Emerging Europe M&A Report 2016/17

CMS_LawTax_Negative_28-100.eps Emerging Europe M&A Report 2016/17 January 2017 In cooperation with: 2 | Emerging Europe M&A Report 2016/17 3 Contents 4 Introduction 10 Dealmaking in emerging Europe at a glance Headlines from 2016 M&A data for emerging Europe 12 Data in focus: key insights The global head of EMIS’ M&A database, Stefan Stoyanov, offers further insight on the stories coming out of 2016’s M&A data 14 Transaction trends in emerging Europe CMS partners from across emerging Europe share their market insight and recent experiences, looking at trends and developments impacting the region’s transactions over the last year 26 The Brexit effect? CMS Corporate partners from both sides of Europe discuss the possible impact of the year’s referendums and elections on the deal landscape in the region 28 Appendix 1 Regional data and top deal lists 36 Appendix 2 Country data and top deal lists League tables League Tables were generated using the LeagueBoard tool available in EMIS DealWatch. The criteria used for crediting the advisers for the purpose of these league tables, as well as for summarising the M&A data presented in this report, include: — Deal Announcement date: 01 January – 31 December, 2016. — 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 Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey and Ukraine. — Deal Value (excluding net debt): at least USD 1m; for commercial real estate deals at least USD 5m (note: deals with an undisclosed value were accounted for as having a value of zero). — Exclusions: rumoured or failed deals, tender offers through a stock exchange, privatisations through a stock exchange, convertibles issues, share buybacks, internal restructurings, joint ventures (unless tangible non-cash assets are exchanged), and employee offers. The ranking was created based on deal advisory information available, according to our best knowledge, as of 6 January, 2017. The data can be subject to updates. Firm Number of deals CMS 47 Dentons 45 Schoenherr 34 Allen & Overy 26 Clifford Chance 26 Sorainen 26 Baker & McKenzie 23 White & Case 21 Havel, Holasek & Partners 19 Hogan Lovells 15 CEE Legal Advisors for 2016 3 4 | Emerging Europe M&A Report 2016/17 5 2016 saw the value of deals in central and south-eastern Europe increase to its highest level since 2013, driven largely by a late flurry of activity including a number of megadeals towards the end of the year. Overall however deal volume in the region was down on 2015. Russia and Poland retained their first and second positions respectively in the deal volume tables, despite drops in transaction numbers compared with last year. The rising stars of the region were the Czech Republic and Romania. Czech Republic enjoyed the strongest M&A activity it has experienced for a decade as volumes rose sharply for the fourth year in a row, and values overtook the previous peak in 2013. Romania too saw a rise in deal numbers, the highest since 2013. Real estate & construction overtook telecoms, IT and manufacturing to become the most active sector by number of transactions. In terms of deal value, the mining sector topped the table, due to a series of major deals in the sector, including the Glencore-QatariRosneft stake purchase. Among the largest deals in CEE were a mix of corporate and private-equity funded transactions, with buyers from within the region, Western Europe and Asia. 2016 saw the rapidly growing influence of China as an investor into the region, almost doubling its spending compared with 2015. US investment into CEE on the other hand saw deal values fall by two-thirds in 2016. Overall, dealmakers acted cautiously in 2016, faced with weakness in the global economy and uncertainty surrounding referendums and elections on both sides of the Atlantic. Many took a wait-and-see approach that meant some deals were temporarily put on hold. One of the lessons of the year is that political change does not necessarily mean a brake on activity – investors are ready and willing to do deals once the outlook becomes clearer. There are many reasons to be positive about 2017, including the potential pipeline of deals waiting to be completed, subject to buyers and sellers deciding that the time and price are right. 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 Partner, CEE Corporate Practice [email protected] Radivoje Petrikic Partner, CEE Corporate Practice [email protected] 4 | Emerging Europe M&A Report 2016/17 5 6 | Emerging Europe M&A Report 2016/17 7 Other 331 Dealmaking in emerging Europe at a glance Number of deals Total value of deals (EUR) 1,985 2016 86.7bn 2015 2,138 53.5bn 2,197 2014 62.8bn 2,558 2013 111.7bn 2,596 2012 137.6bn Deals by volume and by value Highest value of deals in the region since 2013, driven by a number of megadeals towards the end of 2016 Deal numbers across CEE were down for the fifth successive year and are at less than half the level of 2011, when there were 4,175 transactions. Investors were cautious as global economic growth remained weak, amid uncertainty about election and referendum results. There were signs however of confidence picking up towards the end of 2016. The value of deals increased to its highest level since 2013, helped by a brace of megadeals in December. Swiss-based commodities trader Glencore and the Qatar Investment Authority jointly took a 19.5% stake in Russia’s largest oil producer Rosneft for EUR 10.2bn and Japan’s Asahi paid EUR 7.3bn for a portfolio of CEE breweries from AB InBev. Among the 20 largest deals were a mix of corporate and private-equity funded transactions, with buyers from within the region, Western Europe and Asia. Sectors A series of major mining deals, including the GlencoreQatari-Rosneft stake purchase, sent deal values in the sector soaring by 454%, while the Asahi-AB InBev deal contributed to a 154% increase in food and beverage deal values. Real estate & construction overtook telecoms & IT and manufacturing to become the most active sector by number of transactions and but for the Rosneft acquisition it would have been the highest in value. Value of deals by sector 2016 2015 0 2.5 5 7.5 10 12.5 15 17.5 20 22.5 25 Mining Manufacturing Telecoms & IT Services Education & Healthcare Real Estate & Construction Finance & Insurance Wholesale & Retail Media & Entertainment Food & Beverage Energy & Utilities Transport & Logistics Agriculture & Farming Billions (EUR) Number of deals by sector in 2016 Mining (incl. oil & gas) 99 Real Estate & Construction 357 Manufacturing 312 Finance & Insurance 191 Food & Beverage 95 Telecoms & IT 265 Services 145 Wholesale & Retail 190 8 | Emerging Europe M&A Report 2016/17 9 0 5 10 15 20 25 30 35 40 45 50 Hungary Russia Poland Czech Republic Turkey Romania Billions (EUR) Most active countries: by value of deals Russia retained the top spot for deal activity despite a sharp drop in transaction numbers and a series of megadeals in mining, real estate and manufacturing secured its lead as the number one market by value. However, both were