20 April 2006 -- More mergers and acquisitions, a higher value of privatisations and similarities between the most popular industry sectors – these common trends characterise the M&A activity in Central & Eastern Europe and the CIS.
The total estimated M&A deal value of USD 91.2bn exceeds all expectations, almost doubling that of 2004.
Since 1997 PricewaterhouseCoopers has analysed the key trends and driving forces of Mergers & Acquisitions and privatisations in the CEE region. In 2005, we accounted for 1,848 publicly announced, private transactions in ten countries of the CEE/CIS region, including Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Slovakia and Slovenia, with Ukraine in our survey for the first time.
The estimated average disclosed deal value increased from USD 52.1m to USD 71m in 2005, with an average deal size of USD 473.4m among transactions in the +USD 100m bracket.
“Mega deals continue to be a significant factor - 15% of deals were greater than USD 100m, up from 11% in 2004” – highlighted Steven Berger, Transactions Partner of PwC.
Manufacturing still most attractive sector
The number of transactions within each industry sector has been consistent for the past several years. The most active sectors were manufacturing, with 384 transactions in 2005 representing 21% of the total, financial services (13%), energy & utilities (10%) and food & beverages (9%).
Higher cross-border activity
The number of cross-border deals amongst the surveyed countries was three times higher than in 2004. However, 56% of all deals were domestic transactions, driven by the Russian domestic M&A market, where this rate was 72%. In contrast, Romanian and Slovakian M&A markets were dominated by inward transactions, 72% and 63% respectively, compared to an average 40% for the entire region.
Diverse market
We reported an overall growth in activity, but each country has its own specific characteristics.
| Bulgaria | Most dynamic growth in transaction number — 254% |
| Croatia | One of the smallest markets in CEE, but with the largest growth in the estimated market value. |
| Czech Republic | After Russia, the largest market in CEE with stable growth over the last three years. |
| Hungary | Huge growth in transaction number in line with development in the small- and medium-sized domestic transactions market. |
| Poland | One of the largest markets, but only modest growth. |
| Romania | The second-largest growth in the M&A market, both in terms of number of transactions and in estimated market size. |
| Russia | Represents half of the total CEE market value. |
| Slovakia | Decreased activity, increased market value. |
| Slovenia | Consistent level of transactions, but continuously growing market value. |
| Ukraine | First time involved in the survey with a reasonable market value. |
Privatisation continues
Although the number of privatisations reported in the region has decreased by 19%, the value realised on these privatisations was significantly higher – estimated market size of USD 22.8bn, representing an 84% increase on 2004 (44%, excluding Ukraine). Of total transactional activity in the CEE region, privatisations represent a 25% share. Privatisation spending was the highest in Ukraine and Romania, the Czech Republic and Hungary.
Characteristics of the Russian market
Russia remained the most active market in the surveyed CEE/CIS countries, with 706 deals worth USD 52.5bn. The Russian M&A market grew in size by 73% against a 75% regional average growth rate in 2005. Domestic (72%) and inward (19%) transactions represent 91% of the total deals closed. The majority of outward deals were targeted at Ukraine. The manufacturing, financial services and energy & utilities sectors saw the most activity, the latter accounting for 42% of the estimated total Russian market value. In Russia the average private deal transaction size was USD 174.5m in 2005.
Steve Berger commented:
“We see a lot of M&A activity which, in our opinion, will continue to surge at least for the next few years. The structural changes – such as entrance into WTO and regulatory changes – should boost acquisition or consolidation in a number of sectors. In the short and medium-run we believe that several sectors, including the financial sector and commercial banks in particular, will experience a heavy increase in cross-border and domestic deals volume. Russia is gradually becoming more transparent and offers significant market potential and many strategic and financial investors recognize that.”
Notes to Editors:
1. The full survey can be downloaded from the following website:
www.pwc.com/mandace. This publication includes information obtained or derived from a variety of publicly available sources. PricewaterhouseCoopers has not sought to establish the reliability of these sources or verified such information. PricewaterhouseCoopers does not give any representation or warranty of any kind (whether express or implied) as to the accuracy or completeness of this publication.
2. Volume & number of M&A deals in Russia and CEE in 2002 - 2005
 | 2002 | 2003 | 2004 | 2005 |
| Volume of deals in Russia ($bn) | 7,4 | 23,7 | 30,3 | 52,2 |
| Volume of deals in CEE (%bn) | 17,7 | 38,6 | 50 | 91,2 |
| Russia annual growth rate by volume (%) | | 320% | 128% | 173% |
| Number of deals in Russia | 286 | 436 | 451 | 706 |
| Number of deals in CEE | 1070 | 1176 | 1219 | 1848 |
| Russia annual growth rate by number (%) | | 152% | 103% | 157% |
3. For additional information please contact Vera Totskaya, PR Manager, or Olesya Kuzminskaya, PR Specialist.
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