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Emerging Europe M&A Report 2017/18

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January 2018 Contents League tables League tables Contents

CEE Legal Advisors for 2017 4 Introduction 30 Slovakia in the spotlight Will buyers’ appetite for Slovak targets 6 2017 dealmaking in emerging continue? Company Number of deals Europe at a glance CMS 57 A snapshot of the headlines from the 32 Manufacturing – a CEE success story 2017 M&A data for emerging Europe The role of manufacturing in M&A and Dentons 44 greenfield investment into CEE Schoenherr 31 8 Transaction trends – exploring DLA Piper 29 2017’s deal activity across emerging 36 Asian investment in emerging Europe Europe Three perspectives on Asian investment Cobalt 27 Exploring 2017’s deal activity and trends into emerging Europe Wolf Theiss 22 across the region, as well as the outlook Clifford Chance 21 for 2018 40 Emerging Europe’s hotel market picks up Kinstellar 21 16 Data in focus: key insights Exploring the region’s hotel market Weil, Gotshal & Manges 20 The global head of EMIS’ M&A database, resurgence in 2017 Sorainen 20 Stefan Stoyanov, offers insight on some of the stories coming out of 2017’s 42 Talking Turkey M&A data CMS partners discuss 2017 and the League tables were generated using the LeagueBoard tool available in EMIS . outlook for the year ahead The criteria used for crediting the advisers for the purpose of the league tables, as well as 20 The evolution of family offices for summarising the M&A data presented in this report, include: in emerging Europe 44 Energy-from-waste opportunities The rise in family offices across the region in emerging Europe —— Deal Announcement date: 01 January, 2017 - 31 December, 2017. – what do we expect next? Future opportunities in emerging Europe —— Emerging Europe geographic area, understood as the dominant country of operations of the deal target or the location of its main assets, covers: Albania, Belarus, Bosnia and 22 The Balkans in focus 46 Third-party funding for litigation Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, A round-up of key trends and pipeline – protecting investments Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, deals in the Balkans Protecting investments in emerging Turkey and Ukraine. Europe —— Deal Value: at least USD 1m; for commercial real estate deals at least USD 5m (Note: Deals 24 Acquisition finance in with undisclosed value were accounted for as having a value of zero, unless a publicly emerging Europe 48 Strong economic growth drives M&A, available market estimate was provided by a third-party, or a deal value could be estimated by The latest developments in the financing but populism casts a political cloud EMIS. Such cases are clearly labelled in the report). landscape across the region The impact of geopolitics on the deal —— Exclusions: rumoured or failed deals, ECM deals, convertibles issues, share buybacks, internal landscape and investment appetite restructurings, joint ventures, and employee offers. 26 Going global – outbound investment in 2017 on the up in emerging Europe The ranking was created based on EMIS deal advisory information available, according to our best National and domestic champions taking 50 Appendix 1 knowledge, as of 05 January, 2018. The data can be subject to updates. on the world Regional data and top deal lists

28 FinTech finds a new frontier as banks, 63 Appendix 2 insurers and funds face up to Country data and top deal lists competition 94 About us The impact of FinTech on the future of financial services in CEE Cover image: Starý most (Old Bridge) over the river Danube in Bratislava, Slovakia.

2 | Emerging Europe M&A Report 2017/18 3 Introduction Despite the uncertainties around global politics that were Buoyant economic activity and GDP growth across core The US remained the busiest investor by number of Introduction markets in CEE spurred a stellar level of deal flow in the deals with 92 transactions in 2017. Domestic investment swirling around at the start of the year, confidence picked up region, up 6% on 2016. A number of star performers continued to dominate deal activity in the region and emerged in 2017. Romania saw a healthy uptick in M&A Russia clocked up 603 deals worth a value of EUR in the second half of the year and there was a healthy flow activity, with a 13% increase in deal volume and 64% 22.5bn, while Poland negotiated 166 deals worth increase in value. Hungary showed the highest growth EUR 4.3bn. of transactions with continued increasing interest from foreign in terms of total deal value, ending the year on EUR investors throughout 2017. Emerging Europe enjoyed another 2.7bn, a 126% increase on 2016. There was a welcome Across the region, the most active sectors were real sign of revival in Ukraine, despite tensions in the east of estate and construction, followed by manufacturing and solid year for M&A activity and closed 2017 with 2,113 deals the country, reflected in its 67% increase in M&A technology. Mining, including oil and gas, was the activity. Serbia enjoyed a sharp rise in transaction dominant sector by value in 2017, as it was in 2016, across the region, a 6% increase on 2016. Deal value came in numbers, though they tended to be smaller than in the driven largely by a clutch of large deals in Russia. Private previous year. Poland was most active market for new equity activity remains at similar levels as last year, while at EUR 71.5bn, a modest decline from 2016 but well ahead of stock exchange listings, with IPOs worth close to EUR the overall value of deals dropped by 25% after 2016’s 2014 and 2015 levels. 1.8bn in total. record EUR 28.4bn. China became the largest foreign investor across The outlook for 2018 looks positive. The flow of deals emerging Europe in 2017, increasing the value of its shows that CEE remains a key target for international investments into the region by 78%, after a 96% rise in investors, whether they want to tap its markets directly 2016. The 2017 figures are skewed by the CEFC China or use them to produce goods for export. We are Energy-Rosneft deal, but there is no doubt that CEE is already witnessing a healthy pipeline of activity at the firmly on the radar of Chinese investors and will play an start of 2018 with all signs pointing to another good important role in its Belt and Road initiative to improve year for M&A activity in the region. infrastructure within key trading partners. We trust you will find this report useful and encourage you to contact our local teams for additional up to date market insight and advice.

Helen Rodwell Radivoje Petrikić Partner, CEE Corporate practice Partner, CEE Corporate practice [email protected] [email protected]

4 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 5 Headline data Headline data 2017 dealmaking in emerging Europe at a glance

Russia EUR 1bn+ highest acquisition of Zabka in Poland number of by CVC Capital Partners 2,113 deals deals, followed largest private equity acquisition 6% increase from 2016 by Poland in the region Poland Private most active market for new Equity stock exchange listings remains at same level IPOs worth close to Mining/ Real Estate – of activity as last year, EUR 1.8bn in total Natural most active sector while value of deals Resources 390 deals down by 25% sector – EUR 71.5bn highest total total deal value deal value 17% decrease from 2016 EUR 18bn China USA top foreign top foreign Hungary investor into region investor into region highest growth (126%) in total deal value (EUR 2.7bn) (by deal value) (by volume)

6 | Emerging Europe M&A Report 2017/18 7 Transaction trends Transaction Transaction trends – exploring 2017’s deal trends Transaction activity across emerging Europe

Dealmakers were active across the region in 2017 as CEE enjoyed robust economic growth though fewer megadeals meant overall M&A values were lower than in 2016. Concerns that seemingly fragile political environments would detract from M&A activity within emerging Europe were put to rest. The year closed with a 6.4% increase on 2016’s deal volume and although the total value of deals was well down on 2016, it passed the EUR 71.5bn mark, well ahead of 2015 and above 2014 levels.

The year began with investors cautious about the Countries outcome of the US elections, the impact of the Brexit vote and voters going to the polls across Europe. The experience of individual countries varied, reflecting Confidence picked up as the new president settled in at the disparity in size and make-up of economies, as well as the White House, negotiations got underway on the UK’s political developments. As usual, as the largest economy, withdrawal from the EU and the seismic shift to the far Russia saw the most M&A activity. Deal volumes in Russia right that many had feared in Western Europe failed to were steady compared with the previous year, spread materialise. across a broad range of sectors as its economy enjoyed a recovery. Despite EU and US sanctions, growth was This was reflected in the CMS European M&A Outlook fuelled by domestic demand, growing international trade published in September 2017 in which executives and a recovery in the the price of oil. There were fewer predicted M&A activity rising over the coming year, megadeals than in the previous year, and a 17.5% drop in driven by non-European buyers, the need to diversify into overall deal value - although deal value remained well new markets, attractive valuations and technological above 2014 and 2015 levels. change. In Ukraine, despite tensions in the east of the country CEE economic growth outpaced that of Western continuing to drag on the economy, there were welcome Europe, Japan and the US once again in 2017, a signs of revival which were reflected in a 66.7% increase performance that has not gone unnoticed by investors in M&A activity, though values were down against 2016. and all the signs at the start of 2018 point to another year of solid M&A activity. Of the top ten largest deals in Hungary in 2017, six were above EUR 200m which helped more than double the value of deals to over EUR 2.7bn compared to the previous year.

8 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 9 Romania was also a star performer, both in terms of GDP It was a more muted year for Croatia after a record We expect to see the real estate, manufacturing, growth and M&A, with a strong rise in deal numbers (up number of deals in 2016 and although the economy grew consumer products and technology and communications Transaction trends Transaction by 12.5%) and values (up by an impressive 64.3%), with steadily, investor sentiment was impacted by the sectors to continue to drive M&A in 2018, as well as the trends Transaction major deals in energy and utilities, wholesale and retail, problems at food and retail group Agrokor, the biggest transport and infrastructure sector, which offers finance and manufacturing. employer in the Balkans. Slovenia was one of the top interesting targets, including the airports in Belgrade, performing economies in the Eurozone, but saw a drop in Tirana and Sofia. As the CMS Global Infrastructure Index Turkey has been through a traumatic period, including M&A deal numbers and values against 2016 when a EUR 2017 noted, CEE “is particularly exciting as their the failed coup of 2016, but its economy showed signs of 572m Japanese deal boosted the total. economies experience a significant expansion due to the Bill Watson a sharp bounce back towards the end of the year. M&A favourable environment for foreign investment and EU Managing Partner at Value4Capital activity levels recovered to some extent, with an uptick of Serbia enjoyed a sharp rise in transaction numbers, financing”. Among the projects it highlighted were the 11.5% in deal volume and 46% in deal value, although though they tended to be smaller than in the previous planned EUR 384m modernisation of train stations in the Despite talk of overheating in European there is still some way to go before Turkey returns to the year. Deal values in Bulgaria showed a healthy increase, Czech Republic from 2018 to 2022 and the new Central buy-outs, we think now remains a good levels of M&A activity we saw in 2012 and 2013. despite subdued volumes, as its economy moved up a Transportation Port in Poland which will compete with time to invest in the Central European lower gear. Among the smaller countries, Montenegro was a Europe’s largest airports, handling 50 million passengers mid-market. We like the size of the Polish Robust economic growth in Poland, driven by domestic bright spot with deal volumes up 50% and values up a year. market, as well as the other large market, demand and higher public spending, helped offset some 36.6%, as was Bosnia and Herzegovina, but Albania Romania. Competition for deals in this of the nervousness of investors concerned about reported only a handful of deals. Megadeals and greenfield segment, enterprise values of Euros government policy and ensured an active transactions 20-50m, is lower than in others and we market. Poland enjoyed the highest number of Sectors The number of megadeals dropped slightly in 2017, with believe pricing expectations remain transactions in the region after Russia, though values only five of the top 20 deals valued at more than EUR 1bn reasonable too. Sure there is strong growth were down on 2016 when the top two deals alone were Once again, real estate and construction topped the - and of those, only one was more than EUR 2bn. By in revenues and profits which builds sellers worth a combined EUR 2bn. league table by number of deals, broadly in line with comparison, in 2016 all but one of the top 20 deals was expectations, but we’ve found owners 2016 and accounting for four of the largest 20 deals above EUR 1bn and eight were above EUR 2bn. know that it’s not an ever-upwards curve. In The Czech Republic’s economy has continued to perform across the region. It followed a record-breaking 2016 for terms of sectors, we are sticking to services, strongly, with unemployment among the lowest in the sector. The Czech Republic, Poland and Hungary have Of the top 20 largest deals during the year, more which capture growth from inward Europe, but deal activity dropped back from the record been hot spots as investors have turned to CEE for higher than half of the targets were Russian, spread across investment as well as the expansion of levels of 2016. In Slovakia, the automotive sector returns and the prospect of solid rental growth in an mining, manufacturing, real estate, energy and utilities, domestic consumption. continued to be the engine of economic growth. Overall increasingly sophisticated market. telecoms and IT, with eight of those companies going deal numbers were down, but values were up by 6.4%. to Russian buyers. Mining, including oil and gas, was the dominant sector by Foreign vs regional investors value in 2017, as it was in 2016, though there were fewer Across the region, state governments and local megadeals and the total value was lower. The year was authorities remain keen to encourage greenfield In what may be a sign of things to come, China became dominated by a clutch of large deals in Russia, including investments to bring jobs and prosperity. Work the largest foreign investor in the region, increasing the the purchase of a stake in Rosneft for EUR 7.5bn by progressed on the new EUR 1.4bn Jaguar Land Rover value of its investments by 78% to EUR 7.7bn, after a China’s CEFC and the just over EUR 1.7bn purchase of a plant in Slovakia, which has also encouraged 96% rise in the previous year. The figures were skewed stake in the Yzhno-Russkoye oil and gas field by Austria’s developments for related suppliers and logistics by the CEFC China Energy-Rosneft deal, but there is no OMV group. companies. As an attractive location for greenfield doubt that CEE is firmly on the radar of Chinese investors Anne Fossemalle investors, the challenge still remains of finding suitable and will play an important role in its Belt and Road Director of Equity Funds, European Bank Economic buoyancy across CEE has resulted in falling large sites earmarked as industrial zones, with good initiative to improve infrastructure within key trading of Reconstruction and Development unemployment and rising wages, providing a boost for access to transport links and a ready supply of labour. partners. Elsewhere in Asia, investors from Japan, sectors reliant on consumer demand. Telecoms and IT Singapore and India remained active, though deal values CEE is a fascinating region. On the one overtook manufacturing in terms of numbers of Private equity from all three were down on the previous year. hand, we have seen the exit pace of crisis transactions, followed by wholesale and retail and finance and insurance. Energy and utilities remain critically The US was the second-largest international investor by era funds picking up and returning liquidity The outlook for private equity deals in the region remains important and we see continued interest in energy value, with a 95% rise to EUR 2.95bn and it retained its to the market. On the other hand, we see positive in the medium term. The total value of private infrastructure projects as well as energy-from-waste long-standing position as the busiest by number of deals, investment conditions positively affected by equity deals in 2017 was EUR 21.4bn, the second highest projects as countries seek to balance their fuel needs with 92 transactions. the region’s economic growth and by after 2016’s record EUR 28.4bn. Deal numbers remained against environmental commitments. increases in disposable income. The strength level with 2016, increasing only from 266 to 267, but There were big increases in the value of investments of domestic demand is matched by exports activity was broadly spread across sectors and countries. produced by a highly skilled labour-force. Wholesale and retail saw a 48% rise in deal values. The from Austria, Switzerland, Netherlands and France, while sector contributed to one of the year’s megadeals investments from the UK dropped. Deal numbers were Moreover, CEE benefits from developed- A signal that funds see plenty of opportunities, Enterprise through the purchase of convenience store chain Zabka generally lower, but Switzerland and Sweden bucked the market risk and a vibrant, institutional Investors in September 2017 closed a EUR 498m fund, Polska in Poland by private equity heavyweight CVC for trend and were responsible for more transactions. The quality PE ecosystem – and yet it has half of which will be deployed in Poland, and Mezzanine an estimated EUR 1bn. UK was the second largest by number of deals, down emerging market opportunities such as Management launched a fund targeting mid-market 11%, while UK deal values fell by 58% to EUR 2.19bn fragmented sectors and access to primary companies in the region. deal-flow via succession. For us, this means which may be a reflection of the weak pound and a sign high expectations for CEE private equity that investors have become more cautious following the going forward! Brexit vote.

10 | Emerging Europe M&A Report 2017/18 11 We have also seen a wave of investment by South African funds into real estate and other sectors, particularly in Transaction trends Transaction Romania, Croatia and Bulgaria, as well as interest in trends Transaction Hungary and Poland.