well down on the levels of five years ago. Poland also saw a drop in deal numbers, down by more than half since the turn of the decade, as values returned close to 2013 levels thanks to a flurry of large transactions. Czech Republic enjoyed the strongest M&A activity it has experienced for a decade as volumes rose sharply and values overtook the previous peak in 2013. Turkey was affected by uncertainty caused by political instability at home and the conflict in Syria. Despite a significant drop in activity and values against 2015, falling to the lowest levels since 2010, it remains one of the most important M&A markets in the region. Romania’s reputation as a rising star was highlighted by a rise in deal numbers, the highest since 2013. Although values were down on 2015, they were at their third highest level since 2010. The outstanding feature of international investment into CEE in 2016 is the rapidly growing influence of Asian capital. The total value of Japanese acquisitions into the region surged nearly 30 times to EUR 8.1 billion due to the Asahi-AB InBev deal despite a 22% decline in deal flow overall. In a similar fashion, Singapore’s investments also reached EUR 2.4 billion – the highest since 2012. China ranked sixth by number of deals after a 22% increase, and jumped to third place by value after a near-doubling of its spending in the region. Excluding the Asahi-AB InBev deal, China would have ranked second behind the UK. This would be well ahead of the US, which was the largest investor in 2015 and saw deal values fall by two-thirds in 2016. The overall value of UK investment into the region saw an impressive 107% increase on last year. For more inbound investment data, please see Appendix 1. Most active countries: by number of deals 2016 2015 2016 2015 Most active investors: by number of deals 2016 2015 Most active investors: by value of deals 2016 2015 US UK Germany France 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 US UK Germany France 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 US UK Germany France 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 US UK Germany France 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 US UK Germany France 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 US UK Germany France 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 Japan UK China India Billions (EUR) 0 1 2 3 4 5 6 7 8 9 10 Japan UK China India Billions (EUR) 0 1 2 3 4 5 6 7 8 9 10 Most active countries Most active investors in the region 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 Hungary Russia Poland Czech Republic Turkey Romania 0 5 10 15 20 25 30 35 40 45 50 Hungary Russia Poland Czech Republic Turkey Romania Billions (EUR) Japan UK China India Billions (EUR) 0 1 2 3 4 5 6 7 8 9 10 Japan UK China India Billions (EUR) 0 1 2 3 4 5 6 7 8 9 10 Japan UK China India Billions (EUR) 0 1 2 3 4 5 6 7 8 9 10 Japan UK China India Billions (EUR) 0 1 2 3 4 5 6 7 8 9 10 10 | Emerging Europe M&A Report 2016/17 11 Food & Beverage 12 Russia Czech Republic Poland Turkey Billions (EUR) 0.0 2.5 5.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 25.0 Russia Czech Republic Poland Turkey Billions (EUR) 0.0 2.5 5.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 25.0 By number of deals By value of deals There were signs that investors in CEE are gaining the confidence and the capability to carry out significant transactions. Both deal volumes and values coming out of Turkey were lower than 2015, reflecting uncertainty surrounding its economy. Private equity firms are showing renewed interest in CEE, reflecting the emergence of target companies of a size that attracts large international investors. The telecoms and IT sector is a particular area of growth. Biggest private equity deals by value 2016 — Rosneft (Russia) EUR 10.2bn purchase of a 19.5% stake by Glencore and QIA — Energeticky AP Holdings (Czech Republic) EUR 3.1bn sale of 62.8% by local private equity structures of J&T Finance, and Milees Ltd — Grupa Allegro (Poland) EUR 2.9bn takeover by UK private equity consortium — Pointpark Properties (Czech Republic) EUR 2.4bn takeover by GIC of Singapore — Mars Entertainment (Turkey) EUR 603m takeover led by IMM Investment and CJ CGV, South Korea 2016 2015 2016 2015 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Number of deals Total value of deals (EUR) 266 2016 28.4bn 2015 288 10.9bn Deal volumes and values By Sector Most active CEE countries as investors Private equity Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Real Estate & Construction 65 Manufacturing 35 Telecoms & IT 46 Finance & Insurance 20 Services 28 Other 28 Wholesale & Retail 19 Education & Healthcare 13 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 Russia Czech Republic Poland Turkey 0 50 100 150 200 250 300 350 400 450 500 550 600 12 | Emerging Europe M&A Report 2016/17 13 activity to remain stable in 2017. On the list of potential deals is again telecom group P4, whose sale was postponed last year but is likely to attract the interest of prominent foreign funds including KKR, Advent and CVC. Q: How have the region’s other economies fared? The Czech Republic had a particularly good year for M&A and the largest foreign investors were from Asia, including Singapore’s GIC and CEFC China Energy. In Hungary, bigger deals happened in the banking and real estate sectors with predominantly domestic and regional buyers, respectively, while Slovenia’s top three transactions featured buyers from Japan, the USA and Italy. In Romania, deal flow was healthy and the trend of strong inbound investments remained. Despite smaller deals on average, robust fundamentals indicate it will remain the M&A flagman in Southeast Europe in 2017. Bulgaria had a fairly unremarkable year until two large transactions at the end of December pushed total deal value to the highest since 2013. Bigger deals in 2017 could involve a new sale of the incumbent telecom BTC and more banking assets. Q: Will banking be a sector to watch this year? In 2017 we expect to see more deals in the banking sector. Low profits, the ongoing restructuring of Greek lenders, the billions in fees imposed on financial institutions, new sector regulations and the Italian banking crisis are all certain to spur even more disposals. We expect to see deals involving both full equity ownership and separate non-performing loan (NPL) portfolios. Among transactions lined up for 2017 are Raiffeisen and Deutsche Bank’s arms in Poland, Gorenjska in Slovenia, VTB and BM Bank in Ukraine and the still-tomaterialise sale of Bank Victoria in Bulgaria. Q: What is the outlook for M&A in the region? It is a daunting task to predict how M&A in emerging Europe will develop, although two scenarios seem probable. First, China’s increasing appetite towards foreign acquisitions of well-established consumer brands and technology companies, coupled with the regulatory push the country is facing in the USA, is likely to force it to focus more on Europe and Russia. In light of the plummeting of the British