COVID-19 pandemic and its consequences

As mentioned above, deal volumes fell by 12.9% over 2020. However, the fourth quarter of 2020 registered a bounce back worth of EUR 24.3 billion of deals, which helped to counterbalance the losses.

Overall, the reaction of corporations and deal-makers was quick. In this regard, as CMS report stresses, government support packages were useful in supporting business reaction to the pandemic shock.

As in other parts of the globe, the shift towards digital infrastructures gained momentum in emerging Europe. The overall results of the digitalization shift, nonetheless, remain mixed. M&A activities could resort rapidly, “although ay a slower pace than previously”. Retailing, finances, and energy infrastructures were best equipped to gain the maximum benefit from digital technologies. By contrast, sectors in which site visits were necessary for decision-making suffered the most from the economic shutdown.

In sum, as Stefan Stoyanov, Head of M&A Database at EMIS said “despite COVID-19’s devastating impact, the emerging Europe region proved to be very resilient and outperformed other places similarly affected by the pandemic. There were strategic deals featuring foreign investors in many of the region’s countries […] and private equity remained robust”.

The outlook for 2021

The final part of 2020 witnessed a sort of frenzy in the M&A sector, with deal-makers trying to sign deals that had been postponed or suspended due to the health crisis. In this regard, Horea Popescu, CEE Corporate Practice, commented that “we saw this trend pick up in the autumn and there is a decent pipeline of activity in most countries which is a good sign for 2021”.

One of the trends that the regions should be wary of is related to the rise of protectionism across Europe. As the EU bloc sought to mitigate the impact of globalization and health crisis’ externalities, a new EU framework for screening FDI had been put in place.

Aleš Lunder, a CMS partner in Slovenia, said: “The framework is not an FDI regime in its own right but introduces cooperation and information sharing mechanisms to ensure the Commission and member states have the tools to coordinate when vetting FDI on the grounds of security or public order.”

Given the climate of trepidation across the EU, it remains to be seen whether the CEE member states will manage to strike the right balance between the economic benefits of an open investment environment and the legitimate aim to prohibit foreign investment due to concerns over security and public order – CMS and EMIS report.

The screening measures introduced by the 2020 EU framework are not mandatory. But at the same time, “any such measure […] that exists must comply with the basic requirements of the framework. These include transparency, non-discrimination […] allowing for possible comments by the Commission or other Member States”.

According to the report, the FDI screening mechanism would apply to critical industries, such as defense, digital infrastructures, and health. Screening measures for FDI might make transactions longer in a context in which the length of the assessment procedures is still very diversified.

The still unwritten balance between open trade, FDI, and protection of national security-critical assets is therefore set to become crucial in shaping the post-COVID-19 future of the emerging Europe region.


Interested in knowing more about the impact of COVID-19 on trade and investment? Check out the rest of the Markets and Partners section.

von Benedetta Giuliani
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