The importance of domestic buyers should not be overlooked; Russia was the largest player with EUR Andrea Ferancová Bartoňová 22.5bn of deals and 603 transactions, broadly in line with Founder of ESPIRA Investments, a private a year earlier. Between them, Turkey, Poland and the equity firm focused on growth capital Czech Republic were responsible for more than EUR 10bn investments in small and medium size of deals, with Turkey and Poland increasing the overall enterprises based in Central Europe value of their investment into the region by 15% and 12% respectively. Investing in companies managed by balanced management teams of men and After suffering a fall against the value of the US dollar in women and focusing on high potential small 2016, the euro bounced back in the wake of the recovery medium enterprises in traditional sectors in the Eurozone economy and for most of the year it addresses an underexploited niche in the enjoyed strong gains against the pound following the market. This strategy is especially relevant in Brexit vote. Looking ahead, key issues will be whether consumer-oriented sectors, as 80% of total rising US interest rates will push up the value of the dollar consumer spending is driven and strongly and whether a rally in the pound towards the end of influenced by women. Companies which 2017 proves to be more than just a temporary bounce. have their largest customer represented in the decision-making process prove more Attractions of CEE competitive and successful. In addition, research confirms that gender diverse As a broadly stable region, with economic growth Deal drivers for buyers management teams have the capability to outpacing all major economies, a favourable environment deliver superior performance (higher growth for foreign investment and EU financing and an The flow of deals shows that CEE remains a key target for and profitability with lower risk), which can increasingly affluent population of more than 100m international investors, whether they want to tap its lead to excellent risk-adjusted returns for people, CEE is an attractive market in its own right. markets directly or use them to produce goods for investors. Small and medium size enterprises Companies across a wide range of sectors, from export. It is a logical location for companies that operate are important engines of growth and consumer goods to financial services, see it as an in mature markets and are looking elsewhere for growth. significant drivers of innovation in the CEE appealing territory in which to do business. region and therefore we believe in the high Hedde Draper As economies in emerging Europe and the businesses potential of this market segment. Attractive tax rates and improving infrastructure as well Head of Corporate Finance Advisory within them develop, they are creating companies of a as an increasing appetite to embrace PPP projects appeal for Austria and CEE, UniCredit size to be attractive to international buyers who also to investors for both M&A and greenfield projects. appreciate the value of adding sophisticated technology We have seen an active M&A market in and IP to their portfolios. One factor holding back M&A Another big attraction is the availability of a relatively 2017 that we expect to continue into 2018. activity may be that there are simply not enough large low-cost, well-educated and skilled workforce, which has An interesting market in CEE has been assets to make it on to the radar of private equity funds made parts of the region a magnet for industries Romania. International strategic and private or corporate buyers with a higher-value deal sweet spot. including automotive manufacturing, software and equity interest for Romanian assets has technology. The proximity to Western Europe and its been significant. This manifested itself As our European M&A Outlook report showed, 54% of affluent markets is another advantage as far as investors during the auction for Romanian food executives believe that in the coming year cash-rich across Europe, Asia and the US are concerned. retailer Profi, ultimately sold to MEP. corporates will drive deal-making as they search for Romania, being one of the biggest returns. With interest rates still low by historic standards markets in CEE, is perceived by investors to and financial institutions in strong shape, securing have a relatively stable and attractive funding for deals is not an issue, though competition investment climate. between corporates and private equity firms means buyers need to be nimble.

12 | Emerging Europe M&A Report 2017/18 13 Obstacles

Transaction trends Transaction Although CEE remains a relatively stable place to invest trends Transaction and do business, political developments in some countries have given investors reason to be cautious in the last year or so. In particular, the rise of populist politics and a shift away from the centre ground has put the spotlight on Pawel Padusinski countries such as Poland and Hungary. One of the key Co-head of the Warsaw office concerns of investors is that progress that has been made of Mid Europa Partners in unwinding regulation and pushing back bureaucracy could be reversed, though their caution has not had any We continue to see the region offering significant impact on M&A activity levels this past year. compelling investment opportunities especially in the consumer and service- In one respect, some countries within CEE have become oriented sectors. This is largely being driven victims of their own success: their ability to bring in by growth in private consumption in our investment and create jobs has soaked up the available region which is outpacing the growth in the labour, pushing up wages and leading to skill shortages. Eurozone and we believe that this trend will The result is that employers are having to look further continue as local consumer habits converge afield as they seek to fill key positions and keep to those of Western Europe. The region has production lines open, running the risk of stimulating a sizable and growing middle class with migration which can be a politically volatile issue. increasing disposable incomes, seeking more convenience and higher value services. The impact of the new US tax rules is yet to become clear and there is uncertainty about whether the government’s desire to repatriate profits will have the knock-on effect of reducing foreign direct investment in CEE. Deal drivers for sellers Outlook According to the Outlook report, sellers will be looking to offload non-core assets to raise capital for expansion in There are plenty of reasons to be optimistic about M&A faster growing and more profitable areas. There was a activity in CEE in 2018, not least the region’s impressive sharp fall in the number of executives who expected economic performance. With a rate of growth that distress selling to be a key factor in decision making. leaves neighbours in Western Europe looking on with envy, it can offer an exciting and expanding consumer In those CEE economies that went through a period of market in its own right, as well as an economically privatisation early on after the opening up of markets attractive bridgehead into the wider EU. Combine those following the breakdown of the former Soviet Union, factors with a healthy pipeline of deals and the M&A many family businesses are now reaching a stage where scene for the coming year and beyond looks set to be they need funds to expand and are seeking strategic another lively one. investors. However, some owners are preparing to retire and cannot pass on the family business because their children are unable or unwilling to accept the mantle, perhaps because of a failure in succession planning. This so-called generational shift is common to most countries in the region, including Poland, the Czech Republic, Romania and Turkey, and is likely to be an important driver of deals in the coming years.

14 | Emerging Europe M&A Report 2017/18 15 Data in focus: key insights Data in focus: key insights key Data focus: in insights key Data focus: in

The head of EMIS’ M&A database, Stefan Stoyanov, offers further insight on the stories coming out of 2017’s M&A data

Q: How would you describe previously, featuring mixed buyers, addition, sector players have 2017 in terms of M&A activity in as well as stronger country and confirmed an increasing amount of emerging Europe? sector diversification. China’s “locked box” deals, which shift increased interest towards CEE/SEE certain transaction risks in favour of In a year marked by uncertainties likely stems from the availability of the owner. surrounding Brexit’s unwinding and more easily approachable targets the policy direction of the new US than in the U.S. or in Western Q: What about transaction administration, as well as by fears Europe, and a lighter regulatory activity in the banking sector of spreading populism that environment. We expect this – you had predicted increased preceded the elections in the interest to grow further in 2018. activity for 2017? Netherlands, France and Germany, M&A activity across emerging While the real estate sector still Despite our earlier predictions for a countries in CEE/SEE has remained leads by number of deals, the more active banking M&A in 2017, region will surely come in 2018, economy will likely guarantee the Q: There seems to have been a healthy. Deal flow was in fact booming IT scene is turning into a the year was somewhat quiet. Deals although improving economies and interest of both western and Asian recent uptick in deals in Turkey? higher than in 2016, reaching 2,113 significant driving force for M&A. in the financial sector were 161 the expected easing of ECB’s bond buyers at least in the short to transactions at year-end, although The volume of IT-related (16% down from 2016) for a total buying programme could pose a medium term. M&A activity in Turkey gained the total value of M&A fell by 17% transactions increased by 15% last value of EUR 3.5bn. The stabilizing hurdle to sector M&A. speed after April’s constitutional to EUR 71.5bn due to fewer deals year, reaching 305 deals. A lot of European economy and booming Q: Did government policy in referendum, which gave the above the EUR 1bn threshold. The the sector growth could perhaps be mortgage lending in Hungary, the Q: Which was the standout Poland deter investors? president more executive power. median size of deals, based on attributed to various EU funding Czech Republic, Romania and country in the region in terms Transactions long-delayed due to EMIS data on 1,308 transactions mechanisms being in place across Bulgaria have postponed the of M&A? Despite fears over the policy uncertainty finally took place and with disclosed or estimated values, the CEE/SEE countries. pressing need for mergers in the direction of the government, Polish prospects that no imminent political has surprisingly remained Nevertheless, deals with foreign sector. Nevertheless, the near-zero Country-wise, most remarkable in M&A volume and value in 2017 did changes will happen, coupled with unchanged at exactly EUR 11.2m. private equity participation in the interest environment is still 2017 was the revival of big oil & gas not move by much. The year’s strong GDP growth, helped boost EUR 20-50m range, which used to supressing profits and efficiencies deals in Russia, which traditionally marquee transaction saw investors’ confidence. Overall for Q: What are the main trends be sporadic once, are becoming of scale are being sought by active account for a large chunk of the convenience store operator Zabka 2017, M&A was up in terms of both you observed? more common. players in the region, such as region’s total deal value. Top changing hands from one private deal flow and total value but this Belgium’s KBC and Hungary’s OTP. investments by China’s CEFC, equity investor to another. CVC’s comes as no surprise considering Among the big trends we observed Lastly, prolonged access to cheap The latter, said to have prepared a Austria’s OMV and U.S. EUR 1bn purchase of the retailer the sharp dip in 2016 after the in 2017, the most obvious was that funding within the Eurozone war chest of some EUR 1bn, already Schlumberger point towards a from Mid Europa also ranked as the failed military coup. Turkey’s of China gradually becoming a combined with dormant cash in the bought Romania’s Banca returning confidence in the Russian top PE investment in the region. resilient economy will continue major factor for inbound deals in hands of both financial and Romaneasca and Vojvodjanska oil sector, which was also boosted However, with the majority of luring foreign buyers with its CEE/SEE. Last year the Asian strategic investors have boosted Banka in Serbia in summer, and is by the recovering price of the Polish M&A still defined by real quickening growth rates and country ranked as the region’s top demand for acquisitions and eyeing a further 2-3 deals by 2019. commodity. Another major deal estate deals, what impressed most favourable demographics, yet foreign investor for the first time resulted in the formation of a KBC on the other hand, after that should be mentioned in 2017 was the stock exchange continuing depreciation of the ever, despite having to curb its predominantly sellers’ market. The acquiring UBB in Bulgaria in late (although not featured in our activity. By the end of the year, currency and stalling EU record 2016 global buying spree by sellers’ advantageous position was 2016, is now also seeking rankings due to criteria restrictions) eight companies had floated new membership talks may result in nearly 40% due to regulatory and evident in our observations of the opportunities in Slovakia. On the was the combination of the shares on the main market of WSE, another challenging year for M&A. leverage concerns. It should be newly announced deal intentions in Polish scene, after the IPO of ride-sharing businesses of Russian raising close to EUR 1.8bn - the noted, however, that China landed 2017, as well as in the median Raiffeisen’s local unit was again internet major Yandex and Uber highest amount since 2013. With the top investor spot thanks to a valuations - while in 2016 EV/ delayed, the only major banking into a new jointly-owned entity other big deals in the pipeline and single exceptionally large deal - EBITDA was in the 6.5x-7x range, deal that happened was the sale of valued at more than EUR 3bn. also considering FTSE Russell’s CEFC’s purchase of a EUR 7.5bn last year the range extended to part of the business of Deutsche Overall, assets in Russia are recent upgrade of Poland to a stake in Russian oil major Rosneft. 7.5x-9x, signalling the sellers’ Bank to local lender BZ WBK considered still relatively cheap at developed market status, our Nevertheless, Chinese buyouts in stronger bargaining position and (owned by Spain’s Santander) for present, and that taken together expectations for deal making in the 2017 were more pronounced than their “shopping” for top bids. In over EUR 300m. More deals in the with the country’s improving country for 2018 are upbeat.

16 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 17 Data in focus: key insights key Data focus: in insights key Data focus: in

Q: How have the region’s other drawing the interest of foreign Economic growth in CEE/SEE, markets fared? investors in 2018. Lastly, after a coupled with the still cheap slow start to the year, Bulgarian financing, make it a desirable Among other countries in CEE/SEE, M&A finished strong, reaching the investment destination, also given the Czech Republic had a slower highest total value since 2013 of the fewer unknowns at the start of year with just one deal reaching EUR 1.45bn. The deal scene was the year as compared to 2017. In EUR 1bn – the sale of 37% in mostly defined by acquisitions of addition, we expect that tax and Unipetrol to PKN Orlen. Although retail properties by South African regulatory uncertainty overseas in there were slightly more real estate investors, although there were also the U.S. will force companies there deals, there weren’t as many big many interesting deals in the IT to be more cautious about sector transactions as in 2016, sector, including Dynamo Software domestic deals and to take a closer contributing to an overall decline in (estimated at around EUR 60m), look at Europe instead, especially if deal value. Hungary, on the other MM Solutions (EUR 31m) and the dollar shows signs of hand, surged more than 125% Vayant Travel Technologies (EUR improvement against the euro value-wise largely thanks to CEZ 29m). Among the upcoming big following the Fed’s several planned selling its stake in oil major MOL for transactions in 2018 are the sale of interest hikes in 2018. Lastly, nearly EUR 470m, and to U.S. the local business of CEZ, the China’s ranking as a top investor in private equity firm Indigo Partners planned new concession of Sofia CEE/SEE last year could hint at exiting its WizzAir investment in an Airport, as well as rumoured bank future things to come. EUR 280m deal. Those two sales. transactions aside, there were also big deals in real estate (Arena Plaza Q: What is the outlook for M&A Mall, EUR 275m), finance (3% in in the region in 2018? OTP Bank, EUR 208m), telecoms (Invitel, EUR 204m), and energy Although having some concerns (Magyar Gaz Tranzit, EUR 147m). that the wave of populism has not Romania also saw larger deals, with yet fully faded, that corruption is value jumping by more than 60% still an obstacle in some SEE to EUR 3.2bn. More remarkably, the countries, and that gradually Stefan Stoyanov top five transactions were all from increasing labour costs are affecting Head of M&A Database, different sectors, highlighting the the investment attractiveness of the EMIS – A Euromoney Institutional country’s well-balanced economy, region, we are generally optimistic Investor Company which is certain to continue that 2018 will be better for M&A. [email protected]

18 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 19 The evolution offices family CEE of in The evolution offices family CEE of in

It is always exciting to have new players in the emerging European market. Up to this point, the activity of family offices has been largely targeted at low to mid-size deals. However, in 2018 we expect them to be increasingly featured in some of the largest transactions in the region. Helen Rodwell, Partner, CEE Corporate practice