pound, China could be also poised to offset the UK among emerging Europe’s leading foreign investors in 2017 and may even land in the top spot. Second, the appointment of Mr. Trump as US president will rattle emerging markets through several channels. One is the surge of the dollar against the euro which is likely to widen as the Federal Reserve increases interest rates. It is also likely that emerging markets will experience capital outflows. Our bet is that a stronger dollar in 2017 will ultimately result in more US investments in emerging Europe. Having said that, it should be borne in mind – as 2016 showed on at least a couple of widely-publicised occasions – that forecasts can often end up being wrong. Q: How would you describe 2016 in terms of M&A activity in emerging Europe? It was a tremulous year, yet it was not all doom and gloom. Although there were fewer transactions than in 2015, according to EMIS data their median value was higher by EUR 2m at EUR 11.2m and total values were at the highest in three years. That was despite regional tensions stemming from the prolonged migrant crisis, the attempted military coup in Turkey, the surprising Brexit vote and the continued isolation of Russia. The value of private equity deals – entries and exits – more than doubled despite a modest decrease in deal flow and alongside traditionally large US and UK investors there were prominent deals featuring new funds from Qatar, Singapore and South Korea. Q: How difficult a year was it for Russia? Russian M&A continued to suffer under the negative influence of Western sanctions, the rouble’s collapse, a battered economy and political risks. Deals were predominantly domestic but there were also some big foreign investments in oil & gas as commodity prices increased. The 2017 outlook is challenging, but the M&A dip may not be as sharp as previously expected due to certain government measures, such as the active involvement of state corporations and banks in the deal market. Consolidation in sectors like finance, oil & gas, telecoms and agriculture will go on and inbound transactions will be mostly driven by Middle Eastern and Asian capital. Q: What has been the impact of the dramatic events in Turkey? The political uncertainty and the instability of the local currency will continue keeping large investors in the wait-and-see mode they adopted after the failed coup in July. Looking forward, postponed reforms and the slowing of the EU accession process will discourage Western companies from seeking acquisitions in Turkey in 2017. Nevertheless, expected big deals include the sales of OMV’s unit and the KFC restaurant franchises, while advisers have been hired on the sale of 600 companies seized by the government and worth an estimated EUR 9bn. Q: Has government policy in Poland deterred investors? Although the ruling right-wing party PiS imposed a string of investment-adverse taxes and regulations, the local real estate sector this year was among the hottest in Europe. With the M&A scene displaying a certain resilience towards the government’s unfavourable policies, we expect Data in focus: key insights Stefan Stoyanov Global Head of M&A Database EMIS – A Euromoney Institutional Investor Company [email protected] The global head of EMIS’ M&A database, Stefan Stoyanov, offers further insight on the stories coming out of 2016’s M&A data 12 | Emerging Europe M&A Report 2016/17 13 14 | Emerging Europe M&A Report 2016/17 15 Although there was a fall in the number of transactions in the region in 2016, a late flurry of activity, including some large deals in December (such as the sale by SABMiller of its CEE assets to Asahi), resulted in a rise in total M&A value. However, deal values remained well down on the levels seen at the start of the decade. Sentiment was clouded by uncertainty as people went to the polls in a number of countries, including the UK where voters made the historic decision to leave the EU, and the US, where the race to the White House saw Donald Trump elected president. There were also a number of important elections across Europe, including Italy, Austria and Romania. The nervousness of executives was reflected in the survey results for the CMS European M&A Outlook 2016 report, published in November. Nine out of ten of the respondents (senior executives from corporates and private equity firms) were less positive about the levels of activity than a year earlier. However, anecdotal evidence and the rush to complete deals by the end of the year suggests that confidence improved once the outcome of the various polls was known. Dealmakers acted cautiously in 2016, faced with weakness in the global economy and uncertainty surrounding referendums and elections on both sides of the Atlantic. They took a wait-and-see approach that meant some deals were temporarily put on hold, but as confidence returned, the year finished on a strong note and set the scene for robust M&A activity in 2017. Transaction trends in emerging Europe 14 | Emerging Europe M&A Report 2016/17 16 | Emerging Europe M&A Report 2016/17 17 Evolution of NPLs in emerging Europe Erika Papp Partner, CMS Hungary [email protected] Alexander Rakosi Partner, CMS Austria [email protected] The pressure on banks to clean up their balance sheets has created an active market in non-performing loans (NPLs) and we expect that to continue into 2018. Holding large portfolios of NPLs acts as a financial, regulatory and administrative burden for banks. By selling these portfolios to a specialist fund or collection agency, the banks – among other things – free up resources to get on with their core business of lending to consumers and corporate customers, benefiting the broader economy. Among the big sellers of NPL portfolios in the region are the large institutions that operate across a number of countries. They include Erste Group Bank of Austria, Heta Asset Resolution – which is owned by the Austrian state, and affiliates of UniCredit in Italy. There have also been sizeable NPL sales by regional banks, notably one of the largest banks in Slovenia, where there may still be some smaller deals to be completed in 2017. Croatia is expected to be the front-runner in the NPL market over the next 18 months, where several sizeable transactions for the region (ranging from gross exposure amounts between EUR 300m and EUR 800m) have either been completed recently or are currently in the market. In recent years, Romania was one of the most active markets with deals by various institutions. Project Neptune, one of the largest projects in Romania and the region at the time, was however pulled in 2015, reportedly with only parts of the transaction being consummated. Across CEE there is a wide variation in the approach of regulators. Slovenia has largely been investor friendly. Croatia provides relatively clear legal guidance on requirements that NPL transactions need to fulfil, while lack of regulatory guidance in countries such as Bosnia has restricted deal activity. A country seen as having untapped potential is Serbia, where