Regional Mergers & Acquisitions overview 2005

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Date: 06 April 2006, Budapest

Growing number of Mergers and Acquisitions, increasing value of privatisations and similarities among the most popular industry sectors – these common trends characterise the M&A activity in Central & Eastern Europe and in the CIS region. The total estimated M&A deal value worth USD 91.2bn exceeds all expectations, almost double compared to 2004.

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. 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, Slovenia and including 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 the average deal size of USD 473.4m among the transactions over USD 100m.

“In 2005, half of the top ten transaction values were greater than the second largest transaction of 2004. Mega deals continue to be a significant factor, 15% of deals were greater than USD 100 m, up from 11% in 2004” – highlighted Margaret Dezse, Corporate Finance partner of PwC.

Manufacturing remains the most attractive sector
The number of transactions within each industry sector has been consistent for the past 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%).

Elevating cross-border activity
The number of cross-border deals amongst the countries involved in the survey 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, however 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 the CEE with stable growth in the last three years.
Hungary
  • Huge growth in transaction number in line with development in the small and medium size 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, mainly characterised by domestic deals.
Slovakia
  • Decreasing activity, increasing 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 privatisation reported in the region has decreased by 19%, the value realised on these privatisations was most significantly higher – estimated market size of USD 22.8bn, representing an 84% increase compared to 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 Hungarian market
Hungary performed above the regional average in the number of transactions in 2005. The total market size doubled compared to 2004 with an estimated market value of USD 4.6bn. Despite the high number of transactions (231), the total estimated average deal size decreased to USD 27m due to an increase and development in the small and medium size domestic transactions market.

“Domestic deals, 52% in 2005, took a noticeably greater proportion of the total transactions compared to last year’s 43%. Inward investment represented one-third of total transactions in the Hungarian M&A market, with Austria, the United Kingdom and Germany proving to be the most acquisitive investor countries” – stressed Margaret Dezse.

The largest proportion of the total market value was represented by telecom and utilities sectors in inward transactions and by the financial services sector in outward deals. The growing trend in total deal number was driven by acquisitions in manufacturing, services and IT sectors. Exceptional interest was shown in the Hungarian IT sector (13%) compared to the average of the region (5%).

Compared to 2004 the Hungarian market achieved considerable growth in two additional areas: outward transactions and privatisations. Outward transactions tripled with investments concentrated mainly in neighboring countries, Croatia, Czech Republic, Romania and Slovakia. Hungary completed 11 privatisation deals including two mega-privatisations with PricewaterhouseCoopers representing buyers of both Antenna Hungária Rt and Budapest Airport Rt.

Notes to Editors:

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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