The evolution of family offices in Emerging Europe

The growing prominence of family The very investment strategies that In contrast to the position of LPs in An important aspect of this The flexibility of family offices and allocation which adequately offices participating in transactions have made financial empires out of private equity funds, principals in divergent strategic approach to in particular, the absence of an exit accounts for relative exposure to in emerging Europe has been a the likes of the Rothschild, family offices must be able to direct investment is that family strategy, is one of the decisive any one particular asset. Critically, striking development over the last Rockefeller, Quandt, Morgan and directly influence how their money offices and private equity firms advantages over private equity these considerations will always be two years. Family offices primarily Jacobs families over time are now is managed. If this element is employ different formulae in order firms. Unlike private equity firms, founded upon the long-term remain visible in the more mature being emulated by local players. missing, by definition, it is not a to determine the value of assets. family offices are not restricted by preservation of assets of the markets across the region, however, The expansion is symptomatic and family office, it is a fund or a Family offices do not value assets having to invest by reference to a family and accommodating the they are increasingly being commensurate with the growth in quasi-private equity fund created by on a 5-10 year basis, but usually rigid investment thesis or strategy. family’s needs. established and growing in market maturity which is being a family which is investing through consider valuations on a 10-15 year Nevertheless, the apparent benefits influence in broader CEE. experienced across the region. family money. term. Additionally, in situations of this freedom of investment for where interest rates are low, family family offices need to be treated The rise can be ascribed to Irrespective of the causes or A second defining feature in the offices are not always incentivised with caution; they can invite a lack successful entrepreneurs of the motivations for the expansion, comparison concerns their to maximise leverage rates. of discipline and speculation post-communist era, who are now naturally it has invited discussion objectives. Family offices invest with coming into investment. in the process of exiting and about the potential allure of direct the intent of the long-term A notable consequence of the creating wealth or transferring it to investment through family offices preservation of assets, and are not mismatch between the approach to Private equity firms and family family descendants. High-net-worth as opposed to traditional private constrained by an exit strategy. The the valuation of assets and offices face different but equally individuals across emerging Europe equity funds. Both vary in how they practice of investment through investment objectives is that it can significant challenges. Whilst are now in the position to invest are defined but several clear family offices is to allocate money frequently make it unfeasible for private equity firms are confronted their money in the same way distinctions between the two can into an asset which will provide the private equity firms and family with external challenges such as the traditional family offices have been be made. family with a long term annual offices to act in consortium on imposition of regulatory managing money for over 100 return in the form of dividends and transactions. However, in light of requirements for reporting and years in Western Europe and will thereby protect the primary recent headline transactions in the greater transparency with investors; the US. assets. On the other hand, private market and the growing influence the greatest challenges for a family equity funds focus upon expanding of family offices, there is evidence office are internal. Family offices are an asset, selling it and providing a that in certain situations the two susceptible to the desire for certain rate of return for investors. are prepared to act together. The emotional and impulsive biggest obstacle is likely to always investments. They need to ensure be in coming to an agreement on that all investments strictly fit the exit strategy. within a strategic model of asset

20 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 21 Balkans Balkans The Balkans in focus

Q: What were the key trends in the Balkans in 2016? We will see further consolidation of the It was a year of steady progress, banking sector in the region, and as with no significant changes. On the banks try to unwind their non- whole, the Balkans have been politically stable which is very performing loans this may lead to M&A important for the region, though opportunities. there have been some tensions in Radivoje Petrikić, Partner, CMS Serbia the former Yugoslavia which is a reason to be slightly cautious about the future. Economically, a strong upswing in Serbia helped to lift Q: Are there any major deals in Q: What is the outlook for GDP growth in the Western the pipeline for this year? 2018? Balkans, while Romania continued to develop well. We expect to see We are aware of a number of The outlook is very positive. Macedonia being a focus of transactions that are being worked Economic growth is expected to attention after the 2017 elections on and should be completed in rise, helped by rising private and a more EU-friendly 2018. One that is in the public consumption in the region and government. domain is the sale of a 25 year increased demand from the concession in Belgrade Nikola Tesla Eurozone. We are seeing a lot of Q: Where did international Airport in Serbia. The government interest from investors across a investor interest come from? said it received non-binding bids number of countries and a wide from 27 consortia and companies variety of sectors which creates It has been quite broadly based and before it decided on which would optimism around M&A activity this the traditional investors such as go through to the next round. year. Austria, the UK and Netherlands What is encouraging is that the have remained active, plus new interested parties came from across The main risk is political investors from China. One of the Europe and Asia and included many uncertainty, but if countries can trends we have seen this year is big names, which is proof that the sustain the momentum of growth that Turkish companies have been region is very attractive to and reform we should see another very active. Given some of the international investors. year of progress. uncertainties they face at home, it is natural they would look for Q: Have there been any opportunities that are relatively setbacks during the year? close geographically. Unfortunately, an item of news that Q: What were some of the has attracted much attention - not notable deals? just in Croatia and the Balkans, but further afield too - has been the We have not seen any megadeals, crisis suffered by Agrokor, the food but there have been some and supermarket group based in significant smaller acquisitions. Zagreb. It has huge debt problems British American Tobacco has been which have put a cloud over its consolidating its position in the future. As the biggest employer in region, buying a package of brands the region, this could have serious from Bulgartabac in Bulgaria and implications for jobs, for creditors assets of FDS in Bosnia. and the broader economy. We are Luxembourg-based Aelius, which is hopeful that restructuring will go affiliated to Brazilian company EMS, ahead in 2018 and expect to see bought a majority stake in Serbia’s strong interest from buyers in the state-owned drug maker Galenika. event of any break-up.

22 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 23 Acquisition finance in emerging Europe With the rise of M&A and real estate Acquisition finance Acquisition finance deals, the acquisition financing, asset- In recent times, CMS has observed in the region, provoked to some Q: Are the levels of local based lending and the interests of the more aggressive deal terms on extent by the increased presence of liquidity still strong in CEE? banks to finance LBOs has significantly acquisition financing transactions major European funds. But, despite throughout emerging Europe. This some perception that deals are There is a significant amount of risen. We expect to see more acquisition indicates a growing convergence being made on “Western local liquidity, which continues to financing in CEE region in 2018. with Western Europe, however European” terms, there is still a drive the market. Over the next few certain distinctions between the significant gap between the two years, it will be interesting to see Maja Žgajnar, Partner, CMS Slovenia markets remain. regions. Part of the reason for this the extent to which local liquidity is that the majority of deals are still moves to other countries in the CMS International Banking and driven by the availability of region. There has been evidence of Finance Partner, Paul Stallebrass, significant local bank liquidity (with a growing willingness of local discusses the latest developments in advantageous pricing) and on banks to participate in deals which the financing landscape across the syndication local banks are less are taking place with other CEE or region. amenable to accepting aggressive neighbouring Western European Western European terms. countries. Q: How would you summarise the acquisition financing Another significant development is Q: How would you explain the activity we have seen in in homogeneity across the region. absence of Debt Funds in emerging Europe over the last Deal terms and structures in the transactions in CEE? 12 months? emerging CEE markets and the more developed CEE markets are It is a combination of a lack of We continue to see a lot of activity increasingly similar. This trend can knowledge of the market and the in Poland as well as southeast be expected to continue. perception that due to the level of Europe, and in particular, Romania. liquidity within the banking sector In Poland there was concern that Q: Have you seen a substantial of CEE there is simply not the profit the political changes and increased shift in sponsor management to be made. It is arguable that there state ownership of the local over the last few years in CEE? is not the scope for the kind of banking sector might have a margins that debt funds would negative impact on investor A number of big international funds make in Western Europe, although sentiment and the availability of have come into the market over the this is not conclusive as the market financing, but that has not proved last few years and over the last for debt funds in Western Europe is to be the case. The growth 12-18 months they have been becoming increasingly competitive potential of Romania and parts of localising their businesses to a large and margins are being squeezed. southeast Europe continues to extent. This is most apparent in the With this fierce competition in encourage investment too, case of Poland, where we have mind, it is perhaps surprising that notwithstanding the more seen a number of new offices more funds have not been tempted challenging regulatory environment. opened. This is interesting when to look, for instance, at Poland or considered in the context of other the Czech Republic in order to Other historically mature markets high profile funds moving out of increase the likelihood of securing including the Czech Republic, CEE in recent years on the basis a deal. Hungary and Slovakia have seen that it is not a separate market less acquisition finance activity, anymore, and therefore there is no apart from specific sectors such as need to have specialised CEE technology. operations.

Q: Do you notice growing A relatively new development in the evidence of financing market is the increasing presence of transactions in the more investments from family offices (or developed CEE markets similar). As of yet, they have not adopting Western European been particularly active in the Paul Stallebrass terms and expectations? finance market but we are sure this CMS International Banking is a development that will come. and Finance Partner It is clear we are experiencing a shift to a more sponsor-friendly position in the terms and expectations for major transactions

24 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 25 Going global – outbound investment on the up in emerging Europe Outbound investment Outbound investment

Cybersecurity company Bitdefender sector can move into new territories through brands such as Reserved is a classic example of how a without the same capital and Cropp. In recent years, we have company can grow into a national requirements as, say, a retailer or seen a growing trend of leading champion and use that as a manufacturer. Polish companies expanding abroad, springboard to become a global in particular into other EU countries. player. Historically, emerging Europe has For example, manufacturer and not found it as easy to attract wholesaler of household appliances With its roots going back to 1990, venture capital investment that has Amica Wronki’s acquisition of a Bitdefender was founded by kick-started digital innovation in UK-based retailer of high quality entrepreneur Florin Talpes in 2001 other places, such as California’s kitchen appliances in 2015 further and quickly made a name for itself Silicon Valley. But that is changing expanded Amica’s existing network in its home country of Romania. as funds see the value in talent and which already included Poland, Within three years it had set up expertise in countries such as Germany, Russia, the Nordic offices in the US, Germany and UK Romania. countries, the Czech Republic and as its international reputation grew. Slovakia. Bitdefender has played an Today, the Bucharest-based important part in putting the As companies reach the limits of company boasts that it provides region’s technology sector on the growth in their homeland, they will security for 500 million computers map as far as international investors look at markets where there is and its software is distributed in are concerned. Other Romanian sufficient spending power to justify 150 countries, with offices in companies with international the costs of foreign expansion. A countries including Spain, Denmark, ambitions include internet retailer growing number of companies in Italy and Dubai. eMAG which has pushed into CEE are reaching this stage, where Bulgaria, Hungary and Poland and they can be national, regional and It has grown organically, but also telecoms group RCS & RDS which even global champions, with the made timely acquisitions. 2017 was has expanded into Hungary, Spain commercial and financial firepower a landmark year for the business. It and Italy. to do cross-border deals. started with its acquisition of Profil Technology of France, the largest The pattern of outbound We expect to see outbound deal in the company’s history which investment differs from country to investment pick up in 2018 and accelerated its international country. Hungary, for example, has beyond as markets in emerging Europe expansion. It ended in December traditionally been very aggressive and companies within them mature. with a significant investment when through state-backed corporations European private equity firm such as oil company MOL which The strong growth of CEE Vitruvian Partners bought a 30% has operations in 40 countries and economies means that companies in stake in the business from existing OTP Bank in nine countries. the region do not necessarily have shareholder Axxess Capital, valuing to look as far afield as they did in the group at more than USD 600m. In contrast, Poland has created the past. Rapid GDP growth and national and regional champions on increased consumer spending power In many respects, software and the back of its large domestic has created attractive markets on digital technology provide the consumer market. Shoe maker and their doorsteps which will help drive perfect platform for international retailer CCC sells across 16 cross-border deals within the region expansion because they serve a countries, while fashion group LPP going forward. global need and companies in the has 1,700 stores in 20 countries

We have got a positive story to tell, of home-grown companies that have become national champions capable of international expansion, and strong economic growth that makes emerging Europe an attractive target for outbound investment. Horea Popescu, Partner, CMS Romania

26 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 27 FinTech FinTech FinTech finds a new frontier as banks, insurers and funds face up to competition

FinTech is transforming financial One of the problems for established Universal banks, insurers and fund services across the world and Banks, insurers and funds are taking a financial institutions is that they are managers are revisiting their although the sector is still relatively subject to regulation and business models to face the small in CEE, there are huge fresh look at their business models as supervision that may not apply to growing competition from new opportunities for it to expand to consumers appreciate the convenience newcomers. Not only does that entrants. FinTech is growing meet the needs of consumers and of going mobile. The impact is going to create an unfair advantage, but exponentially and will be a focus for financial services providers. there is also the danger that M&A and investment. At this stage be huge. without proper accountability for the deals in emerging Europe tend Payment is a key area of focus for Cristina Reichmann, Partner, CMS Romania many of these new services, to be small, but for investors there FinTech, giving customers the ability consumers could be left in a is the opportunity to get involved in to transfer money instantly and vulnerable position. exciting technology at an early cheaply, speeding up processing A good example of how banks and In a significant development in stage when prices are low. and making it easier for customers their customers in CEE have 2017, a leading European telecoms to carry out cross-border embraced mobile banking is company may extend its services in transactions. Warsaw-based mBank, which has CEE to consumer loans. That may be been building its presence in a sign of things to come. Capital raising is being transformed Poland, the Czech Republic and through peer-to-peer lending and Slovakia. A more recent entrant into For start-ups, the goal may be to crowdfunding, opening up new the CEE market is German bank strike a co-operation agreement opportunities for lenders, N26, which offers accounts in with a bank or even agree a borrowers and investors. The Slovenia and Slovakia and was takeover. Others are planning to advantage for all parties is that authorised to operate in Romania grow to a size where they can be a loans which might have taken from September 2017. challenger in specific areas such as months to arrange through a bank currency exchange. As ever with can now be made instantly. Insurers and asset managers were start-ups, a large number will at first slower to adopt new inevitably disappear under the Other areas where technology is technologies. However, they are weight of competition from small driving change are cryptocurrencies starting to recognise the positive rivals and big institutions alike. (powered by blockchain effect these could have on risk technology), cybersecurity and perspective (new type of risks to be Poland has been the focus for various products based on data insured), re-engineering of banking FinTech in CEE, but the Czech analytics and artificial intelligence. products (Internet of Things Republic, Hungary and Romania are technology), internal operations also making inroads, thanks to their In many respects, the banking and, perhaps most importantly, reputation for IT skills and system in emerging Europe has consumer experience. The ability to technological innovation. adopted new technologies faster conduct financial affairs on than its western European smartphones, from straightforward For ambitious new companies, competitors. Banks in CEE have banking transactions to buying and forging links with London – Europe’s been at the forefront of selling investments, seems to be the leading FinTech centre – is an developments, first through common expectation these days. important step in developing their internet banking and more recently technology and reaching investors. The links between FinTechs in CEE and through mobile banking, as well as Although FinTech is usually The UK has a very supportive London will only get stronger, allowing services such as contactless card associated with start-ups, giant regulatory regime – known as the payments. Digitisation is online payment systems such as regulatory sandbox – to help companies to tap into the funding accelerating the pace of change PayPal of the US and Alipay of start-ups test innovative products. available in the UK and giving investors and banks need to keep up. Some China, which already have millions For instance, Polish company Billon the opportunity to back innovative are developing technologies of their of users, could move into territory that introduced an instant payment own and others are looking to buy previously occupied by banks. The system based on a blockchain companies. or invest in FinTech businesses. same goes for the likes of Amazon, technology, has set up its main Irek Piecuch, Partner, CMS Poland Apple and Google which could office in London even though most leverage their huge customer bases of its IT staff are in Warsaw. and technology to encroach into financial services.

28 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 29 Slovakia Slovakia Slovakia in the spotlight The excitement for investment in

Slovakia had a healthy level of M&A There is growing evidence of In addition to CNIC, other Chinese Slovakia is unparalleled in modern times activity in 2017, with deal value substantial inbound investment companies are looking at the as multinationals are increasingly taking figures up and volume remaining transactions into Slovakia from country, but investment so far has advantage of the benefits the market relatively stable year on year. The major multinational investors. For been moderate and most of the transactions were spread across a instance, in September Prologis Asian interest has come from Japan has to offer. In 2018 we expect the broad range of sectors and announced the sale of its Prologis and South Korea. Besides Czech, announcement of several major included several landmark Park Galanta-Gan hub in western the German and Austrian investors greenfield projects and an uplift in transactions. However, the most Slovakia, comprising 240,000 remain the most active international encouraging aspect of investment square metres of space across four investors in Slovakia, though it is M&A activity. in the market was not reflected in facilities, to China’s CNIC also on the radar of US and UK Petra Čorba Stark, Counsel, CMS Slovakia M&A, but in the unprecedented Corporation in one the largest companies. greenfield investment boom that logistics space deals in emerging has occurred and is expected to Europe. Highlights of recent investment continue throughout 2018. activity in Slovakia include: the sale of Alpha Medical, a diagnostics company with operations in Slovakia and the Czech Republic, to The stable growth in the economy is Geneva-based Unilabs; the planned engendering confidence from investors merger of broadband operators abroad, which is reflected in a number of Swan and Benestra by their respective owners, DanubiaTel and substantial inbound deals that have Slovak private equity company introduced several major new players in Sandberg Capital; US internet the market. shopping group Amazon opening a new logistics centre in Sered in the Peter Šimo, Partner, CMS Slovakia Trnava region; and Polish Enterprise Fund VII, managed by Enterprise Investors, purchasing 100% of In particular, the automotive Investors are attracted by Slovakia’s independent food retailer CBA industry provided a valuable stable political and economic Slovakia. stimulus for the Slovak economy. climate, competitive incentives and The construction of the new EUR its location in the heart of CEE, As the year progressed there was 1.4bn Jaguar Land Rover plant at close to major European markets. It intense speculation about the Nitra in the West of the country got has a well-educated and skilled possible sale of US Steel plant at underway and the company workforce, with competitive pay Kosice by US Steel Corporation for officially launched a recruitment rates, but concerns remain that more than EUR 1bn, with China’s campaign ready for production to with unemployment at a historic He Steel reportedly competing with begin in late 2018. It is expected to low, wages could be driven higher Czech-Slovak group Moravia Steel. create 2,800 direct jobs and - particularly in the automotive An agreement early in 2018 would thousands more in the supply industry where demand for skilled get M&A activity for the year off to chain. The fourth car manufacturer labour is on the rise. a strong start, but even without to locate in the country, following such a megadeal there looks to be Volkswagen, PSA Peugeot Citroen The economy has also been a healthy appetite among buyers and Kia Motors, JLR’s arrival boosted by EU funds, primarily to with an eye for Slovak targets. cements Slovakia’s position as the build infrastructure such as roads, largest automobile maker in the but with many of those projects world per capita, producing more either complete or coming to an than one million vehicles a year in a end, some of that stimulus will fade country with a population of only away, though the OECD is 5.4 million people. forecasting growth rising to 4% over the next two years.