legal and regulatory restrictions have meant limited activity so far. Still, there is cautious optimism (also with the involvement of international financing/development institutions) that the regulatory landscape in Serbia will become more investor friendly. By the middle of 2018, we expect a large number of these issues to be resolved and until then deal making in NPLs will remain strong. Ukraine has also witnessed NPL activity in recent times. With 81 banks (out of a total of 177) currently in liquidation, the government (and the banks themselves) are under significant pressure to sell off NPLs, and we are seeing heightened activity as a result. Countries The performance of individual countries in the region varied widely, reflecting the heterogeneous nature of the region. Some enjoyed strong economic growth and increased M&A activity, but others were held back by political uncertainty and geopolitical tensions. Russia continued to suffer from the impact of sanctions imposed by the US and EU. Although the number of deals declined, a string of large mining transactions meant overall values increased sharply. Investors in Ukraine remained cautious because of tensions in the east of the country, resulting in a sharp fall in deal volumes though not value. Romania was a hot spot, enjoying not only the fastest economic growth in the region, but also an increase in M&A activity and the prospect of more to come following the election of a government that signalled a business-friendly approach and a period of political stability. Poland’s economic growth slowed, but was still at a much higher level than most of its western neighbours. Notwithstanding the commentary and speculation about the anxiety of investors over the agenda of the government, deal values rose sharply, driven by a string of large transactions. Domestic investors were busy in the Czech Republic, helping to drive up deal volume to the highest level since the turn of the decade, helped by growing interest from China and Singapore. In Slovakia, there was a steady stream of small transactions, but fewer large deals. In the Balkans, the picture was patchy, with Croatia seeing an increase in activity, as both Bosnia and Herzegovina and Bulgaria saw M&A volumes similar to the previous year. Meanwhile, Serbia and Slovenia experienced fewer deals. Turkey is going through a period of instability, affected by the conflict in neighbouring Syria and an attempted coup, both of which deterred investors in the short-term. This was reflected in a drop in M&A in 2016. However, it remains a strong emerging market with a young and growing population that should offer investors plenty of opportunities once stability returns. Sectors Across the region, the most active sectors by volume were real estate and construction, manufacturing, telecoms and IT, finance and insurance, and wholesale and retail, with the largest deals broadly spread across consumer products, mining, energy, telecoms, manufacturing and property. In the financial sector, focus in the region was on non-performing loans (NPLs) as banks sold portfolios to clear their balance sheets. That trend is expected to continue in 2017, leaving banks better capitalised and in a stronger position to finance M&A activity in the future. In energy, there is growing interest and optimism about the carbon neutral sectors. This is not just restricted to renewables but also in nuclear where ageing reactor fleets are in need of modernisation or decommissioning. Executives surveyed for our November report predicted that industrials and chemicals, closely followed by TMT, would be the hot sectors in Europe in 2017. Megadeals and greenfield In 2016 there were fewer “megadeals” in the region year on year. However, the year ended on a high when Asahi agreed to buy the CEE assets of SABMiller for EUR 7.3bn, prompted by competition regulators following AB InBev’s takeover of SABMiller. Many of the largest transactions were in Poland, including the sale of Allegro – a rival to eBay – to a private equity consortium for EUR 2.9bn and the agreed sale of the cable business Multimedia Polska to Londonbased media group Liberty Global for EUR 690.9m. Other notable deals include the sale of one of Romania’s biggest retailers, Profi, to Mid Europa Partners for EUR 533m. Significant developments in greenfield investments included Jaguar Land Rover starting work on its new factory in Slovakia, Mercedes committing to an engine plant in Poland, and Amazon opening new fulfilment centres in the Czech Republic and Poland. Selling NPLs has benefits not just for banks but also for businesses and the broader economy. Erika Papp Sellers’ renewed commitment to sell NPLs and a solid deal pipeline has resulted in increased investor interest, both internationally and regionally. Alexander Rakosi 18 | Emerging Europe M&A Report 2016/17 19 Technology and communications John Fitzpatrick Partner, Global Head of M&A for the Technology, Media & Communications Sector Group [email protected] Emerging Europe is fast becoming one of the best connected places in the world and host to operations by some of the biggest companies in the technology and communications sector. Among those already well established in the region are CISCO, Microsoft, HP, Adobe, IBM, Intel and Oracle. One of the foreign technology companies that has been most active in the region is Londonbased software solutions and IT services group Endava. In 2016, it celebrated its 10th anniversary in Romania by recruiting its 700th employee at its Cluj-Napoca centre, taking the total number in the country to 1,500. Romania accounts for more than half of its global workforce and it also has operations in Bulgaria, Macedonia, Moldova and Serbia. In some parts of the region, technology roots can be traced back to the Soviet era when many areas developed engineering specialties, leaving a legacy of a school and university education system that turns out highly qualified IT specialists. Many cities in the region have evolved into technological eco-systems that provide a skilled workforce, a flow of IT graduates, fast internet and a tradition of working on complex engineering projects. That makes them very attractive to investors. There were some large cross-border deals in the sector last year, including Liberty Global’s EUR 690m purchase of the cable business of Multimedia Polska, and Eurobank’s deal to outsource technology for its subsidiaries in Romania, Bulgaria, Serbia and Ukraine to Accenture. However, a feature of M&A activity in the sector in 2016 was a shift towards smaller deals. Poland is still the dominant market in technology and communications, but its share is not as great as in the past as other countries including Romania, Bulgaria, Hungary and Ukraine compete to win investment. There has been heavy interest from US investors, but also from Germany, France, Italy and the UK, as well as Chinese investors who have become more active and see emerging Europe as a cost-effective location from which to serve western European