Central and South Eastern Europe - M&A Barometer 2012

Introduction
Ernst & Youngs M&A Barometer is a summary and analysis of publicly disclosed information accumulated from various reputable databases, such as DealWatch, Zephyr and from Ernst & Youngs own database. M&A activity and data includes private to private transactions and excludes: Acquisitions of minority stakes below 15% (versus 20% , in the previous issues) Majority shareholders further acquisition of a minority interest, Real estate transactions (except when the target and buyer was a real estate company or real estate fund), Capital market transactions (except for transactions that resulted in a change of control), Acquisitions of licenses, Joint venture agreements, Greeneld investments, IPOs, Privatizations. Multi country deals on a country level (value of these deals was ignored in each country, but the number was accounted for). Internal reorganizations In our Mergers & Acquisitions (M&A) Barometer we analyze the prevailing trend in 11 Central and South Eastern European (CSE) countries (Bulgaria, Croatia, Czech Republic, Greece, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia and Turkey). Although the countries under review vary in size, background and economic growth, six of them have experienced a decreased M&A activity in terms of deal number in 2012 compared to 2011, while in 5 countries the M&A market had shown an increase. The total number of deals in CSE decreased by 1.8%, moreover a 17.6% decline in total estimated transaction value of the M&A market in 2012 compared to 2011. More specically, we observed the majority of domestic transactions, 53% of the total number of deals. Also noteworthy is the fact that transactions were dominated by strategic investors and the most active target industry was Manufacturing while in terms of value the largest transactions occurred in the Banking and Financial services, Food & Beverages and Energy and mining sectors.

Highlights 2012
Top 3 countries by number of transactions: Turkey, Poland, Czech Republic Number of closed transactions: 1,108 Estimated M&A market size: USD 41.8 bn Top three most active industries in CSE (by number of deals): 1. Manufacturing (135 deals) 2. Services (116 deals) 3. Energy and mining (115 deals) Top three most active industries in CSE (by average value): 1. Banking and Financial services (USD 252m) 2. Food & Beverages (USD 205m) 3. Energy and mining (USD 120m) Average deal size of deals over USD 100m: USD 573.2m Average deal size of deals below USD 100m: USD 14.5m Number of deals over USD 100m, as % of total number of deals: 4.2% Disclosure rate of transaction value or deal size: 38.8%* *Applying individual disclosure rate we estimated the total transaction value of the M&A market for each country.
Ernst & Young recognized by mergermarket as top of the European league tables for accountancy advice on transactions in calendar year 2012

W INNE R 2012

Turkey continued to be the most active country in terms of the number of deals in 2012 closing 297 transactions during 2012. It was followed by Poland and the Czech Republic closing 276 and 155 deals respectively. The total number of transactions decreased in the region from 1,128 deals in 2011 to 1,108 in 2012 representing a 1.8% decline year on year. However, in the Czech Republic, Greece, Poland, Slovakia and Turkey the M&A market had shown an increase from 2011 to 2012 based on the number of transactions.

Number of transactions

Number of M&A transactions in CSE

350 300 250 200 150 100 50 0

2011

2012

Estimated market size (USDbn)

Total estimated transactions value of the market

The total 2012 estimated transaction value in CSE market was USD 41.8bn, down 17.6% from the previous year. Turkey ranked rst with an estimated value of USD 17.6bn, followed by the Czech Republic (USD 8.3bn) and Poland (USD 8.02bn). The signicant decline in terms of deal value in Poland is mainly attributable to the lack of similar mega transactions compared to 2011. Similarly, the increase in Slovakia and in the Czech Republic is mainly due to 1 large transaction with a value over 1bn USD.

25 20 15 10 5 0

2011

2012

Investor population Strategic and nancial

The vast majority of deals were closed by strategic investors in all countries, resulting in an overall proportion of 83% in the region. The share of nancial investors was the highest in Hungary followed by Serbia, Bulgaria and Slovakia.

2012
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Strategic

Financial

Direction of transactions
The CSE transaction market was dominated by domestic transactions in 2012 (53% of the total number of deals) which represents a 4% decrease compared to 2011 in favour of an increase in inbound and outbound. Domestic transactions were most popular in Hungary, the Czech Republic, Poland and in Serbia. Turkey and Poland had the most number of outbound transactions (34 and 28 deals), which targeted Italy (6 deals) and Germany (5). The proportional share of outbound transactions was the highest in Greece, Slovenia and Croatia. The proportional share of inbound transactions was the highest in Slovakia followed by Romania, Croatia and Bulgaria. Transacting within the region, the most active were Czech Republic (12 deals) and Poland (9 deals).
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
6%

Direction of transactions Direction of transactions based on deal number (number of deals)

Outbound 10% Inbound 37%

Domestic 53%

16%

12% 31%

4%

11%

0%

6%

15% 29%

21%

11%

46%

46% 32% 61% 50% 63% 52% 59%

38%

48%

48%

52% 27% 19% 33% 30%

54%

42%

56%

42%

40%

Inbound

Domestic

Outbound

Industry breakdown breakdown(number based of ondeals) deal numbers

Sector analysis
The Manufacturing sector was the most active target industry (by number of transactions), accounting for 135 deals in 2012. This was followed by Services, and Energy and mining . In terms of value, the largest transactions occurred in the Banking and Financial services and Food & Beverages sectors.
3% 5% 5%

0% 2% 1% 1% 0% 1% 2% 2% 3%

12%

10%

6%

10%

6% 8% 7% 7% 8%

Manufacturing Energy and mining IT Banking and Financial services Telecom & media Transportation Agricultural Chemicals Tourism Entertainment R&D Services Retail & Wholesale Real estate Food & Beverages Pharmaceuticals and health care Construction Other Publishing & printing Textiles Automotive

Each country had its own favoured industry, however Manufacturing and Energy and mining ranked rst in most countries.

Target Country Bulgaria Croatia Czech Republic Greece Hungary Poland Romania Serbia Slovakia Slovenia Turkey

Industry Energy and mining Retail & Wholesale / Construction Services Energy and mining Telecom & media Manufacturing Retail & Wholesale Manufacturing Food & beverages / Telecom & media Manufacturing Energy and mining

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Foreign interest
Although there were fewer foreign inbound deals compared to domestic deals, in terms of the origin of foreign capital invested in CSE by M&A transactions, Western European and non European investors continued to lead against CSE countries in 2012. The USA was the most active in 2012, closing 64 deals in the region followed by the UK (39) and Germany (36).

Bulgaria Diana Nikolaeva diana.nikolaeva@bg.ey.com Croatia, Hungary, Slovenia Margaret Dezse margaret.dezse@hu.ey.com Czech Republic Petra Wendelova petra.wendelova@cz.ey.com Greece Tassos Iossiphides tassos.iossiphides@gr.ey.com

Ten largest transactions in CSE in 2012 (USDm)

Poland Bartlomiej Smolarek bartlomiej.smolarek@pl.ey.com Romania Florin Vasilica orin.vasilica@ro.ey.com Serbia Wilson Balachandra wilson.balachandra@yu.ey.com Slovakia Jozef Mathia jozef.mathia@sk.ey.com Turkey Musk Cantekinler musk.cantekinler@tr.ey.com
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* StarBev operations in the Czech Republic, Serbia, Croatia, Romania, Bulgaria, Hungary, Montenegro, Bosnia-Herzegovina and Slovakia. The total amount was taken into account on a CSE level only and not on an individual country basis. ** Transaction was approved in 2012 and closed in January 2013. *** Real operations in Romania, Poland, Russia and Ukraine. The total amount was taken into account on a CSE level only and not on an individual country basis.

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