30 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 31 Manufacturing Manufacturing – a CEE success story Manufacturing

Manufacturing continued to play a vital role in the CEE’s economic success story during 2017 and once Manufacturing has been a big success again was a key focus for M&A and story for CEE and all the signs are that greenfield investment. will continue for some time to come.

Deal values in the sector rose by Iain Batty, Partner, CEE Commercial Practice 25% to EUR 9.29bn, the third largest after mining and real estate and construction. Deal numbers Aviation maintenance is another Employers in CEE see the effects of were slightly lower than the growing sector and GE and Brexit and are monitoring these and previous year and for the first time Lufthansa announced plans to open the volatility of the pound carefully there were more deals in telecoms a plant in 2018 to service GE to see whether it will encourage and technology than widebody engines, expected to migrant workers to return home. manufacturing. create 500 jobs, in Sroda Slaska in Poland. For both M&A and greenfield In terms of M&A, activity was investment, investors need to broadly spread across sub-sectors Manufacturing investment has understand that from an and countries. In the Czech generally been driven by overseas employment law and regulation Republic, the second biggest deal producers, either through M&A or point of view, the rules can vary of the year was the purchase of setting up local subsidiaries, from across the region and there is no rolling stock maker Skoda European, US and Asian companies. one-size-fits-all policy. We have Transportation by Czech investment Chinese investment has been on a found that in transactions, company PPF for an estimated EUR small scale so far, but there are a lot employment law and HR issues are 390.8m. Romania saw a flurry of of discussions taking place. often considered very late in the deals, including the purchase of process, which is a mistake because EcoPack by DS Smith of the UK for There is growing demand for getting the right structures in place EUR 208m and the sale of Takata greenfield sites and one of the can take several months. Corp to Key Safety Systems of the problems for investors is finding US for EUR 153.9m. In Turkey, large plots zoned for industrial use. Another issue to be considered is Erkunt Traktor was snapped up by Ownership, where sites are divided setting up employee forums which Mahindra and Mahindra of India for into small parcels, can also be an benefit both sides and can have a EUR 97.5m. In Slovenia, the French issue because compulsory purchase commercial benefit and increase company Trigano purchased the by government is only possible in efficiency. Slovenian manufacturer Adria Mobil some jurisdictions. for EUR 200m. There have been concerns about a One of the effects of the wave of shift to populist politics in Poland CEE remains an attractive location investment in countries such as and Hungary, but those for greenfield investors and existing Poland, Hungary, the Czech governments have so far been manufacturers looking to expand Republic and Slovakia, is that careful not to alienate employers their operations in the region. unemployment rates are low and that want to create jobs and we wages are rising. In some parts of have not seen any change in The automotive sector is one of the the region recruitment of skilled regulations or laws to affect region’s success stories and the workers is becoming a challenge, manufacturers. Jaguar Land Rover plant under prompting employers to look construction in Slovakia is further afield for labour at the risk Interest in manufacturing in CEE becoming a magnet for suppliers of stirring up political controversy remains at a high level and our and logistics companies. Elsewhere, about migration. experience is that seldom have so Mercedes-Benz began work on a many potential investors been new EUR 500m engine plant at looking at opportunities. Jawor, Poland, and VW announced it is to build its new electric utility vehicle in the country.

32 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 33 Manufacturing Manufacturing Manufacturing 360˚ CMS partners from various practice areas and offices talk about the continued investments we see in the manufacturing sector

We expect a significant increase in transactions in the manufacturing sector in 2018, especially in small and medium- sized companies. Aleš Lunder, Partner, CEE Corporate practice

Most jurisdictions in CEE support new investments through various types of tax, Last year, in both the region and in customs and local incentives, including Turkey, we continued to see an increase state-aid and subsidies, as well as in small and mid-size M&A deals, a lot of employment grants for all sizes of which were investments in the enterprises. manufacturing sector. Tamara Jelić Kazić, Partner, CEE Tax practice Döne Yalçın, Partner, CMS Turkey

All too often in a transaction, the Finding the right location, with good employment law and HR issues are transport links and an available considered far too late in the process. workforce, on land that is already zoned They need to be taken into account much for industrial use, is probably more earlier, usually months before, as part of important to an investor than the broader M&A planning. government incentives. Katarzyna Dulewicz, Wojciech Koczara, Partner, CEE Employment practice Partner, CEE Real Estate practice

34 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 35 Asian investment in emerging Europe Asian investment in emerging Europe Asian investment View from China Seeing China from inside Europe Asian investment

Nick Beckett, Managing Areas such as football clubs, In the Czech Republic, telecoms Andrzej Blach, Counsel at Partner of CMS Beijing, on gaming and real estate are not seen giant Huawei confirmed plans to CMS Poland, on Chinese Finding local partners and advisers to Chinese investment into as a priority. Whether it is through invest as much as USD 360m, while investment into emerging Europe emerging Europe Belt and Road or not, the focus is CEFC China was reportedly guide them through the legal and going to be on infrastructure, planning to increase its presence by Chinese investors, including those regulatory minefield of doing business Chinese investment in emerging energy and technology, areas leading a consortium to buy a who have no significant experience is vital to Chinese success in CEE. Europe hit record levels in 2017, up where there is a high level of majority stake in broadcaster CME. working in foreign markets are 78%, in the same year that President innovation, along with chemicals increasingly finding themselves Andrzej Blach, Counsel, CMS Poland Xi Jinping pledged an additional USD and consumers goods. Whereas five years ago China was forced to look overseas as the pace 124bn for the Belt and Road initiative interested in acquiring technology, of growth in their domestic economy to expand global trade networks. Outside of Russia, almost half of brands and talent to help its slows. hides the fact that the 16 CEE Equally important is the need for the deals have been into Poland, companies become stronger, they countries do not necessarily have a CEE businesses who may be used to The region is earmarked as an and China is casting its net wider have since learned to innovate and Whether they are state owned or lot in common, even those in the dealing with European and US important destination on what has across emerging Europe, not just develop their own business models. private, they are being told by their EU. investors to understand the cultural been described as the New Silk Road geographically but by sector too. In technology, for instance, their parent companies or the government differences of working with that was first unveiled in 2013 to R&D is as impressive as many to look elsewhere for growth. As a Legal culture is a good example of Chinese and other Asian investors. boost investment in ports, roads, rail In Poland, construction equipment leading multinationals. growing economy with significant where there are huge differences. They must understand the and other infrastructure around the maker LiuGong moved its regional needs for investments in In China, many deals and contracts differences are more than just world. The 16+1 initiative, between headquarters to Warsaw and Looking ahead, we are likely to see infrastructure, emerging Europe is an are agreed on the basis of a linguistic and manifest themselves China and emerging European expanded its site at Stalowa Wola, less investment in areas such as real ideal target. meeting of minds and a handshake. in many areas, from human partners, sits neatly alongside it as a and in Slovakia CNIC bought the estate and entertainment, but as Lawyers tend to document deals as interaction to negotiating strategies forum for deepening ties. Prologis facility at Galanta-Gan. the Chinese become more This can pose a challenge for those agreed by business people whereas and corporate decision-making. innovative we will see them focus who have been used to dealing only in the West a lot of the structure I suspect many projects will be Smaller deals included Thunder on innovation and infrastructure as in China. They may have superb comes from lawyers. These are challenges both sides labelled “Belt and Road” whether Software Technology’s purchase of China plays a leading role on the engineering skills and technical have to overcome, but there is a they are or not. After all, China saw MM Solutions in Bulgaria, Norinco global stage. talent, but because they have only Traditionally, Chinese business growing understanding between CEE as an important market long International taking a controlling ever competed in a state-dominated people used to boast that they the two. One thing is certain, the before the New Silk Road stake in Croatian windpower economy, it can be a shock to find never took an agreement out of a Chinese have shown over the programme. company Energija Projekt and this is not enough alone to guarantee drawer. This approach cannot work centuries that they are very skilled battery maker Camel Group raising success. They do not always in the West where parties rely at commerce and once they For the first time, in 2017 China its stake in Zagreb electric supercar understand how harsh competition heavily on the precise wording of understand a country or a sector became the biggest international company Rimac Automobili. in the West tends to be. documents which can be crucial they are likely to be very successful investor in CEE and for the third year when it comes to enforcement. The in their ventures. As far as CEE is in succession the value of Chinese If the Chinese state says yes to a carefully drafted “clause 17” on concerned, what started as a trickle investments reached a new high, project, then it will likely go ahead. page seven and signed off at 5am of business will turn into a flood. rising to EUR 7.7bn after doubling in Whether or not it comes under the What Chinese investors are not may appear to be of little the previous year. The figures were prepared for is that it is not the same significance, but it could ultimately banner of “Belt and Road” there is going skewed by the largest deal of the in Europe where there can be all be of paramount importance to year in the region, CEFC China to be a big increase in Chinese kinds of political and legal obstacles both parties. Energy’s purchase of a stake in investment in CEE. at a local, national or even EU level. Russian oil and gas company Rosneft, For instance, public procurement Having local partners can make a but M&A interest remained high. Nick Beckett, Partner, CMS China rules are there for a reason and big difference, but the Chinese cannot simply be waived, which is have traditionally hired advisors Deal numbers were only slightly something Chinese investors do not very late in the process because down from 2016’s all-time high, but always fully appreciate. they do not appreciate the benefits that should not be taken as a sign of of bringing in that expertise early waning interest. Rather, China is Another issue, and one that is not on. Fortunately, those attitudes pulling levers to control the outflow exclusive to China, is that outsiders are changing. of capital and my sense in talking to do not often appreciate the clients, banks and private equity differences between CEE countries firms is that the Chinese want to on matters such as law and make sure it is directed into the most regulation. Although the 16+1 logical and sensible investments. initiative makes geographic sense, it

36 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 37 Asian investment in emerging Europe Asian investment View from Asia From an Asian perspective, Brexit means there is now strong competition between CEE and UK as the best location in which Andrew Stott, Managing attention will increasingly turn Japan’s focus will also be on big to do business with Europe. Partner of CMS Singapore, elsewhere. In addition, as various industries such as steel and motors, on Asian investment into commentators have already along with white goods and Andrew Stott,

emerging Europe observed, “core” countries in the consumer goods. Expect the likes Partner, CMS Singapore Asian investment emerging in Europe CEE region such as Poland, of Sumitomo Corp, Mitsui and Historically, Asian companies from Hungary, the Czech Republic, Mitsubishi to invest more heavily in countries such as Japan, South Slovakia and Romania are growing CEE over the short to medium term. Korea, Singapore and India, have faster than any region in the world seen the UK as the gateway into with the exception of Asia Pacific. India has a diverse economy spread Europe, but the Brexit vote may This growth is in part due to the across pharmaceuticals, household change that and it should continue emergence of “new industries”, goods, manufacturing and to develop the profile of CEE, such as those focused on the technology which traditionally saw accelerating the economic growth Internet of Things and connected the UK as the cultural business story in the region. devices, where there is no legacy partner providing a key access point bias and CEE opportunities to deal into Europe. On a purely economic The UK has offered good access to directly with the Asian basis, I suspect we will see closer markets in terms of transport, powerhouses are unfettered by ties with CEE. infrastructure and border controls, legacy deals or dominance of as well as a business-friendly companies in more developed Culturally, Asian companies prefer environment, low corporation tax Western markets. to have a partnership model rather and a skilled workforce. Asian than outright acquisition or a new companies were prepared to accept As transport links improve and CEE greenfield approach in unfamiliar the higher costs of the UK as becomes better connected in terms markets and we see opportunities trade-off for the sake of access into of distribution and the supply chain, growing for joint ventures. For CEE the EU and operational reliability, global distribution models will companies, becoming a trusted but if access to the common market concentrate on where it makes partner with an Asian company in is lost then so is some of the most geographic sense to locate one part of their business can open attraction of being in the UK. The which will be good for the region. doors to working with others, or CEE can mirror many of the Singapore does not necessarily have expanding those relationships, such advantages of the UK and it is the “weight” of large-scale as with the much larger Korean, cheaper with close access to the industries and corporations with Japanese and Indian larger EU markets such as Germany the investment firepower to conglomerates, in another field. and France and land access to participate in the big engines of Russia and Turkey, so on a very growth, but it has two large There has been no knee-jerk mercenary, balance-sheet basis it sovereign wealth funds that are reaction to Brexit by Asian can provide the alternative that interested in areas such as data investors, but there is a sense that Asian companies are looking for. centres, supply chain, logistics interest in CEE is accelerating and When you look at it from an Asian parks, real estate and digital companies that five years ago investment perspective, the future technology. would not have been sure where looks bleak for Britain and positive Romania or Slovakia were are now for CEE. For Korea’s “chaebol”, as the big looking carefully at where they family-owned conglomerates are might locate manufacturing, R&D That is not to say we should be known, there are huge and distribution in CEE. entirely convinced by UK political opportunities to take part in fear-mongering. Existing construction projects and the We anticipate a large amount of investments in the UK are likely to manufacturing and distribution of partnerships with CEE-based stay because they have already automobiles and white goods, companies and an exponential been paid for and closure would and associated industrial processes increase in Asian investment in result in a loss or inability to and services. the region. monetise the underlying asset. However, when it comes to making new investments or locating back-office functions and decisions driven by logistical access to the EU,

38 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 39 Hotels market Emerging Europe’s hotel market picks up Hotels market

Tourists and business travellers are increasingly making a bee-line for hotels in CEE. The region’s It has taken many years for prices in increased economic prosperity, its the hotel market to return to realistic spectacular coastlines and scenery levels after the financial crisis, but they and its historic cities have made it a popular destination and that has are now at levels where buyers are been reflected in increased M&A interested again. activity in the sector. Gregor Famira, Partner, CMS Croatia Terrorist attacks in North African resorts and cities have prompted Across CEE countries, the tourism is Generally, assets are being bought holidaymakers to consider maturing and improving in terms of in individual deals, rather than as alternatives which has benefited the quality of hotels and service it part of a portfolio. many of the region’s countries, with offers which is helping to increase the exception of Turkey which has demand. Even those countries Among the landmark deals, had security and political issues of without access to beaches are Austria’s HETA Asset Resolution its own to contend with. seeing growth in city breaks, while agreed the sale of Skiper resort in GDP growth has increased demand Istria to a local company, Hard Rock Those countries with a long for business hotels. Hotels announced it was coming to coastline, including Croatia, Croatia and Hilton unveiled plans for Montenegro and Albania, have Poland has had a particularly strong two new hotels for Zagreb. In seen strong growth in tourism, as year and is one of the few countries Romania, the Radisson Hospitality have Bulgarian resorts on the Black large enough to attract M&A Complex in Bucharest was sold by Sea. Croatia in particular has interest in smaller cities, not just its Nasdaq-listed owner to two become a default option for Warsaw. Prague, Budapest and international funds and Starwood Germans who would otherwise Romania have also been in the Capital Group agreed the purchase have travelled to North Africa or spotlight. of the Sofitel Budapest Chain Bridge Turkey, while Dubrovnik has Hotel. received an additional boost from Demand for hotels is also being fans of the popular Game of driven by rising prices in commercial Buyers continue to be primarily from Thrones TV show in which it real estate, which has prompted Western European institutional features as a location. investors to consider alternative investors, however recently there asset classes, pushing up hotel has been a spike in interest from Before the financial crisis, hotel prices and flushing out sellers. Asian investors. Meanwhile, Turkish prices in Croatia became investors have been less active overheated, but they subsequently Where prices are rising sharply outside their own country, plunged and are now at realistic there is a paradox because potential particularly in Croatia. levels, drawing renewed interest sellers are cautious about where from investors. Those hotels whose they can reinvest the proceeds to The market is picking up and we owners were in financial difficulties get higher returns. expect more consolidation and more were left in the ownership of banks interest from international buyers in which have since been trying to There is growing interest in leased 2018 as owners. The majority of clear them from their balance hotels, which are selling quickly and these are family concerns looking to sheets, a process that is gradually at a high price because they offer sell out completely or take the coming to an end. fixed income at relatively low risk. business to a more professional level through refinancing.