markets. Private equity firms are also showing renewed interest in the sector which is becoming increasingly important to the region’s economy. Foreign investors Although involved in fewer deals than in 2015, Russian investors were the most active across emerging Europe in 2016, accounting for the largest number of deals and the biggest investment by value. Western European countries were the dominant foreign investors in emerging Europe, led by the UK, Germany, France and Austria, but they completed fewer deals year on year. Of those countries, the UK was the only one to increase its level of investment, more than doubling the amount to become the largest European investor into the region during 2016. The US remained the largest investor by deal volume, but both the number of deals and value were down year on year. One of the features of the past year has been the rising level of interest from investors in Asia, most notably China, which was one of the biggest investors into the region in 2016. The strong Chinese interest in the region is a relatively recent development. Chinese companies and banks have carried out detailed research in recent years, laying the foundations for a wave of investment into the future. The software, IT and services segment is very strong and there is a very good base of potential employees and an expanding technology eco-system. John Fitzpatrick 20 | Emerging Europe M&A Report 2016/17 21 Greenfield investment Iain Batty Partner, CEE Commercial Practice [email protected] Q: Which countries are looking to invest in emerging Europe? The main inward investment activity has come from Western Europe, with interest also from the US, Japan and South Korea. Chinese companies are looking closely at the region. With one or two exceptions, the levels of Chinese investment have not been huge so far, but at some stage we can expect a wave of investment from China. Q: Which sectors are attracting the most interest? CEE continues to be a magnet for companies for manufacturing and service centres across a wide range of sectors including automotive, retail and IT. Q: What were the landmark projects in 2016? There was a ground breaking ceremony in Nitra in September to mark the start of construction of Jaguar Land Rover’s new EUR 1.5bn vehicle manufacturing plant in Slovakia, which is due to start production in 2018 and will employ over 2,000 people. Other significant developments included Mercedes-Benz’s plans for an engine plant in Poland, Amazon announcing two fulfilment centres in Poland and the Czech Republic, and India’s Apollo Tyres opening a plant in Hungary. Q: What are the attractions of the region for foreign investors? The main attractions of the region are political stability, a low-cost but skilled workforce and good transportation links with the rest of Europe. There is, however, sometimes a divergence between what investors are looking for and what governments want, which is for investors to bring in more added value jobs, for example, in engineering, design and R&D. Q: Are there any signs that costs are rising? A paradox of increased investment is that some places are seeing labour shortages, driving up wages, leading to cases of employees being bussed across borders and even brought in from Mexico and North Korea. Finding skilled labour remains a challenge, but the legal obstacles to employing people are not as great as in Germany or France, so emerging Europe remains very attractive to employers. Q: What are governments doing to bring in investment? A wide range of tax breaks, grants and other incentives are available and investors should hold a beauty parade to see what is on offer. Countries across the region are very active in promoting themselves. Slovakia’s SARIO development agency stands out as particularly proactive. Q: What are prospects like for the coming year? Although there is some nervousness about Russia, Ukraine and Turkey, the outlook for inward investment in the region remains positive. We are seeing a steady stream of companies looking to come here and there’s a lot of goodwill on the part of governments to encourage investment. Iain Batty 22 | Emerging Europe M&A Report 2016/17 23 Rise of the megadeal Dariusz Greszta Partner, CMS Poland [email protected] One of the largest deals ever seen in emerging Europe was worthy of a toast when Asahi of Japan bought a clutch of breweries put up for sale following the takeover of SABMiller by AB Inbev. After beating off interest from rivals, Asahi paid EUR 7.3bn for SABMiller’s assets in Poland, Czech Republic, Hungary, Slovakia and Romania, sold so as to appease European competition authorities. The transaction rounded off a strong year for megadeals, with much of the action taking place in Poland, where one of the trends has been the reversal of past privatisations, as the state buys back assets it considers strategically important in energy, utilities and financial services. It has led to increased M&A activity in the short term, but there is a risk it could threaten Poland’s reputation as a reliable place to do business and may deter foreign investors. In the largest banking acquisition in Poland so far, Italy’s UniCredit sold its 32.8% stake in Bank Pekao to state-controlled Polish insurer PZU and development fund PFR for EUR 2.5bn. It is a significant deal because it means more than half of Poland’s banking sector is controlled by the state. There may already be another deal in the making, as Austria’s Raiffeisen Bank has been rumoured to be in negotiations for the sale of its Polish operations. French energy companies EDF and Engie put power stations in Poland up for sale and the government has been keen to keep them under Polish control. Mid Europa Partners recently put convenience store chain Zabka Polska up for sale; likely to be the largest private equity exit in Poland to date, and offering a strong start to the 2017 pipeline of megadeals. The outlook suggests megadeal activity may not be as strong as in the past, but there is plenty to suggest increasing activity in the next tier down, where deal values are up to EUR 100m. There are a number of companies in the region that have grown large enough to attract interest from global buyers and the only question is when they might be put up for sale. There are still a lot of family-owned businesses big enough to attract global investors and there are regional companies that could be buyers with support from private equity funds. Dariusz Greszta regulatory regimes will remain a magnet for investment. Governments across the region are keen to attract and nurture such investment through tax breaks, grants and other incentives. It should not be forgotten that the region provides an attractive market in its own right with a population of more than 100m people, rising incomes and a growing middle class. Deal drivers for buyers Some European dealmakers hit the brakes in 2016, but those confident in their strategy and with sturdy finances remained active and sentiment among global buyers continued to be strong. Corporates