Page 5 - bne_newspaper_February_01_2019

Top Stories
February 1, 2019 www.intellinews.com I Page 5
Investors shrug off politics to boost deal value in emerging Europe
petite for M&A was much stronger in the Central and Southeast Europe regions, despite the rise of populism and “illiberal democracy”, spreading protests and other forms of political instability. This is in line with bne IntelliNews’ observation that while “Planet Politics” is in a terrible state in much of the region, “Planet Business” is much healthier.
“There is little evidence that widespread politi- cal protests or instability deterred investment in emerging Europe in 2018,” said the CMS/EMIS report.
On top of emerging Europe’s long-term position as a gateway to Western Europe, the CMS/EMIS report considers that the region’s “fast growing and maturing economies make it an attractive market in its own right”.
This was helped by continued strong economic growth across emerging Europe, combined with a stable international economy, said the report, which “created a conducive environment for deal making in 2018”.
“M&A activity has been surprisingly buoyant. Markets have reached a size and level of sophisti- cation that makes them more aligned to western European expectations and standards and that is reflected in interest from international investors including private equity funds and corporates,” said Helen Rodwell, partner in the CEE corporate practice, CMS, in the report.
Setbacks for Russia
Russia, while still the location of the largest num- ber of deals in the region (605), is the exception
to the generally rosy picture seen across the CEE region. It experienced a 10% fall in the number of deals and a 26% fall in deal value to €27.1bn — the lowest since CMS started publishing the annual report in 2012.
Commenting on the fall in deal-making in Russia, the head of EMIS’ M&A database, Stefan Stoyanov, said: “Foreign investors and significant transac- tions in Russia continued to be scarce in most sectors besides oil & gas, chased away by various bans and diverging opinions on the continuation
of imposed Western sanctions. ... This year’s two largest transactions aside, most M&A was driven by domestic activity. However even that could be declining, as many Russian companies have be- gun to spend their free cash on buying back own shares instead. Local market analysts have ex- pressed fears that should this become a trend, it could result in a wave of company delistings from the Moscow Exchange.”
Elsewhere in the region it was a very different sto- ry. In terms of deal volume, Russia was followed by Poland, the second most active country in the region, with 323 deals in 2018, of which almost a quarter were in the Real Estate & Construction sector. The second-largest country among the new Europe EU members, Romania, experienced a significant rise in M&A deal value in 2018, again despite serious concerns over the undermining of the anti-corruption fight and outspoken attacks on multinationals by the ruling party. Meanwhile, the original illiberal democracy from the region, Hungary, saw a 70.5% rise in deal value.
Despite the tanking of the Turkish lira and the increasingly authoritarian politics, Turkey saw
the aggregate value of M&A nearly doubled to €14.8bn due to two very large banking deals, while activity remained stable. The report notes that, “Some companies may be forced to consider deleverage options (indeed, the largest deal in the country in 2018 was the debt restructuring of Turk Telekom), creating opportunities for foreign inves- tors to enter local businesses at favourable valu- ations.” Such low valuations — also identified in