I don’t see a reason why demand from hotel visitors will go down or why transactions in the sector would cool off. Lukáš Hejduk, Partner, CMS Prague

40 | Emerging Europe M&A Report 2017/18 41 Turkey Turkey Talking Turkey

CMS partners Döne Yalçın and Alican Babalioglu discuss 2017 and the outlook for the year ahead Foreign investors are like birds on a wire. It does not take much to frighten them Q: How have the economy and away and it can take a long time to M&A market performed since the failed coup attempt in 2016? persuade them to come back. Alican Babalioglu, Partner, CMS Turkey The failed coup attempt along with a series of terrorist attacks certainly created a lot of uncertainty, and have become distressed assets held back after the failed coup are particularly as far as foreigners at opportunistic prices. DY picking up where they left off. DY were concerned. However, there is evidence of a bounce back in the Q: What have been the most Q: What about Turkish investors economy. In the third quarter of active sectors? looking at home and abroad? 2017, Turkey’s GDP grew by 11.1%, faster than any other G20 country. Infrastructure remains very They have been more cautious The M&A scene has been buoyant important for the whole economy, about investing at home and there in 2017, with deal numbers up including bridges, roads, airports has been a rapid growth in 11.5% and values up 44.1%. AB and hospitals. Turkish and South outbound investment which will Korean companies began work on continue. Cash-rich Turkish Q: Is Turkey still an attractive the longest suspension bridge in companies are branching out into place to do business and invest? the world at Canakkale at a cost of different industries at home and about USD 2.8bn. Manufacturing looking to expand abroad. Most Turkey is a huge economy with a has been strong and distribution is business are family owned and have very young, affordable and an area of interest to investors. traditionally been very conservative, well-qualified labour force. It is a but the new generation of sons and big consumer market and investors Major deals included Austria’s OMV daughters is more professional and with a long-term view see it as a selling its Petrol Ofisi petrol stations their vision is broadening. AB good market to be in. AB to Vitol of Switizerland for EUR 1.4bn, Spanish bank BBVA Q: What is the outlook for When investors became nervous, increased its stake in Garanti Bank 2018? the government moved swiftly to and Austria’s Hamburger offer incentive schemes and Containerboard announced a EUR Turkey is seen as an emerging support for investment, particularly 300m greenfield investment.AB market with potential. The situation in manufacturing. We are seeing is fragile, but things have been more public-private partnership Q: Where has overseas interest steadily improving over the past 12 (PPP) activity and the government is come from? months. DY improving the legal framework around that which should build Germany and Austria, the UK and We see confidence building, barring confidence and bring in US, as well as South Korea, Japan any unforeseen setbacks. As international expertise. DY and China. The profile has shifted reputable names complete deals, from five years ago when it was we will see investors come back. Q: Tourism is a key industry. dominated by European investors. There are some major infrastructure How has it fared? Now we are seeing growing projects in the pipeline and the interest from the Middle East and next 12 months will be critical for Tourism has suffered and there has Asia. Some nervous investors who the tourism industry. AB been a drop in foreign business travel, but there have been some positive signs. There is a lot of tourism from the Middle East and Turkish companies and funds want to some of the friction between diversify and be seen as international Turkey and Russia has eased which operators. should help, but we really need to win back European tourists. Some Döne Yalçın, Partner, CMS Turkey hotels could not weather the storm

42 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 43 Energy-from-waste Energy-from-waste

Equipment suppliers are typically not just interested in supplying the technology, but in maintaining and operating plant and having an equity stake in ownership. Đorđe Popović, Partner, CMS Serbia

Poland has one of the most Across emerging Europe, the As a young and underdeveloped developed waste collection and experience on energy-from-waste is sector in CEE, energy-from-waste is waste management markets in patchy. Bulgaria and Romania have unlikely to attract M&A attention at emerging Europe, with a number of increased their plans for new this stage, but as projects mature plants in operation and others energy-from-waste capacity, from there are likely to be opportunities planned in Warsaw and combined around five projects five years ago for investors to build a portfolio. In installations for smaller cities and to more than 30, but there is no some of the leading jurisdictions towns. The country has successfully major installation in operation yet. across CEE there are some initial utilised the PPP model, as well as Smaller countries such as Albania attempts for refinancing of the EU funds, thus becoming the and Bosnia and Herzegovina are successful energy-from-waste leading jurisdiction for energy- lagging further behind. projects based on the PPP model. from-waste projects across CEE. One of the issues for Poland for the The issues are being debated across future installations would be the region and in particular how to Energy-from-waste opportunities in emerging Europe whether progress on recycling will harness international financial and mean there is not enough waste technical expertise, from material to use as feedstock for construction companies, equipment The energy-from-waste industry is Meanwhile, EU regulation such as The market has been slow to grow, plants. One solution could be to providers and the professional relatively new for most of the the Waste Framework Directive of but it is taking off and there are build smaller plants serving local investors that focus on such emerging European countries, but it 2008 and the Renewable Energy some positive signs, particularly on areas and multiple municipalities. projects. The availability of EU is growing in importance because Directive setting targets for 2020 funding as public-private funds is a major incentive for the of public, political and economic have put governments under partnership (PPP) becomes more region combined with the wide pressures. pressure to address the issues. Even widely used as a way of financing district heating infrastructure, in those countries where there is major projects. which is capable of utilising the At one level, there is growing little desire to engage with waste steam produced in addition to the awareness about climate change management, the threat of legal For instance, one of the major base-load electricity. and global warming has made the action has focused minds. projects announced in 2017 was public more responsive to issues the award of a 25-year PPP to a such as the circular economy, The picture across CEE is patchy, consortium of Suez of France and treatment of waste and alternative but countries have generally been Itochu of Japan to treat 340,000 energy sources. At another level, slower to adopt energy-from-waste tonnes of municipal waste in It is likely that the CEE region will utilise governments are working out how than their Western European Belgrade that would otherwise the experience of Poland and Western to meet their energy requirements neighbours, some of which, such as have gone into one of the biggest Europe in the field of energy-from- and tackle a legacy of Austria, have embraced it landfill sites in Europe. It is an underinvestment in power capacity enthusiastically. indication of the level of interest waste, which is expected to grow that risks leaving them over- among contractors and operators substantially in the forthcoming years. dependent on Russian gas supplies. There are multiple reasons for this. that there were three bidders for Kostadin Sirleshtov, Partner, CMS Bulgaria One is the technical complexity of the project. Construction is due to projects which require a level of start in the first quarter of 2018 in expertise that may not be available what is likely to become a flagship locally and the other is a lack of project, not just for Serbia but also experience in funding this kind for the whole of CEE. of project.

44 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 45 Third-party funding for litigation – protecting investments

Although third party funding of fears that the rules of the game are one regarded as a related party,

Third-party funding for litigation legal disputes is becoming more being changed to the detriment of where there may be concerns about Third-party funding for litigation widespread around the world, it is investors. the court’s impartiality. still little used in CEE jurisdictions. In some countries the Whether or not there are concerns Awareness of how it works remains independence of the judicial system about judicial independence, one low, but is growing and it is likely to is being called into question. There solution is to insert arbitration become more popular as a way of are also concerns about the length clauses into contracts so that any mitigating risks for investors and of the court process and the ability potential dispute is moved out of companies. to enforce rulings at the end of the state’s control.

In the US, class action lawsuits Given the concerns about the provide a natural home for such funding, but their use remains independence and efficiency of the court patchy in CEE. For instance, there is system in some countries, businesses no legislation for them in Hungary often opt for arbitration, which is an area or Romania, and although they are used in Poland, the system is based where third-party funding is likely to on the “opt-in” principle, unlike the have an increasing role to play. “opt-out” approach of the US. That provides no incentive for the Małgorzata Surdek, Partner, CMS Poland defendants to settle a dispute; there is no guarantee that a settlement Even the largest corporations with proceedings. One option is to bring with a group of claimants will bring deep pockets and large legal teams a claim at the International Centre an end to the matter, as another are not in the business of litigation for Settlement of Investment group may be formed to raise the which is costly not just in financial Disputes which is part of the World same claims against the defendant. terms but also in management Bank, but this can cost between This factor combined with time. Turning to a specialist funder EUR 4m and EUR 20m. protracted proceedings in class of legal cases helps to spread the actions, are the main reasons for financial risk and share the burden Another alternative is to go down their limited popularity in Poland. of managing a process that could the investment arbitration route, last two to four years. which can be cheaper, quicker and There are reservations about the use more easily enforceable, making of third-party funding in CEE, both Outside of multinationals, third-party funding an attractive from a claimant and funder companies operating in the region solution for the claimant and the perspective. But the knowledge that are unlikely to have come across funder. this kind of service is available if third party funding. Similarly, needed, particularly for arbitration funders may not be aware of the It could also be employed in cases, should give companies and opportunities in the region because commercial arbitration, particularly investors some confidence as they there is not the same culture of in cases where there is a dispute enter into negotiations. litigation as, say, in the US and the with a state-owned company or relatively small financial value of most disputes would make them unattractive. Third-party funding enables investors to One area that could be of interest retain counsel for the investment treaty to funders is disputes between disputes, a cost that otherwise might investors and states. Not only is seem prohibitive. It has the benefit of there is a tsunami of regulation from Brussels, but there is also a increasing access to justice and blizzard of rules from regulators encouraging investors to bring meritorious and enforcement agencies in claims against host states. individual countries. A shift to populist politics in countries such as Gabriel Sidere, Partner, CMS Romania Poland and Hungary has raised 46 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 47 Strong economic growth drives M&A, but populism casts a political cloud Impact geopolitics of Impact geopolitics of The impact of geopolitics on the deal landscape and investment appetite in 2017

Whatever concerns investors might insulated them from some of the advantage of EU and individual have had about the state of the fluctuations seen by other government incentives, a skilled global economy and politics at the currencies such as the dollar. Local workforce and rates of pay that are start of the year, they did little to currencies have also mostly been still highly competitive - if on the dampen enthusiasm for M&A in relatively strong, despite rise, as employers compete for staff emerging Europe. President Trump’s fluctuations in the Polish zloty, the in key industries. arrival in the White House did not Turkish lira and the Russian rouble. have any material impact on global After years of progress in terms of growth and three rises in US interest Investors like stability, particularly in liberalising their economies, rates did not send the value of the the economic and political reducing bureaucracy and dollar soaring – in fact, it declined landscapes. There are some clouds establishing an independent judicial steadily over the year. Brexit talks on the horizon in CEE, but broadly system, a number of countries in between the UK and the EU made speaking the region remains a emerging Europe appear to be some progress, and there was stable one, without excessive risks turning back the clock. widespread relief that the elections as far as investors are concerned. in France and Netherlands did not Poland has gone down an going down a similar route to result in political chaos, though the International investors used to view increasingly Eurosceptic route and Poland and Hungary by swinging to German election later in the year left CEE as a gateway into the vast made proposed changes to its the centre-right and electing a The regional economy is in a good place a weakened Chancellor Merkel trying market of Western Europe, but it is judicial system that many see as populist prime minister at the head and GDP growth expectations have been to stitch together a new coalition. now increasingly seen as an potentially damaging to inward of a minority party with a positively revised. That makes CEE a important market in its own right. investment. The EU warned in Eurosceptic approach. Sluggish international growth was a The countries in this report, December that judicial reforms good place for investors, whether it is feature of 2016, but as 2017 including Russia and Turkey, have a threatened the rule of law by However, the shifting political through M&A or direct investment. progressed the Eurozone economy combined population of more than allowing the government to landscape in these three countries recovered, which increased 350m and a growing middle class interfere in the judiciary. Launching has not yet had a major impact on Dora Petranyi, confidence across Europe and helped of consumers with money to spend. disciplinary measures under Article investment sentiment. While CEE Managing Director, CMNO set the backdrop for growth in most 7 of the Lisbon Treaty, the uncertainty may have been of the Eurozone’s neighbouring For companies in sectors such as European Commission gave Poland ratcheted up, the M&A scene has Ukraine has endured a difficult and deals in the region. Recent countries. CEE has enjoyed growth consumer goods and retail, CEE can three months to address its remained resilient. For the time three years since Russia annexed decades have seen UK, French and rates higher than the US, Japan and provide higher rates of growth than concerns, though, the government being, investors from outside the Crimea, with conflict in eastern US investors become more active, Western Europe, increasing its can be achieved in mature markets insisted they were necessary to region do not see the risks of parts of the country, but there are similarly Asian investors, particularly attraction as a place to do business such as Western Europe, the US tackle inefficiency and corruption. investing in these countries as signs of an economic upturn and from South Korea, Japan and and invest. and parts of Asia. The purchase of Polish coal and outweighing the potential rewards. EMIS data indicates a sharp rise in Singapore. And after years of gas-fired plants from EDF by the M&A activity. It is too early to say if weighing up the lie of the land, In a year of turbulence on the It has also established a reputation state-owned Polska Grupa Another possible cloud on the this is sustainable and much will Chinese investors have started to currency markets, many CEE as an important place to plant Energetyczna for EUR 991m was a horizon is that, in those countries depend on whether relations build a presence on the ground. countries have benefited from being businesses to export into landmark deal, not just because of that have most successfully between Kyiv and Moscow Although this is still relatively small, part of the Eurozone, which has neighbouring countries, taking its size, but also because it raised attracted foreign investment, improve. it is growing and will only increase concerns about the Polish wages have started to rise as as China’s Belt and Road initiative government’s desire to take control unemployment has fallen. This is Turkey is also emerging from a gathers pace. of strategic assets. particularly true in the automotive difficult period, following the failed Some of the political shifts in countries sector, where employers are coup and the continuing civil war in Yes, there are potential hurdles such as Poland, Hungary and Czech Hungary has also adopted a very competing for staff from a limited neighbouring Syria, but economic ahead for CEE, but it remains a populist approach, which does not pool of skilled workers. One growth has picked up and the high-growth region which is Republic have increased uncertainty for always make it a favourable solution is to recruit from countries potential for the economy remains attractive to investors from across investors, but so far have not had a environment in which to do in the east of the region, but this huge. the globe. There are plenty of significant impact on the appetite for business. All eyes will be on the risks creating political problems reasons to be optimistic about the election in 2018 to see whether it because migration is such a thorny Overall, CEE has many attractions outlook for 2018. M&A. The alarm bells are not ringing yet. reinforces this trend. The Czech issue, and one that has already for international investors, with Graham Conlon, Partner, Republic has strong links to the resulted in clashes between the EU strong historic links to the German- International Private Equity West, but it has been a and Poland, Hungary and the speaking countries, which remain disappointment in many respects, Czech Republic. an important source of funding,