with strong balance sheets are seeking to fill gaps in product ranges and geographical coverage, but they will have to be quick to beat private equity firms that are continually searching for targets. Finding a bargain remains the primary consideration for buyers. Our European M&A Outlook report showed that 54% of executives believed undervalued targets would be the main driver of buyers’ activity. As CEE economies and the companies within them mature, there is a growing number of businesses becoming big enough to make them attractive to regional and global players. Deal drivers for sellers The flip side of the coin is that some sellers are under pressure and 65% of respondents in our survey thought distress would be the greatest sell-side driver. However, sellers are also looking to do transactions for positive reasons, for example where the business has reached a turning point and needs new financing or a new ownership structure. Succession planning has also become a key issue for owners approaching retirement age. Where their families do not want to take over the business, they must seek an external buyer. In the past, a stock market listing or IPO might have been an option, but a developing trend in recent years has been a drop in IPOs and a shift towards trade sales – particularly in Poland. Obstacles The main obstacles to M&A activity in Europe, according to our survey for our November report, were political instability and tighter regulation and although not unique to the region, they are key issues in the minds of investors looking at, or already operating in, the region. There have been cases in the finance, insurance and energy sectors of western companies retreating from the emerging European markets as a result of feeling discouraged or unwelcome due to policy or regulation. Where investors have doubts about stability, there is a strong tendency to hold back or look elsewhere. Outlook Like the rest of Europe, M&A activity in emerging Europe in 2016 ebbed and flowed against the background of heavy political uncertainty. One of the lessons of the year is that political change does not necessarily mean a brake on activity – investors are ready and willing to do deals once the outlook becomes clearer. There are many reasons to be positive about 2017, including the potential pipeline of deals waiting to be completed, subject to buyers and sellers deciding that the time and price are right. There was a massive increase in investment from Singapore and India, while Japan was responsible for the largest single deal through Asahi’s CEE brewery takeover. Currency values and fluctuations continued to be a talking point 2016. In CEE, the region’s low-cost advantages were accentuated by the low value of the euro against the US dollar. The rise in US interest rates in December widened the gap and the prospect of further increases by the Federal Reserve in 2017 will play into the hands of those US-based investors looking to benefit from an exchange rate advantage. One sign of the region’s growing self-confidence is the number of deals that are not reliant on outside investors. This reflects the fact that many domestic companies and national private equity firms have reached a size where they no longer have to sit on the side-lines and can conduct cross-border deals of their own. Poland and Turkey were among the most active, though at lower levels than in 2015, while Czech Republic trebled its investment to become the largest domestic investor in CEE. Attractions of CEE However sluggish the global macroeconomic environment may have been, the factors that have made CEE an attractive region in which to do business are still in place. These include a relatively high annual GDP growth, a proximity to western markets and the availability of a relatively low-cost, highly skilled labour force. Countries that can offer a stable political climate alongside good infrastructure, transport links, the availability of real estate, and attractive legal, tax and My impression is that domestic players are starting to play a much more significant role in the M&A market than in previous years. Radivoje Petrikic Balkans in focus Radivoje Petrikic Partner, CMS Serbia [email protected] It was a relatively quiet year for deals in the Balkans but ended with a significant move by the Bank of China. The world’s fifth largest bank opened an office in Serbia, its first in the Balkans, and was granted a licence to begin operating in 2017. After initially serving Chinese and Serbian companies, it will become the main hub for conducting business with other Balkan countries. It is expected to herald a big increase in Chinese investment into the area. Overall, deal volumes were steady, but values were lower in 2016. The picture varied widely between individual countries in the Balkans, and because they are so different it is difficult to come to a conclusion about general trends. There were fewer major deals, but a shift towards smaller scale acquisitions meant more activity among domestic players rather than the likes of KKR and Blackstone, who were more active in the region in the past. Banks have been cleaning up their portfolios by shedding NPLs and that should help improve lending. It may also prompt some corporate customers into restructuring or asset sales in order to repay debts. Serbia sold the state-owned Smederevo steel plant to China’s He Steel Group and there has been widespread interest in the possible sell-offs of Belgrade’s Nikola Tesla airport and Komercijalna Bank. It was a busy year for dealmakers in Croatia, where transaction volume rose, but in contrast Bosnia has seen progress on privatisations come to a halt and has lagged behind in M&A due to political fragmentation. Slovenia also saw a number of major transactions this year. Political uncertainty in Bulgaria has held back its economy, though the number of deals rose in 2016 and there is some hope activity will accelerate in the coming year should stability return; while in Macedonia investors held back ahead of elections. Political stability is the key to M&A activity and it varies from country to country; as does the level of government control and the will to push through privatisations. Looking ahead, the pace of economic growth and M&A activity should be steady, but it will depend on stability and the ability of banks to clean up their NPL portfolios. 