Emerging Europe deal activity rebounds, reaching highest levels since 2018

Emerging Europe deal activity rebounds, reaching highest levels since 2018.

Key points:

• Dealmaking in the CEE region is increasingly buoyant.
• The number of deals in Ukraine grew to 135 last year (making it the third most active jurisdiction for M&A among Emerging Europe countries) compared to 89 deals in 2023, which shows the resilience and attractiveness of Ukraine even during war while market conditions show potential for more deals to be done.
• The International Monetary Fund forecasts that European emerging market economies are anticipated to grow by 3.1% in 2025, compared with 1.4% in Europe’s advanced economies.
• A stronger focus on JV transactions shows the desire of new investors not just to acquire the competitor, but build a partnership and create a synergy together in developing the business.
• Emerging Europe to benefit from sustained growth, a robust financial ecosystem, and an increasingly digitalised economy.

Findings from the CMS Emerging Europe M&A 2024/25 report, published in cooperation with EMIS, demonstrate the resilience of the Emerging Europe deal market as activity rose to the highest levels since 2018. Market confidence has been bolstered by improving economic conditions and a greater sense of stability as inflation continues to subside, and central banks cautiously anticipate further interest rate cuts.

The report shows that deal flow in Emerging Europe increased by 8% compared with 2023, with 1,281 deals announced in 2024. However, despite higher deal volume, aggregate deal value fell by 30.9% to EUR 25.72bn. Values were impacted by the relative absence of “megadeals” valued at EUR 1bn or more. In 2024, there was a shift towards small and mid-market deals. Average deal value fell to EUR 20.1m in 2024 compared with EUR 31.4m in 2023.

Cross border investment

Cross border deals remained strong with activity increasing to 776 deals, 31 higher than the previous year. Standout performers for M&A included the United States, which retained its top position by deal count (102), and the UK, which ranked as the second most active foreign investor (68) despite deal volume decreasing. Aggregate deal value reduced from EUR 35.5bn to EUR 23.3bn, with Luxembourg ranking in first place by deal value (EUR 2.01bn).

Country hotspots

Poland maintained its position as a major M&A market (269 deals at EUR 5.77bn) and Romania was the region’s second most active jurisdiction (187 deals), however, both saw overall reductions in deal volume compared with 2023. Countries where deal activity increased included Bulgaria (88 deals), Croatia (92 deals) and Hungary (63 deals), where volumes rose by 7.3%, 10.8% and 10.5% respectively. Several countries saw deal values fall compared with 2023, including Poland and Hungary, due to fewer megadeals. However, the Czech Republic and Slovakia present a more complex picture as deal volume fell by 7.2% (128 deals) and 14.6% (35 deals) respectively – but deal values jumped by 53.8% (EUR 5.65bn) and 25.5% (EUR 4.19bn). It is also noteworthy that Ukraine has entered the top 10 in the Telecommunications and IT sectors, with deals amounting to EUR 193.5 million and EUR 148.5 million, respectively. When considering the total number of deals, Ukraine is making rapid progress compared to 2023 (89 deals vs. 135 deals, respectively). Overall, a significant increase in deal numbers in Ukraine shows the resilience of its economy and attractiveness to investors, even during the war. The most active sectors for investments in Ukraine are Telecom & IT, Real Estate & Construction, Mining, Energy & Utilities and Logistics.

Sector diversity

The report shows that there were significant shifts in the sectors driving deal activity. By recorded deal value, the largest sectors were Energy & Utilities, Real Estate & Construction and Food & Beverage. Energy & Utilities saw deal value increase by 162% (rising from EUR 3.72bn to EUR 9.75bn). Real Estate and Construction saw an increase in both deal volume (194, up from 158) and value (EUR 5.65bn, up by 77.2% from EUR 3.19bn).

Private equity

In 2024, Emerging Europe saw private equity deal volume increase by 12.6% to 278 deals. However, reflecting the wider trend seen across the region, private equity deal value fell by 11.4% to EUR 13.88bn. Notable deals included Blackstone’s acquisition of a portfolio of ten logistics assets in the Czech Republic and Slovakia for EUR 470m and CVC Capital Partners’ acquisition of Partner in Pet Food (PPF) in Hungary for EUR 2.0bn, which was the largest transaction by value. Although there was less private equity investment from abroad, the trend for increasing activity by local private equity focusing on mid-market investments can be seen.

Helen Rodwell, Partner at CMS Czech Republic, comments: “Private equity investors continue to take an interest in Central and Eastern Europe and, with private equity deal volumes increasing by 12.6% last year, the investment landscape remains dynamic. In recent years, partnering with local capital has proven to be an additional route to market in the region - giving rise to additional opportunities and competitive advantage for the larger private equity houses.”

Outlook

Telecommunications and technology are driving deal activity in Ukraine and across the CEE region, as these sectors are crucial for economic growth, particularly during periods of uncertainty. In Ukraine, notable deals include major acquisitions by NJJ Group: Lifecell, purchased from the Turkish company Turkcell, and Datagroup-Volia, acquired from Horizon Capital.

In Ukraine specifically, the rise of IT hubs and digital initiatives, such as Diia.City, is attracting both domestic and foreign investors, further fuelling M&A activity in tech and telecom.

The CMS Emerging Europe M&A 2024/25 report can be found here.