48 | Emerging Europe M&A Report 2017/18 49 Appendix 1 Deals by volume and by value – emerging Europe Appendix 1 Appendix 1:

Regional data and top deal lists 137.6 111.7 2,596 2,558 2,197 62.8

2012 2013 2014

86.7 71.5 2,138 53.5 1,985 2,113

2015 2016 2017

Number of deals Total value of deals (EUR) bn

Number of deals by sector in 2017 – emerging Europe

Real Estate Manufacturing Telecoms & IT & Construction 390 308 305 Wholesale & Retail Finance & Insurance Food & Beverage

199 161 137 Services Mining (incl. oil & gas) Other

136 103 374 Source: All data provided by EMIS

50 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 51 Appendix 1 Emerging Europe: top 20 deals 2017 Emerging Europe: inbound investment 2017 Appendix 1

Target Country Sector Deal Type Stake % Buyer Country of Deal Value Investor country FY17 Deals FY16 Deals % of Target Buyer Value Source (€m)  USA 92 88 5%

Rosneft Russia Mining (incl. oil & gas) Minority 14.2 CEFC China China 7,520.7 1 UK 67 75 -11% stake Energy Germany 61 66 -8% Sibur Holding Russia Manufacturing Minority 14.3 Leonid Mikhelson Russia 1,755.4 2 stake - private investor France 42 46 -9%

Yuzhno-Russkoye field Russia Mining (incl. oil & gas) Minority 25.0 OMV Austria 1,719.0 1 Switzerland 40 27 48% stake Austria 36 37 -3% Eurasia Drilling Company Russia Mining (incl. oil & gas) Acquisition 51.0 Schlumberger United States 1,652.2 2 Netherlands 27 33 -18% OMV Petrol Ofisi Turkey Wholesale & Retail Acquisition 100.0 Vitol Group Switzerland 1,368.0 1 Sweden 27 19 42% Zabka Polska Poland Wholesale & Retail Acquisition 100.0 CVC Capital United 1,000.0 2 Partners; EBRD Kingdom; China 27 28 -4% international South Africa 20 22 -9% Portfolio of 28 retail properties of AXA, Poland Real Estate & Acquisition 100.0 Chariot Top Netherlands 1,000.0 1 Ares Management and Apollo-Rida * Construction Group

Unipetrol Czech Manufacturing Minority 37.0 PKN Orlen Poland 1,000.0 1 Republic stake / Tender offer

Assets of EDF in Poland Poland Energy & Utilities Acquisition 100.0 Polska Grupa Poland 991.2 1 Energetyczna

Retail portfolio of Immofinanz in Moscow Russia Real Estate & Acquisition 100.0 Fort Group Russia 901.0 1 Construction

MegaFon Russia Telecoms & IT Minority 19.0 Gazprombank Russia 898.2 1 stake

RusHydro Russia Energy & Utilities Capital 13.0 VTB Bank Russia 891.0 1 Investor country FY17 Value, €m FY16 Value, €m % increase China 7,726.5 4,350.7 78% Garanti Bankasi Turkey Finance & Insurance Minority 10.0 Banco Bilbao Spain 871.8 1 stake Vizcaya USA 2,956.3 1,513.6 95% Argentaria (BBVA) UK 2,191.3 5,192.0 -58% Bashneft Russia Mining (incl. oil & gas) Minority 7.6 Rosneft Russia 805.5 1 stake / Netherlands 2,128.7 586.5 263% Tender offer Austria 2,080.7 330.2 530% Polyus ** Russia Mining (incl. oil & gas) Minority 10.0 Fosun Hong Kong; 791.9 1 stake International; China; Russia Switzerland 1,500.7 278.4 439% Hainan Mining; Zhaojin Mining Germany 1,358.4 1,266.5 7% Industry; RDIF South Africa 1,334.6 964.7 38% Mersin International Port Turkey Transportation & Minority 40.0 IFM Investors Australia 742.7 1 Logistics stake Australia 1,101.0 346.9 217%

PIK Group Russia Real Estate & Minority 24.6 Sergey Gordeev Russia 699.5 1 Spain 964.3 72.4 1,232% Construction stake / - private investor Tender offer NOTE: Only deals with investors from a single country were considered. Portfolio of 12 retail properties of Chariot Poland Real Estate & Acquisition 100.0 Echo Polska Netherlands 692.1 1 Top Group * Construction Properties

13,000 cell towers of VimpelCom Russia Telecoms & IT Acquisition 100.0 Russian Towers Russia 666.7 2

Kondaneft Russia Mining (incl. oil & gas) Acquisition 100.0 Rosneft Russia 657.8 1

* Chariot Top Group first acquired a portfolio of 28 properties and then sold 12 of them. ** On 15 January, after the data extraction cut-off date, it was announced that the deal failed.

 Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate Source: All data provided by EMIS

52 | Emerging Europe M&A Report 2017/18 53 Appendix 1 Value of deals by sector – emerging Europe 2017 2016 Most active countries: by number of deals 2017 2016 Appendix 1

Agriculture Russia & Farming

Education & Poland Healthcare Services Turkey Energy Czech & Utilities Republic Finance Romania & Insurance Hungary Food & Beverage 0 100 200 300 400 500 600 700 Manufacturing Number of deals

Media & Publishing

Mining (incl. oil & gas)

Other

Real Estate & Construction

Services

Telecoms & IT Transportation & Logistics Most active countries: by value of deals 2017 2016 Wholesale & Retail Russia

0 2500 5000 7500 10000 12500 15000 17500 20000 22500 25000 Poland

Millions (EUR) Turkey Czech Republic Romania

Hungary

0 5 10 15 20 25 30 35 40 45

Billions (EUR) Source: All data provided by EMIS

54 | Emerging Europe M&A Report 2017/18 55 Appendix 1 Most active foreign investors: by number of deals 2017 2016 Most active investors from within the region: by number of deals 2017 2016 Appendix 1

USA Russia

UK Poland

Germany Turkey

Czech France Republic

0 10 20 30 40 50 60 70 80 90 100 0 100 200 300 400 500 600

Number of deals Number of deals

Most active foreign investors: by value of deals 2017 2016 Most active investors from within the region: by value of deals 2017 2016

China Russia USA Turkey UK Poland Netherlands Czech Republic 0 1 2 3 4 5 6 7 8 0 2 4 6 8 10 12 14 16 18 20 22 24

Billions (EUR) Billions (EUR)

NOTE: Only deals with investors from a single foreign country were considered. NOTE: Only deals with investors from a single country from within the region were considered. Source: All data provided by EMIS

56 | Emerging Europe M&A Report 2017/18 57 Appendix 1 Deals by volume and value in Private Equity (2012-2017) Private Equity: top 20 deals 2017 Appendix 1

Target Country Sector Deal Type Stake % Buyer Country of Deal Value of Target Buyer Value Source (€m)  14.7 255 233 12.9 248 9.3 Rosneft Russia Mining (incl. oil & Minority 14.2 CEFC China Energy China 7,520.7 1 gas) stake

Zabka Polska Poland Wholesale & Retail Acquisition 100.0 CVC Capital Partners; EBRD United 1,000.0 2 Kingdom; 2012 2013 2014 international

Portfolio of 28 retail properties Poland Real Estate & Acquisition 100.0 Chariot Top Group Netherlands 1,000.0 1 of AXA, Ares Management and Construction Apollo-Rida *

28.4 Polyus ** Russia Mining (incl. oil & Minority 10.0 Fosun International; Hainan Hong Kong; 791.9 1 288 266 267 21.4 gas) stake Mining; Zhaojin Mining China; Russia 10.9 Industry; RDIF

Mersin International Port Turkey Transportation & Minority 40 IFM Investors Australia 742.7 1 Logistics stake 2015 2016 2017 Portfolio of 12 retail properties Poland Real Estate & Acquisition 100 Echo Polska Properties Netherlands 692.1 1 of Chariot Top Group * Construction Number of deals Total value of deals (EUR) bn Eurasia Drilling Company Russia Mining (incl. oil & Minority 16.1 Middle Eastern investors; RDIF; Greater MENA; 517.1 2 gas) stake RCIF; China-Eurasian Economic Russia; China Cooperation Fund (CEF) Number of Private Equity deals by sector in 2017 Insurance assets of Russia Finance & Merger 100.0 The Sputnik Group; Boris Jordan Russia 395.6 1 Renaissance Insurance and Insurance - private investor; Baring Vostok Blagosostoyanie Capital Partners; Transfingroup Real Estate Manufacturing Telecoms & IT Managing Company Skoda Transportation Czech Manufacturing Acquisition 100.0 PPF Group Czech Republic 390.8 2 & Construction Republic

Magnolia Park shopping centre Poland Real Estate & Acquisition 100.0 Union Investment Real Estate Germany 380.0 1 in Wroclaw Construction 69 41 36 INEA Poland Telecoms & IT Acquisition n.a. Macquarie Group Australia 358.3 2 A&D Pharma Holdings Romania Wholesale & Retail Acquisition 100.0 Penta Investments Czech Republic 350.0 2 Wholesale & Retail Finance & Insurance Food & Beverage SASA Macedonia Mining (incl. oil & Reverse 100.0 Central Asia Metals United 335.4 1 gas) takeover Kingdom

Part of the business of Poland Finance & Acquisition 100.0 Banco Santander Spain 305.0 1 Deutsche Bank Polska Insurance

Wizz Air Hungary Transportation & Minority 18.7 institutional investors n.a. 283.2 1 Logistics stake

26 20 16 Kozyatagi Carrefour Turkey Real Estate & Acquisition 100.0 Gulaylar Turkey 269.0 2 Construction

Transportation Services Other Banvit Bandirma Vitaminli Yem Turkey Food & Beverage Acquisition 79.5 BRF; Qatar Investment Authority Brazil; Qatar 256.4 1

& Logistics Airport Pulkovo Russia Transportation & Minority 25.0 RDIF; Baring Vostok Capital Russia; China; 240.0 1 Logistics stake Partners; RCIF; Mubadala Russia; UAE; Development Greater MENA

TransContainer Russia Transportation & Minority 24.5 Enisey Capital Russia 210.5 3 15 12 32 Logistics stake Food Union Group Latvia Food & Beverage Acquisition n.a. Meridian Capital China; PAG China; Hong 210.3 1 / Capital Asia Capital Kong increase

NOTE: The table includes both new PE investments and PE exits. * Chariot Top Group first acquired a portfolio of 28 properties and then sold 12 of them. ** On 15 January, after the data extraction cut-off date, it was announced that the deal has failed.

 Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate Source: All data provided by EMIS

58 | Emerging Europe M&A Report 2017/18 59 Appendix 1 IPOs: top 20 IPOs 2017 Real Estate: top 20 deals 2017 Appendix 1

Target Country of Target Sector Stake % Deal Value (€m) Value Source Target Country of Target Deal Type Stake % Buyer Country of Deal Value Value Buyer (€m) Source En+ Group Russia Mining (incl. oil & gas) 18.8 1,282.1 1 

PLAY Communications Poland Telecoms & IT 47.9 1,043.6 1 Portfolio of 28 retail Poland Acquisition 100.0 Chariot Top Group Netherlands 1,000.0 1 properties of AXA, Ares Dino Polska Poland Wholesale & Retail 49.0 393.6 1 Management and Apollo-Rida * Detsky Mir Group Russia Wholesale & Retail 30.5 303.4 1 Retail portfolio of Immofinanz in Russia Acquisition 100.0 Fort Group Russia 901.0 1 Mavi Giyim Turkey Manufacturing 55.0 296.0 1 Moscow

Global Liman Turkey Transportation & Logistics 38.2 210.4 1 PIK Group ** Russia Minority stake / 24.6 Sergey Gordeev - Russia 699.5 1 Tender offer private investor RCS & RDS Romania Telecoms & IT 25.6 207.4 1 Portfolio of 12 retail properties Poland Acquisition 100.0 Echo Polska Properties Netherlands 692.1 1 getBACK Poland Finance & Insurance 40.0 174.4 1 of Chariot Top Group *

DP Eurasia Turkey; Azerbaijan; Georgia; Services 51.0 169.3 1 Retail real estate portfolio of Czech Republic; Acquisition 100.0 CPI Property Group Czech Republic 650.7 2 Russia; Netherlands CBRE Global Investors in the Hungary; Poland; Griffin Premium RE Poland Finance / Real Estate 57.1 120.1 1 Czech Republic, Hungary, Romania Poland and Romania Obuv Rossii Russia Manufacturing 37.5 87.5 1 PIK Group ** Russia Acquisition *** 20.1 Sergey Gordeev - Russia 554.8 1 Sphera Franchise Group Romania Services 25.3 62.0 1 private investor

Globaltruck Management Russia Transportation & Logistics 45.4 51.3 1 Gorbushkin Dvor Russia Acquisition 100.0 Viktor Kharitonin - Russia 446.4 2 Group private investor

Waberer's International Hungary Transportation & Logistics 29.7 50.3 1 Olympia Center in Brno Czech Republic Acquisition 100.0 Deutsche EuroShop Germany 382.0 1

R22 Poland Telecoms & IT 36.7 21.7 1 Magnolia Park shopping centre Poland Acquisition 100.0 Union Investment Real Germany 380.0 1 in Wroclaw Estate Mistral GYO Turkey Finance / Real Estate 25.0 15.9 1 Office space and parking area in Russia Acquisition 100.0 Agency for Housing Russia 368.4 1 MaxCom Poland Manufacturing 32.0 11.3 1 IQ-Quarter complex Mortgage Lending

Venture Inc Poland Finance & Insurance 50.3 7.0 1 Metropol Istanbul Shopping Turkey Acquisition 100.0 EYG Group; Kefeli Turkey 300.4 1 Mall Gayrimenkul Madara Cosmetics Latvia Manufacturing 14.2 3.3 1 Galeria Katowicka Poland Acquisition 100.0 Employees Provident Malaysia 300.0 2 XTPL Poland Manufacturing 9.1 2.4 1 Fund (EPF)

Arena Plaza Mall in Budapest Hungary Acquisition 100.0 NEPI Rockcastle South Africa 275.0 1

Kozyatagi Carrefour Turkey Acquisition 100.0 Gulaylar Turkey 269.0 2

Aviapark Russia Minority stake 30.0 Aviapark Mall Russia 254.2 2 Holdings

Paradise Center Bulgaria Acquisition 100.0 NEPI Rockcastle South Africa 252.9 1

Krokus shopping centre in Poland Acquisition 100.0 NEPI Rockcastle South Africa 249.4 1 Krakow; Serenada shopping centre in Krakow

PIK Group ** Russia Minority stake 7.6 VTB Bank Russia 222.0 1

Serdika Center and Office Bulgaria Acquisition 100.0 New Europe Property South Africa 207.4 1 Investments (NEPI)

Portfolio of eight Vienna House Czech Republic; Poland; Acquisition n.a. U City Thailand 180.0 1 hotels Romania

* Chariot Top Group first acquired a portfolio of 28 properties and then sold 12 of them. ** The three deals for PIK Group involved separate sellers and sale processes. *** Following the deal, the buyer will own more than 50% of PIK Group.

 Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate Source: All data provided by EMIS

60 | Emerging Europe M&A Report 2017/18 61 Appendix 2 Appendix 2

Appendix 2: County data and top deal lists

62 | | Emerging Emerging Europe Europe M&A M&A Report Report 2017/18 2017/18 63 Appendix 2 Albania Top 5 deals in Albania in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Cakran-Mollaj oil field; Mining (incl. oil & gas) Acquisition / 100.0 Albpetrol Albania 18.7 1 Gorisht-Cokul oil field Debt-for-equity Deals by volume and value in Albania (2012-2017) swap Banka Credins Finance & Insurance Minority stake 14.9 Amryta Capital United n.a. Kingdom

Veneto Banca assets in Finance & Insurance Acquisition / 100.0 Intesa Sanpaolo Italy n.a. Albania Distressed

Amonices oil field Mining (incl. oil & gas) Acquisition 100.0 Albpetrol Albania n.a. 12 164.1 7 47.9 5 37.4 Life insurance business of Finance & Insurance Acquisition 90.0 Samir Mane - private Albania n.a. Insig investor; Shefqet Kastrati - private investor 2012 2013 2014

 Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate 9 561.7 5 31.0 5 18.7

2015 2016 2017

Number of deals Total value of deals (EUR) m

Number of deals by sector in 2017

Finance & Insurance Mining (incl. oil & gas)

3 2 Source: All data provided by EMIS

64 | Emerging Europe M&A Report 2017/18 65 Appendix 2 Bosnia and Herzegovina Top 5 deals in Bosnia and Herzegovina in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Merkur Otoka Shopping Real Estate & Acquisition 100.0 Bingo Bosnia and 51.0 2 Center Construction Herzegovina

Deals by volume and value in Bosnia and Herzegovina (2012-2017) Konzum Wholesale & Retail Acquisition / n.a. LEDO; Sarajevski Bosnia and 35.1 1 Debt-for-equity Kiseljak Herzegovina swap

Farmland Agriculture & Farming Acquisition 100.0 undisclosed Chinese China 24.0 1 investor(s) 152.0 VGT Osiguranje Finance & Insurance Acquisition 95.0 GRAWE Group Austria 9.2 1 21 98.3 19 19 52.7 Bijeljinaput Real Estate & Acquisition 100.0 Kozaraputevi Bosnia and 5.1 2 Construction Herzegovina

2012 2013 2014  Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate

28 151.6 20 72.0 21 98.1

2015 2016 2017

Number of deals Total value of deals (EUR) m

Number of deals by sector in 2017

Food & Beverage Finance & Insurance Wholesale & Retail

7 6 6 Manufacturing Real Estate Agriculture & Construction & Farming 3 3 1 Telecoms & IT Other

1 1 Source: All data provided by EMIS

66 | Emerging Europe M&A Report 2017/18 67 Appendix 2 Bulgaria Top 10 deals in Bulgaria in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Paradise Center Real Estate & Acquisition 100.0 NEPI Rockcastle South Africa 252.9 1 Construction

Deals by volume and value in Bulgaria (2012-2017) Serdika Center and Office Real Estate & Acquisition 100.0 New Europe Property South Africa 207.4 1 Construction Investments (NEPI)

The Mall Real Estate & Acquisition 100.0 Hyprop Investments; South Africa 156.0 1 Construction private investor(s)

Bulgarian leasing portfolio of Finance & Insurance Acquisition 100.0 AMS Bulgaria Bulgaria 150.0 3 1,489.0 Heta Asset Resolution 83 1,240.0 1,067.0 73 69 Cigarette brands of Food & Beverage Acquisition 100.0 British American United 100.0 1 Bulgartabac; Express Logistic Tobacco Kingdom and Distribution

2012 2013 2014 Dynamo Software Telecoms & IT Acquisition / n.a. Francisco Partners United States 64.1 3 Capital increase

Galleria Stara Zagora; Mall Real Estate & Acquisition 100.0 MAS Real Estate; South Africa; 62.0 1 Galleria Burgas Construction Prime Kapital Romania

Galleria Varna Real Estate & Acquisition 50.0 Delta Holding Serbia 60.0 3 86 1,367.6 82 1,451.1 Construction 63 698.9 Moto-Pfohe Wholesale & Retail Acquisition 100.0 Sumitomo Corp Japan 50.2 2

TPP Varna Energy & Utilities Acquisition 100.0 Sigda Bulgaria 50.0 2 2015 2016 2017

 Value source – key: Number of deals Total value of deals (EUR) m 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate

Number of deals by sector in 2017

Real Estate Telecoms & IT Manufacturing & Construction 17 13 11 Finance & Insurance Wholesale & Retail Food & Beverage

10 9 6 Services Education & Other Healthcare Services 6 2 8 Source: All data provided by EMIS

68 | Emerging Europe M&A Report 2017/18 69 Appendix 2 Croatia Top 10 deals in Croatia in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Broadcast operations of Media & Publishing Acquisition 100.0 Kohlberg Kravis United States 135.0 3 Central European Media Roberts & Co Deals by volume and value in Croatia (2012-2017) Enterprises (CME) in Croatia * Sunce Koncern Real Estate & Minority stake 50.0 Sunce Ulaganja Croatia 43.0 1 Construction

Energija Projekt Energy & Utilities Acquisition 76.0 Norinco International China 32.0 1 Cooperation 611.0 492.5 419.3 Punta Zlatarac Tucepi Real Estate & Acquisition 50.0 TUI Group Germany 31.5 1 43 52 45 Construction Rimac Automobili Manufacturing Capital increase n.a. Camel Group China 30.0 1

Hoteli Makarska Real Estate & Privatization 55.5 Valamar Riviera; Croatia 22.8 1 2012 2013 2014 Construction Allianz ZB

Hoteli Maestral Real Estate & Privatization 68.9 J&T Finance Group Czech Republic 15.1 1 Construction

Luka Rijeka Transportation & Privatization 11.8 OT Logistics Poland 10.6 1 1,071.0 52 867.6 370.2 Logistics 41 35 Pevec Wholesale & Retail Minority stake 19.8 Dicentra Croatia 8.2 3 Vila Castello Real Estate & Acquisition 100.0 Slovak private Slovakia 8.1 1 Construction investor(s) 2015 2016 2017

* As of late November, the deal is under regulatory block in Croatia, and KKR is assessing the situation. Number of deals Total value of deals (EUR) m  Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information Number of deals by sector in 2017 3. EMIS Estimate

Real Estate Transportation Finance & Insurance & Construction & Logistics 10 6 4 Manufacturing Wholesale & Retail Energy & Utilities

3 3 2 Media & Publishing Services Other

2 2 3 Source: All data provided by EMIS

70 | Emerging Europe M&A Report 2017/18 71 Appendix 2 Czech Republic Top 10 deals in Czech Republic in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Unipetrol Manufacturing Minority stake / 37.0 PKN Orlen Poland 1,000.0 1 Tender offer

Deals by volume and value in Czech Republic (2012-2017) Skoda Transportation Manufacturing Acquisition 100.0 PPF Group Czech Republic 390.8 2

Olympia Center in Brno Real Estate & Acquisition 100.0 Deutsche EuroShop Germany 382.0 1 Construction

Retail real estate portfolio of Real Estate & Acquisition 100.0 CPI Property Group Czech Republic 294.6 3 CBRE Global Investors in the Construction Czech Republic 5,708.9 171 5,017.7 1,297.0 153 Moravia IT Telecoms & IT Acquisition 100.0 RWS Holdings United 273.5 1 102 Kingdom

Logistics portfolio of Stage Real Estate & Acquisition 100.0 CBRE Global United States 125.0 1 2012 2013 2014 Capital in Plzen Construction Investors

FTV Prima Holding Media & Publishing Acquisition 50.0 Vladimir Komar - Czech Republic 116.0 1 private investor; Ivan Zach - private investor

8,739.6 Metropole Zlicin shopping Real Estate & Acquisition 50.0 Unibail-Rodamco France 110.0 1 3,395.9 202 176 4,346.6 143 centre in Prague Construction Aqualia lnfraestructuras Energy & Utilities Minority stake 49.0 Fomento de Spain 92.5 1 Inzenyring; SmVaK Construcciones y 2015 2016 2017 Contratas (FCC) River Garden Office II; River Real Estate & Acquisition 100.0 Encore+ Luxembourg 84.0 1 Number of deals Total value of deals (EUR) m Garden Office III Construction

NOTE: The sale of Alpha Medical, said to be among the largest ones this year, is not included as its value could not be properly estimated.

Number of deals by sector in 2017  Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information Real Estate Manufacturing Telecoms & IT 3. EMIS Estimate & Construction 55 34 20 Wholesale & Retail Services Education & Healthcare Services 15 13 10 Food & Beverage Transportation Other & Logistics 7 7 15 Source: All data provided by EMIS

72 | Emerging Europe M&A Report 2017/18 73 Appendix 2 Hungary Top 10 deals in Hungary in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Magyar Olaj- Es Gazipari Mining (incl. oil & gas) Minority stake 7.5 undisclosed n.a. 465.4 1 (MOL) investor(s)

Deals by volume and value in Hungary (2012-2017) Wizz Air Transportation & Minority stake 18.7 institutional n.a. 283.2 1 Logistics investor(s)

Arena Plaza Mall in Budapest Real Estate & Acquisition 100.0 NEPI Rockcastle South Africa 275.0 1 Construction

Retail real estate portfolio of Real Estate & Acquisition 100.0 CPI Property Group Czech Republic 239.4 3 CBRE Global Investors in Construction 1,520.1 134 Hungary 102 729.0 102 773.4 OTP Bank Finance & Insurance Minority stake 3.0 institutional n.a. 208.5 1 investor(s)

2012 2013 2014 Invitel Group * Telecoms & IT Acquisition 100.0 CEE Equity Partners; Poland; China 204.4 1 China-CEE Investment Cooperation Fund

Magyar Gaz Tranzit Energy & Utilities Acquisition 100.0 Magyar Olaj- Es Hungary 147.4 1 Gazipari (MOL) 162 1,974.7 1,195.7 142 2,706.4 136 Invitel * Telecoms & IT Acquisition 99.9 RCS & RDS Romania 139.5 1

Corvin Skypark Real Estate & Acquisition 100.0 OTP Ingatlan Hungary 128.3 1 Construction Befektetesi 2015 2016 2017 Alapkezelo Sofitel Budapest Chain Bridge Real Estate & Acquisition 100.0 Starwood Capital United States 75.0 1 Number of deals Total value of deals (EUR) m Construction Group

* Invitel Group (comprising four companies) was acquired by Chinese investors in January. In July, they sold the main company of the Group.

Number of deals by sector in 2017  Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information Real Estate Finance & Insurance Telecoms & IT 3. EMIS Estimate & Construction 45 21 13 Media & Publishing Food & Beverage Energy & Utilities

12 11 9 Services Manufacturing Other

8 6 17 Source: All data provided by EMIS

74 | Emerging Europe M&A Report 2017/18 75 Appendix 2 Montenegro Top 5 deals in Montenegro in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Elektroprivreda Crne Gore Energy & Utilities Minority stake 41.7 Government of Montenegro 250.0 1 Montenegro

Deals by volume and value in Montenegro (2012-2017) Crnogorski Telekom Telecoms & IT Acquisition 76.5 Hrvatski Telekom Croatia 123.5 1

Luka Bar Transportation & Privatization 30.0 OT Logistics Poland 8.5 1 Logistics

Riviera Hotel Real Estate & Acquisition / 100.0 Montenegro Hotels Montenegro 6.8 1 Construction Auction

Jugopetrol Wholesale & Retail Minority stake 9.8 Nova Ljubljanska Slovenia 5.8 1 12 10 115.8 7 93.9 57.6 Banka (NLB)

 Value source – key: 2012 2013 2014 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate

16 301.9 412.4 96.3 8 12

2015 2016 2017

Number of deals Total value of deals (EUR) m

Number of deals by sector in 2017

Finance & Insurance Energy & Utilities Transportation & Logistics 4 2 2 Real Estate Manufacturing Wholesale & Retail & Construction 1 1 1 Telecoms & IT

1 Source: All data provided by EMIS

76 | Emerging Europe M&A Report 2017/18 77 Appendix 2 Poland Top 20 deals in Poland in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Zabka Polska Wholesale & Retail Acquisition 100.0 CVC Capital Partners; United 1,000.0 2 EBRD Kingdom; International Deals by volume and value in Poland (2012-2017) Portfolio of 28 retail properties Real Estate & Acquisition 100.0 Chariot Top Group Netherlands 1,000.0 1 of AXA, Ares Management and Construction Apollo-Rida *

Assets of EDF in Poland Energy & Utilities Acquisition 100.0 Polska Grupa Poland 991.2 1 Energetyczna 11,600.0 9,000.0 363 Portfolio of 12 retail properties Real Estate & Acquisition 100.0 Echo Polska Netherlands 692.1 1 331 285 4,500.0 of Chariot Top Group * Construction Properties Synthos Manufacturing Minority stake / 31.4 Michal Solowow - Poland 486.0 1 Tender offer private investor

2012 2013 2014 Magnolia Park shopping centre Real Estate & Acquisition 100.0 Union Investment Germany 380.0 1 in Wroclaw Construction Real Estate

INEA Telecoms & IT Acquisition n.a. Macquarie Group Australia 358.3 2

Part of the business of Finance & Insurance Acquisition 100.0 Banco Santander Spain 305.0 1 Deutsche Bank Polska 11,200.0 10,600.0 346 6,300.0 288 Galeria Katowicka Real Estate & Acquisition 100.0 Employees Provident Malaysia 300.0 2 279 Construction Fund (EPF)

Emperia Holding (Stokrotka) Wholesale & Retail Acquisition / 100.0 Maxima Group Lithuania 292.5 1 Tender offer 2015 2016 2017 Krokus shopping centre in Real Estate & Acquisition 100.0 NEPI Rockcastle South Africa 249.4 1 Number of deals Total value of deals (EUR) m Krakow; Serenada shopping Construction centre in Krakow

Hortex Holding Food & Beverage Acquisition 100.0 Mid Europa Partners United 200.0 2 Kingdom Number of deals by sector in 2017 Galeria Twierdza shopping Real Estate & Acquisition 100.0 Echo Polska Netherlands 166.6 1 centre in Zamosc; Wzorcownia Construction Properties shopping centre in Wloclawek; Galeria Tecza shopping centre Real Estate Manufacturing Telecoms & IT in Kalisz; Galeria Twierdza shopping centre in Klodzko & Construction Galeria Sloneczna shopping Real Estate & Acquisition 100.0 REICO investicni Czech Republic 164.0 1 centre in Radom Construction spolecnost Ceske sporitelny

Tryton Business House office Real Estate & Acquisition 100.0 Griffin Premium RE Poland 160.0 1 building in Gdansk; A4 Construction 68 57 39 Business Park office building in Katowice; West Gate office building in Wroclaw Food & Beverage Wholesale & Retail Services Netia Telecoms & IT Minority stake 31.8 Cyfrowy Polsat Poland 149.2 1

Pioneer Pekao Investment Finance & Insurance Acquisition 51.0 Bank Pekao Poland 140.0 1 Management; Pekao Pioneer Powszechne Towarzystwo Emerytalne 35 20 18 Griffin Premium RE Real Estate & Acquisition / 67.9 Globalworth Real United 139.6 1 Construction Tender offer Estate Investments Kingdom

Part of the business of Finance & Insurance Acquisition 100.0 Indigo Underwriters United 122.6 1 Finance & Insurance Education & Other mFinanse Kingdom

Healthcare Services Proximo I office building in Real Estate & Acquisition 100.0 REICO investicni Czech Republic 116.6 1 Warsaw Construction spolecnost Ceske sporitelny 13 10 28 * Chariot Top Group first acquired a portfolio of 28 properties and then sold 12 of them.  Value source – key:

1. Official data Source: All data provided by EMIS 2. Market estimate provided by EMIS and based on publicly available information 78 | Emerging Europe M&A Report 2017/18 3. EMIS Estimate 79 Appendix 2 Romania Top 10 deals in Romania in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Enel Distributie Muntenia; Energy & Utilities Minority stake 13.6 Enel Italy 401.2 1 Enel Energie Muntenia

Deals by volume and value in Romania (2012-2017) A&D Pharma Holdings Wholesale & Retail Acquisition 100.0 Penta Investments Czech Republic 350.0 2