24 | Emerging Europe M&A Report 2016/17 25 Romania, a rising star? Horea Popescu Partner, CMS Romania [email protected] Q: Why is Romania attracting so much interest? From an economic perspective, Romania is the region’s hottest market. It was the strongest performing CEE economy in 2016. What gives us confidence in the future is that it has been a healthy performance built on both consumption and industrial growth. Q: What has been driving Romania’s growth? It has an increasingly attractive tax regime and in recent years there has been a strong anti-corruption drive. VAT has already been cut and there is speculation about a whole swathe of further tax cuts and reforms. Q: What are the attractions for foreign investors? Although it is known for its relatively low-cost labour, Romania is building a reputation as a country with a well-educated workforce that can perform at similar or even higher standards than those in Western Europe, particularly in TMC and software development. Q: What has been the impact on M&A activity? There was a strong rise in the number of deals and we have seen values reach levels rarely seen since the wave of privatisations a decade ago. One of the interesting features is that this activity was broadly spread across the financial services, consumer goods, and telecoms and IT sectors. There was also a lot of activity in automotive components. Q: Were there any landmark deals? There were a number of EUR 100m plus transactions, the largest of which was the sale of one of the country’s biggest retailers, Profi, which was sold for EUR 533m to private equity fund Mid Europa Partners. Q: Which countries is investment coming from? European investors were the most active, followed by the US, but we have also seen Chinese investors studying opportunities. Q: What is the outlook for Romania? The economy may not be large, but it is a work in progress and there is a sense that the country is firmly on the road to achieving its full potential and should benefit from a period of political stability following December’s election results. We see a lot of new investment coming in and Romania will probably remain one of the best performing economies in Europe. I don’t see any reason why it wouldn’t. Horea Popescu 26 | Emerging Europe M&A Report 2016/17 27 Some of the pessimism surrounding Brexit faded as financial markets, investors and companies began to weigh up the effects of the decision. There was a lull in M&A activity in the months before and after the referendum, but during the autumn and winter there was a sense of playing catch-up, as the volume and size of deals accelerated. There is still uncertainty about the terms of departure from the EU and a growing realisation that the withdrawal and negotiation process could take well beyond the minimum of two years required after the triggering of Article 50 (expected in March 2017). Judging by experience, UK investors are likely to be cautious at each key stage in the process, while they wait for more clarity on the positions of UK and EU negotiators. Investments into UK nevertheless continue to take place, such as SoftBank’s acquisition of ARM Holdings, and fast-food giant McDonald’s decision in December to select the UK as its non-US tax base in place of Luxembourg. Up to this stage, any negative effects of Brexit upon M&A activity in emerging Europe appear negligible. There is nothing to suggest that UK companies looking to make investments in the region have put plans on hold as a result of the referendum. Moreover, CEE and SEE countries see Brexit as an opportunity, which allows them to market themselves to the rest of the world as an alternative to the UK for investors seeking a route into the EU. In anticipation that UK financial services companies might lose their passporting rights into the EU, cities in CEE and SEE will be keen to present themselves as suitable alternative locations with a skilled workforce and good infrastructure. The challenge will be to convince banks and insurers that they are better placed than the likes of Frankfurt or Paris. Yet, despite the opportunities presented by Brexit and the lack of any perceived negative impact upon the CEE and SEE, the question that is confronting investors is the extent to which Brexit provides a pretext for more political upheaval on a global scale. A rise in populism was one of the outstanding features of global politics in 2016. The shattering of the status quo which underpinned the Brexit result was echoed in the US in November when Donald Trump won the presidential election and to varying degrees in other elections and referendums in Europe during the year. In December, the defeat for Italy’s government in a referendum added to uncertainty surrounding the EU, but whether it will be the catalyst for a broader crisis remains to be seen. It was not all one-way traffic though and the election result in Austria was seen as bucking the populist trend, as was the victory for the Social Democrats in Romania. There were also elections in 2016 in Moldova, Croatia, Macedonia, Montenegro, Serbia and Slovakia, as well as a referendum in Hungary on EU migrant quotas – where the results have been clear cut. In the meantime, there will be further uncertainty ahead of 2017 elections due in Albania, Bulgaria, Czech Republic, Hungary, Serbia and Slovenia. Europe as a whole will be looking at the election results in France, Germany and the Netherlands. M&A activity could well weaken in advance of the polls and – depending on the outcome – after the results. Populism is not a new concept in the region and some countries have been living with its effects for several years. There was a lot of nervousness about Poland after a change of government in 2015 and a focus on so-called “economic patriotism”. Despite this, M&A activity was brisk in Poland 2016 and all the signs are that it will remain so in 2017. Poland has enjoyed reasonably robust economic growth, helped by the cheap zloty, but the populist approach has raised questions over its economic stability. Some of the deal activity has been driven by positive sentiment, but some by foreign investors selling businesses in sectors such as energy and finance, where the government is keen to fly the Polish flag. Hungary has been through a similar process since joining the single market in 2004. Its style of government has sometimes alarmed EU leaders, although it has continued to recognise the importance of foreign investment. The history of the region is marked by political instability, but the recent past shows that when countries can map out a secure future the region is enormously attractive to investors. Looking ahead, M&A activity in individual countries will be influenced by the outcome of the various elections in the region. Investors and dealmakers will also be keeping a watchful eye on developments in the EU, including Brexit negotiations and elections in key countries, as well as on the implications of the policies adopted by the new president of the US. Charles Currier Partner, Head of Corporate at CMS UK [email protected] Graham Conlon Partner, Co-Head of International Private Equity [email protected] Corporate partners Charles Currier (based in London) and Graham Conlon (based in CEE) discuss the possible impact of the year’s referendums and elections on the deal landscape in the region 66% 90% 54% 65% 79% There were times during 2016, both in Europe and further afield, when it seemed the tectonic plates of politics and economics were shifting. The UK referendum on EU membership, the US presidential election, and a slew of referendums and elections across Europe created a sense of uncertainty. Shockwaves from those events will continue to