The Czech mergers and acquisitions market was one of the few markets in Central and South Eastern Europe which reported a drop in activity during 2011. In the Czech Republic the number of transactions fell by 24 % against 2010, while in the region as a whole it rose by 11 %. However, the total value of disclosed transactions in the Czech Republic was USD 4.2 billion, up 29 % on 2010. The trend towards a smaller number of larger transactions was confirmed on the Czech market, with 11 transactions with disclosed value being worth more than USD 100 million. From investors’ point of view the most attractive sectors were manufacturing and services, information technology and real estate. These are the results of the ranking of mergers and acquisitions entitled “M&A Barometer in the Czech Republic and the region of Central and South Eastern Europe” compiled by Ernst & Young. The most interesting markets in the region of Central and South Eastern Europe are Poland, Turkey and Romania.
Most transactions on the Czech market took place between Czech firms, whose share rose to 60 % in comparison with 49 % in 2010. Incoming investment was mainly from the United States, Poland, Germany, the Netherlands, Finland and Great Britain. Outgoing investment was mainly in Slovakia, Poland and Hungary. Strategic investors maintained their predominance on the market, and the share of financial investors rose slightly to 26 %. The value of a transaction was disclosed in 39 % of cases, just as in 2010. On the basis of disclosed transactions the estimated value of the Czech acquisition market was USD 4.2 billion, i.e. USD 0.9 billion or 29 % higher than last year.
In terms of the number of transactions the manufacturing and services sectors were the most interesting, with both accounting for approximately one fifth of all transactions. Smaller but more numerous transactions saw information technology take third place. Real estate was next on 12 %. What is interesting about this last statistic is that it involved the four most important transactions in terms of size on the Czech market. In 2011, the largest disclosed transactions were the real estate transactions carried out by Multi Development, which sold the Forum Nová Karolina Shopping Centre in Ostrava and Forum Ústí nad Labem to the real estate fund Meyer Bergman Limited and the Canadian fund Hospital & Healthcare of Ontario Pension Plans for USD 403 million.
In 2011, the acquisition market in Central and South Eastern Europe (Bulgaria, Czech Republic, Croatia, Greece, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia and Turkey) grew as a whole by 11 %. Of these 11 countries only four reported a drop in the number of transactions undertaken, with the CR being joined by Greece, Croatia and Slovenia. “The agreement on the global market is that the most interesting markets in this region are Poland and Turkey, followed by Romania. In addition, Poland and Turkey also dominated in terms of the number and volume of transactions in the region,” says Petr Kříž.
Given the less than optimistic forecasts of the development of the eurozone, many analysts anticipate that there will be fewer mergers and acquisitions in 2012. Even though many European companies are at threat of restricted access to bank financing because of the unfavourable economic development of the eurozone, large corporations still enjoy access to credit. However, it is possible that many of them will not need credit for possible acquisitions, since they have hoarded sufficient financial reserves of their own.
“Network sectors are becoming more and more attractive. Consolidation is going on in the food processing industry and pharmaceuticals, while healthcare is offering long-term potential. However, a company’s market position, the sector growth potential and recently the relative predictability of the development of the sector are the key factors,” explains Petra Wendelová.
The most attractive markets for capital transactions in 2012 will probably include China, India, Brazil, the United States and Australia. Other investment destinations amongst developing countries are Malaysia, Mexico and Argentina. As far as the BRIC countries are concerned, during 2011 in Brazil, Russia and China the volume of domestic mergers and acquisitions increased, along with transactions realised abroad. A similar trend can be expected in 2012, because the crisis in the eurozone is motivating financially strong economies, such as the Chinese, to reassess their investment strategy and instead of state and other obligations invest in tangible assets, e.g. infrastructure or natural resources.