Bancpost Finance & Insurance Acquisition 99.2 Banca Transilvania Romania 240.0 2

EcoPack; EcoPaper Manufacturing Acquisition 100.0 DS Smith United 208.0 1 Kingdom

Radisson Blue Hotel in Real Estate & Acquisition 100.0 Revetas Capital United 169.2 1 150 2,240.8 Bucharest Construction Kingdom 1,464.0 131 118 1,185.0 SDEE Distributie Muntenia Energy & Utilities Minority stake 22.0 Electrica Romania 164.7 1 Nord; SDEE Distributie Transilvania Nord; SDEE 2012 2013 2014 Distributie Transilvania Sud; Electrica Furnizare

Takata Corp operations in Manufacturing Acquisition 100.0 Key Safety Systems United States 153.9 3 Romania

1,977.6 3,249.3 BitDefender Telecoms & IT Capital increase 30.0 Vitruvian Partners United 151.3 3 3,071.8 136 153 Kingdom 119 Premium Porc Group Agriculture & Farming Acquisition 100.0 Polaris Private Equity Denmark 134.0 2

Certain assets of Oltchim Manufacturing Acquisition / 100.0 Dynamic Selling Romania 128.9 1 2015 2016 2017 Distressed Group; Chimcomplex

Number of deals Total value of deals (EUR) m  Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate Number of deals by sector in 2017

Manufacturing Real Estate Wholesale & Retail & Construction 39 30 15 Telecoms & IT Finance & Insurance Food & Beverage

13 11 9 Transportation Services Other & Logistics 7 6 23 Source: All data provided by EMIS

80 | Emerging Europe M&A Report 2017/18 81 Appendix 2 Russia Top 20 deals in Russia in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Rosneft Mining (incl. oil & gas) Minority stake 14.2 CEFC China Energy China 7,520.7 1

Sibur Holding Manufacturing Minority stake 14.3 Leonid Mikhelson Russia 1,755.4 2 Deals by volume and value in Russia (2012-2017) - private investor

Yuzhno-Russkoye field Mining (incl. oil & gas) Minority stake 25.0 OMV Austria 1,719.0 1

Eurasia Drilling Company Mining (incl. oil & gas) Acquisition 51.0 Schlumberger United States 1,652.2 2

Retail portfolio of Immofinanz Real Estate & Acquisition 100.0 Fort Group Russia 901.0 1 99,000.0 in Moscow Construction 882 791 69,800.0 728 29,900.0 MegaFon Telecoms & IT Minority stake 19.0 Gazprombank Russia 898.2 1

RusHydro Energy & Utilities Capital increase 13.0 VTB Bank Russia 891.0 1

2012 2013 2014 Bashneft Mining (incl. oil & gas) Minority stake / 7.6 Rosneft Russia 805.5 1 Tender offer

Polyus *** Mining (incl. oil & gas) Minority stake 10.0 Fosun International; Hong Kong; 791.9 1 Hainan Mining; China; Russia Zhaojin Mining Industry; RDIF 43,300.0 683 640 671 36,700.0 PIK Group * Real Estate & Minority stake / 24.6 Sergey Gordeev - Russia 699.5 1 18,700.0 Construction Tender offer private investor

13,000 cell towers of Telecoms & IT Acquisition 100.0 Russian Towers Russia 666.7 2 2015 2016 2017 VimpelCom Kondaneft Mining (incl. oil & gas) Acquisition 100.0 Rosneft Russia 657.8 1 Number of deals Total value of deals (EUR) m Yug Rusi Group Food & Beverage Acquisition 62.0 Solnechnye Produkty Russia 634.8 2

PIK Group * Real Estate & Acquisition 20.1 ** Sergey Gordeev - Russia 554.8 1 Construction private investor

Number of deals by sector in 2017 Eurasia Drilling Company Mining (incl. oil & gas) Minority stake 16.1 Middle Eastern Greater MENA; 517.1 2 investors; RDIF; RCIF; Russia; China China-Eurasian Telecoms & IT Manufacturing Real Estate Economic Cooperation Fund & Construction (CEF)

Gorbushkin Dvor Real Estate & Acquisition 100.0 Viktor Kharitonin Russia 446.4 2 Construction - private investor

RusAl Manufacturing Minority stake 7.0 SUAL Partners; Viktor Russia 430.7 1 133 87 84 Vekselberg - private investor; Leonard Blavatnik - private Mining (incl. oil & gas) Wholesale & Retail Services investor Insurance assets of Finance & Insurance Merger 100.0 The Sputnik Group; Russia 395.6 1 Renaissance Insurance and Boris Jordan - private Blagosostoyanie investor; Baring Vostok Capital Partners; Transfingroup 78 64 38 Managing Company Ust-Luga Oil Wholesale & Retail Minority stake 25.0 Transneft Russia 368.7 2 Agriculture Finance & Insurance Other Office space and parking area Real Estate & Acquisition 100.0 Agency for Housing Russia 368.4 1 & Farming in IQ-Quarter complex Construction Mortgage Lending

* The deals for PIK Group involved separate sellers and sale processes. ** Following the deal, the buyer will own more than 50% of PIK Group. 37 35 115 *** On 15 January, after the data extraction cut-off date, it was announced that the deal failed.  Value source – key:

1. Official data Source: All data provided by EMIS 2. Market estimate provided by EMIS and based on publicly available information 82 | Emerging Europe M&A Report 2017/18 3. EMIS Estimate 83 Appendix 2 Serbia Top 10 deals in Serbia in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Vojvodjanska Banka; NBG Finance & Insurance Acquisition 100.0 OTP Bank Hungary 125.0 1 Leasing

Deals by volume and value in Serbia (2012-2017) Galenika Manufacturing Minority stake / 8.0 Srbijagas; Serbia 123.1 2 Debt-for-equity Government of the swap Republic of Serbia

Piraeus Bank Belgrade Finance & Insurance Acquisition 100.0 Direktna Banka Serbia 59.5 1

Mercator Centar Real Estate & Acquisition 100.0 MPC Properties Serbia 46.0 1 Construction 44 666.0 41 860.9 159.0 Belgrade Plaza Real Estate & Acquisition 100.0 BIG Shopping Israel 44.9 1 25 Construction Centers

Galenika Manufacturing Privatization 93.7 EMS Brazil 41.0 2 2012 2013 2014 Atterbury Serbia Real Estate & Acquisition n.a. Atterbury Europe South Africa 35.2 3 Construction

Energoprojekt Holding Real Estate & Minority stake / 16.7 Napred Serbia 22.8 1 Construction Tender offer 921.3 51 752.1 45 624.4 Beohemija-Inhem Manufacturing Acquisition 100.0 Preston Serbia 20.0 1 29 Toza Markovic Manufacturing Acquisition / 65.9 Srbijagas Serbia 20.0 2 Debt-for-equity swap 2015 2016 2017  Value source – key: Number of deals Total value of deals (EUR) m 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate

Number of deals by sector in 2017

Manufacturing Real Estate Finance & Insurance & Construction 15 12 5 Wholesale & Retail Agriculture Food & Beverage & Farming 4 3 3 Services Energy & Utilities

2 1 Source: All data provided by EMIS

84 | Emerging Europe M&A Report 2017/18 85 Appendix 2 Slovakia Top 5 deals in Slovakia in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Prologis Park Galanta-Gan Real Estate & Acquisition 100.0 CNIC Hong Kong 164.8 3 logistics facility Construction

Deals by volume and value in Slovakia (2012-2017) Lozorno logistics park Real Estate & Acquisition 100.0 undisclosed n.a. 90.2 3 Construction buyer(s)

Universal Media Manufacturing Acquisition 56.7 Sharp Japan 85.0 1 Corporation Slovakia

Composite Innovation Manufacturing Acquisition 50.1 LG Group South Korea 39.9 1 2,767.0 International (c2i) 49 717.9 58 472.5 38 Park One office building in Real Estate & Acquisition 100.0 REICO investicni Czech 35.6 1 Bratislava Construction spolecnost Ceske Republic sporitelny 2012 2013 2014 NOTE: The sale of Alpha Medical, said to be among the largest ones this year, is not included as its value could not be properly estimated.

 Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 1,854.9 3. EMIS Estimate 47 49 428.5 42 456.1

2015 2016 2017

Number of deals Total value of deals (EUR) m

Number of deals by sector in 2017

Real Estate Wholesale & Retail Manufacturing & Construction 9 8 7 Telecoms & IT Media & Publishing Education & Healthcare Services 7 3 2 Food & Beverage Finance & Insurance Other

2 1 3 Source: All data provided by EMIS

86 | Emerging Europe M&A Report 2017/18 87 Appendix 2 Slovenia Top 10 deals in Slovenia in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Adria Mobil Manufacturing Acquisition 100.0 Trigano France 200.0 2

Broadcast operations of Media & Publishing Acquisition 100.0 Kohlberg Kravis United States 94.9 3 Deals by volume and value in Slovenia (2012-2017) Central European Media Roberts & Co Enterprises (CME) in Slovenia

Portfolio of 13 Merkur DIY Wholesale & Retail Acquisition / 100.0 HPS Investment United States 49.0 2 stores * Distressed Partners

Mercator Wholesale & Retail Minority stake / 18.5 Sberbank Russia 40.6 1 Auction 960.0 923.2 34 38 39 Merkur Trgovina * Wholesale & Retail Acquisition / 100.0 HPS Investment United States 28.6 2 376.0 Distressed Partners

Petrol Mining (incl. oil & gas) Minority stake 3.0 Slovenian State Slovenia 21.3 3 2012 2013 2014 Holding (SDH)

Geoplin Wholesale & Retail Minority stake 7.8 Petrol Slovenia 14.5 1

Perutnina Ptuj Food & Beverage Minority stake 12.8 SIJ – Slovenian Steel Slovenia 11.2 1 Group 1,329.2 62 Paloma Manufacturing Minority stake / 30.3 Eco-Invest Slovakia 9.7 1 870.8 49 Tender offer 34 489.6 Mesna Industrija Primorske Food & Beverage Acquisition / 100.0 Pivka Slovenia 4.2 1 (MIP) Distressed 2015 2016 2017

* The deals for Merkur and for its 13 DIY stores involve separate assets of the distressed company, separate sale processes and sellers. Number of deals Total value of deals (EUR) m  Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information Number of deals by sector in 2017 3. EMIS Estimate

Manufacturing Wholesale & Retail Finance & Insurance

6 6 5 Transportation Food & Beverage Services & Logistics 4 3 3 Telecoms & IT Real Estate Other & Construction 3 2 2 Source: All data provided by EMIS

88 | Emerging Europe M&A Report 2017/18 89 Appendix 2 Turkey Top 20 deals in Turkey in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

OMV Petrol Ofisi Wholesale & Retail Acquisition 100.0 Vitol Group Switzerland 1,368.0 1

Garanti Bankasi Finance & Insurance Minority stake 10.0 Banco Bilbao Vizcaya Spain 871.8 1 Deals by volume and value in Turkey (2012-2017) Argentaria (BBVA)

Mersin International Port Transportation & Minority stake 40.0 IFM Investors Australia 742.7 1 Logistics

Osmangazi Elektrik Perakende Energy & Utilities Acquisition 100.0 Zorlu Holding Turkey 333.3 1

16,600.0 14,000.0 Menzelet HEPP; Kilavuzlu Energy & Utilities Privatization 100.0 Koc Holding Turkey 306.7 1 331 343 11,400.0 262 HEPP Metropol Istanbul Shopping Real Estate & Acquisition 100.0 EYG Group; Kefeli Turkey 300.4 1 Mall Construction Gayrimenkul

2012 2013 2014 Kozyatagi Carrefour Real Estate & Acquisition 100.0 Gulaylar Turkey 269.0 2 Construction

Banvit Bandirma Vitaminli Food & Beverage Acquisition 79.5 BRF; Qatar Brazil; Qatar 256.4 1 Yem Investment Authority

Kerevitas Gida Food & Beverage Acquisition / 73.9 Yildiz Holding; Turkey 214.8 1 12,500.0 Capital increase Turkish private investor(s) 240 183 5,200.0 204 7,600.0 Besler Gida Food & Beverage Acquisition 100.0 Kerevitas Gida Turkey 214.8 1

2015 2016 2017 Copper mine in Siirt Mining (incl. oil & gas) Acquisition 100.0 Cengiz Holding Turkey 182.2 1 Superbahis Telecoms & IT Acquisition 100.0 Ropso Malta Malta 150.0 1 Number of deals Total value of deals (EUR) m TAV Havalimanlari Holding Transportation & Minority stake 8.1 Aeroports de Paris France 142.4 1 Logistics

Konya Ilgin Elektrik Uretim Energy & Utilities Acquisition 100.0 Park Elektrik Turkey 140.2 1

Number of deals by sector in 2017 Migros Ticaret Wholesale & Retail Minority stake 9.8 Anadolu Endustri Turkey 129.8 1 Holding Manufacturing Real Estate Wholesale & Retail Akkardan; Bossa Manufacturing Acquisition n.a. Oguz Tekstil Turkey 104.0 3 & Construction Tasucu Port Transportation & Privatization 100.0 Metal Yapi Konut Turkey 98.1 1 Logistics

Erkunt Traktor; Erkunt Sanayi Manufacturing Acquisition 100.0 Mahindra & India 97.5 2 Mahindra 34 28 25 Samli wind power plant Energy & Utilities Acquisition 100.0 Guris Insaat Turkey 94.1 1 Milta Turizm Isletmeleri Other Acquisition 100.0 Koc Holding Turkey 89.7 1 Energy & Utilities Telecoms & IT Transportation & Logistics  Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information 3. EMIS Estimate 24 16 16 Food & Beverage Services Other

15 15 31 Source: All data provided by EMIS

90 | Emerging Europe M&A Report 2017/18 91 Appendix 2 Ukraine Top 10 deals in Ukraine in 2017 Appendix 2 Target Sector Deal Type Stake % Buyer Country Deal Value Value of Buyer (€m) Source 

Ukrainian Agrarian Agriculture & Farming Acquisition 100.0 Kernel Holding Ukraine 138.4 1 Investments

Deals by volume and value in Ukraine (2012-2017) EVRAZ Sukha Balka Mining (incl. oil & gas) Acquisition 100.0 Development Ukraine 98.2 1 Construction Holding

Agro Invest Ukraine Agriculture & Farming Acquisition 100.0 Kernel Holding Ukraine 38.3 1

Astarta Holding Agriculture & Farming Minority stake 10.0 Fairfax Financial Canada 34.6 1 Holdings 4,768.3 342 2,245.0 249 111 833.1 DTEK Dniprooblenergo Energy & Utilities Privatization 25.0 System Capital Ukraine 32.8 1 Management

Kyivenergo Energy & Utilities Privatization 25.0 System Capital Ukraine 25.3 1 Management 2012 2013 2014 DTEK Dniproenergo Energy & Utilities Privatization 25.0 System Capital Ukraine 23.8 1 Management

Karpatneftekhim Telecoms & IT Acquisition 100.0 Igor Shchutsky - Ukraine 23.4 1 private investor; Ilham Mamedov - private 140 605.3 investor 504.9 54 90 490.9 Magellan shopping centre Real Estate & Acquisition 100.0 Sberbank Russia 20.1 3 Construction

2015 2016 2017 DTEK Zakhidenergo Energy & Utilities Privatization 25.0 System Capital Ukraine 13.9 1 Management Number of deals Total value of deals (EUR) m

NOTE: The deal for hypermarket chain Karavan, said to be among the largest ones this year, is not included as its value could not be properly estimated.

Number of deals by sector in 2017  Value source – key: 1. Official data 2. Market estimate provided by EMIS and based on publicly available information Finance & Insurance Agriculture Real Estate 3. EMIS Estimate & Farming & Construction 19 11 9 Telecoms & IT Manufacturing Services

9 9 8 Energy & Utilities Wholesale & Retail Other

7 5 13 Source: All data provided by EMIS

92 | Emerging Europe M&A Report 2017/18 93 About us About us

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