Mergers & Acquisitions market value tripled since 2004 in CEE

Kiev, 20 April 2007 Press Release

Maturity, momentum and mega-deals

In line with continental Europe and the UK which last year achieved their strongest Mergers & Acquisitions performance in recent history, transaction activity in Central & Eastern Europe was also extremely buoyant. In total 2,527 publicly-disclosed transactions were completed in the CEE countries last year. Overall, deal volume rose by 37% last year while the total value of these transactions rose by 79% and reached a record-breaking USD 163bn compared with USD 91bn in 2005 – reported PricewaterhouseCoopers in its latest M&A report.

PricewaterhouseCoopers tracked publicly disclosed, private-sector transactions in eleven countries of the region: Bulgaria; Croatia; Czech Republic; Hungary; Poland; Romania; Russia; Slovakia; Slovenia; Ukraine and including Serbia in its survey for the first time.

“Much of this growth was due to an outstanding performance by Russia which recorded 1,210 transactions totalling USD 111bn during 2006. As a whole, however, M&A activity in CEE remained robust with new stars such as Ukraine and Serbia beginning to attract considerable investment attention” - highlighted Margaret Dezse, Corporate Finance partner of PwC.

Top target industries

There are few surprises among the ranking of industry sectors by M&A activity in 2006 with a similar picture to previous years emerging. Manufacturing remains the titleholder for the most active sector with 499 transactions (384 in 2005) representing 20% and 21% of the deal total, respectively. It is followed by financial services with 16% (13% in 2005); food & beverages with 10% (9% in 2005) and energy & utilities also at 9% (10% in 2005).

However with regard to year-on-year deal volume growth, construction, transport, financial services and retail & wholesale last year showed the greatest increases.

The pharmaceuticals & chemicals industry earned the title of ‘most valuable industry’ in CEE with 344% increase in the average deal size from USD 45m to USD 200m in 2006.

Quick facts

Privatisations up by 52 % but down in market value by 70%

The 11 countries (newly joined by Serbia) reported 490 privatisations in 2006. This compares to 322 in 2005. The power houses of the region were Serbia (210), Russia (158) and Poland (56), which accounted for 87% of all privatisations in CEE. The top five sell-offs totalled at USD 4bn representing 53% of the entire CEE privatisation market.

In contrast to the generally upbeat M&A trend, the total value of privatisations dropped dramatically last year, from USD 22.8bn in 2005 to USD 7bn in 2006. This could be a positive sign, indicating that much of the CEE region has matured beyond the State sell-off stage.

M&A market in Ukraine

• Ukraine ranked fourth among the 11 CEE/CIS member countries in terms of market value growth after Croatia, Hungary, and Russia – the total value of the M&A transactions is estimated around USD 3.4bn, increasing 44% compared to 2005.
• 170 private sector deals completed, representing an increase of 101% over 2005 (85 deals in 2005).
• Average disclosed deal size was around USD 45m.
• Approximately 53% of all transactions (by number of deals) were cross-border inward deals, only 5% accounted for investments made by Ukrainian companies in foreign targets. The remaining 42% were domestic transactions.
• Largest amount of inward foreign investments originated from Russia (22 deals), Poland (13 deals), Cyprus (6 deals), France (5 deals), and the U.K. (5 deals).
• Financial services sector was the largest by far by volume (approx. USD 1.7bn) and number of deals, as several top-tier banks were acquired by foreign investors. Growth was driven by large population, growing income, spreading of consumerism culture, and relatively low regional penetration of banks.

Most significant transactions:

Privatisation in Ukraine

• Year 2006 saw 23 privatization deals for a total value of USD 89 mln. The amount of deals tripled since last year.
• The Government foresees large-scale reconstruction and modernization of industrial capacities, energy, utility and transportation infrastructure, with increasing demand for private investments
• Among large privatization targets are a fixed-line operator Ukrtelecom, Odessa port works, as well as stakes in 16 of the 25 regional power distribution companies (“oblenergo’s”).

• Mergers and Acquisitions Survey: Ukraine 2006 (in Ukrainian) (147 kB)
  
  
• CEE/CIS Mergers and Acquisitions Survey 2006 (in Ukrainian) (367 kB)

PricewaterhouseCoopers has performed an analysis on the key trends and driving forces related to the Mergers & Acquisitions and privatisation activity in the CEE region since 1997.

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.

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