be felt through 2017 and beyond and it may be years before the full impact becomes clear. However, the robust level of M&A activity across Europe and within CEE and SEE shows that despite the increased nervousness among investors, those who see a strategic and financial logic in deals have not been deterred. The decision of British voters to leave the EU came as a surprise to politicians, pollsters and commentators, sending out a message that the electorate was dissatisfied with the status quo, anxious about power drifting to Brussels and worried about the effects of globalisation. The prospect of the EU’s second largest economy breaking away leaves Europe in uncharted waters and uncertainty about where it will lead has created volatility on financial markets and left dealmakers puzzling about how they should react. Results of the survey for our European M&A Outlook 2016 report in November showed that confidence among executives dropped after the UK referendum. Their assessment of M&A activity across Europe over the coming year was more negative than before the vote. Two thirds of respondents expected a decline in activity and none felt more positive than they did a year earlier. It was not all doom and gloom though and despite the more cautious atmosphere the resounding message was that Europe, including CEE and SEE, remained open for business. There was renewed optimism about deals coming from outside of Europe. Top findings and trends from our European M&A Outlook 2016 are: When we surveyed executives ahead of the referendum, 59% expected M&A activity to increase over the next 12 months, but in a revised poll after the vote that had fallen to 24%. The Brexit effect? feel M&A in Europe will decline are less positive about levels of European M&A activity than they were last year believe undervalued targets will be the main driver of buy-side M&A feel that distress will be the greatest sell-side driver state that cross-border deals into Europe from non-European acquirers will increase 28 | Emerging Europe M&A Report 2016/17 29 Emerging Europe: top 20 deals 2016 Target Country of Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Rosneft Russia Mining (incl. oil & gas) Privatisation (19.5%) Glencore Plc; Qatar Investment Authority Switzerland; Qatar 10,2001 Anheuser-Busch InBev businesses in Central and Eastern Europe Czech Republic; Hungary; Poland; Romania; Slovakia Food & Beverage Acquisition (100%) Asahi Group Holdings Ltd Japan 7,3001 Bashneft Russia Mining (incl. oil & gas) Privatisation (50.1%) Rosneft Russia 4,726.81 Energeticky A Prumyslovy Holding as Czech Republic Energy & Utilities Acquisition (62.8%) Daniel Kretinsky - private investor; Managers of EPH Czech Republic 3,1423 Grupa Allegro Poland Telecoms & IT Acquisition (100%) Cinven; Permira Advisers LLP; Mid Europa Partners LLP United Kingdom 2,957.31 Bank Pekao SA; Pioneer Pekao Investment Management; Pekao Pioneer PTE; Dom Inwestycyjny Xelion Poland Finance & Insurance Minority stake (32.8% in Bank Pekao) PZU SA; Polski Fundusz Rozwoju SA Poland 2,508.31 PointPark Properties sro Czech Republic Real Estate & Construction Acquisition (100%) GIC Pte Ltd Singapore 2,4001 Morton Group Russia Real Estate & Construction Acquisition (100%) PIK Group Russia 2,050.22 Morton Group Russia Real Estate & Construction Acquisition (100%) Sergey Gordeev - private investor Russia 1,995.22 Vankorneft ZAO Russia Mining (incl. oil & gas) Minority stake (23.9%) Indian Oil Corporation Ltd; Oil India Ltd; Bharat Petroleum Corp Ltd India 1,804.51 Uralkali Russia Manufacturing Minority stake (20%) Dmitry Lobyak - private investor Belarus 1,486.93 Arkhangelskgeoldobycha (AGD) Russia Mining (incl. oil & gas) Acquisition (100%) Otkritie Holding Russia 1,367.91 Sibur Holding Russia Manufacturing Minority stake (10%) Silk Road Fund Co Ltd China 1,262.32 Taas-Yuryakh Neftegazodobycha Russia Mining (incl. oil & gas) Minority stake (29.9%) Indian Oil Corporation Ltd; Oil India Ltd; Bharat Petroleum Corp Ltd India 1,0001 Verkhnechonskneftegaz Russia Mining (incl. oil & gas) Minority stake (20%) Beijing Enterprises Group Co Ltd China 9911 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate Number of deals by sector in 2016 Transportation & Logistics 71 Mining (incl. oil & gas) 99 Real Estate & Construction 357 Manufacturing 312 Finance & Insurance 191 Food & Beverage 95 Wholesale & Retail Telecoms & IT 265 Energy & Utilities 190 91 Media & Entertainment 62 Agriculture & Farming 53 Education & Healthcare 54 Services 145 Appendix 1: Regional data and top deal lists Number of deals Total value of deals (EUR) 1,985 2016 86.7bn 2015 2,138 53.5bn 2,197 2014 62.8bn 2,558 2013 111.7bn 2,596 2012 137.6bn Deals by volume and by value 30 | Emerging Europe M&A Report 2016/17 31 Note 1: Note 1: The July stock exchange tender offer from Avast for AVG in the Czech Republic, and the July stock exchange privatization of 11% in Alrosa in Russia are not included. Note 2: The two deals for Morton Group in Russia involve the co-owner of PIK Group Sergey Gordeev first buying Morton through his company Horus Real Estate Fund and then selling it to PIK. * After the deal, CEFC will own 50% of J&T Finance. ** MegaFon will acquire the majority of the voting rights in Mail.ru * Only deals with buyers from a single country were considered for the inbound value calculation. Target Country of Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Irkutskenergo Russia Energy & Utilities Minority stake (40.3%) En+ Group Russia 938.61 J&T Finance Group SE Czech Republic Finance & Insurance Acquisition (41%)* CEFC China Energy Co Ltd China 8613 Vankorneft ZAO Russia Mining (incl. oil & gas) Minority stake (11%) ONGC Videsh Ltd India 853.21 Mail.ru Group Russia Telecoms & IT Acquisition (15.2%)** MegaFon Russia 711.51 Cable business of Multimedia Polska Poland Telecoms & IT Acquisition (100%) Liberty Global Plc United Kingdom 690.91 Buyer country FY16 Deals FY15 Deals % FY16 Value, EUR m* FY15 Value, EUR m* % USA 88 127 -31% 1,513.6 3,967.9 -62% Germany 66 88 -25% 1,266.5 3,184.4 -60% UK 75 73 3% 5,192.0 2,510.6 107% Austria 37 42 -12% 330.2 370.3 -11% France 46 45 2% 592.5 1,081.2 -45% China 28 23 22% 4,350.7 2,223.7 96% Japan 18 23 -22% 8,063.6 284.1 2,738% India 7 6 17% 3,739.9 1,155.5 224% Singapore 5 6 -17% 2,402.0 32.12 7,378% South Africa 22 9 144% 964.7 1,276.25 -24% Czech Republic 159 107 49% 3,954.0 1,315.8 200% Russia 575 583 -1% 23,024.5 11,200.6 106% Poland 146 187 -22% 3,871.8 1,696.0 128% Turkey 112 131 -15% 2,873.4 4,107.2 -30% Emerging Europe: inbound investment 2016 Private equity: top 20 deals 2016 Target Country of Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Rosneft Russia Mining (incl. oil & gas) Privatisation (19.5%) Glencore Plc; Qatar Investment Authority Switzerland; Qatar 10,2001 Energeticky A Prumyslovy Holding as Czech Republic Energy & Utilities Acquisition (62.8%) Daniel Kretinsky - private investor; Managers of EPH Czech Republic 3,1423 Grupa Allegro Poland Telecoms & IT Acquisition (100%) Cinven; Permira Advisers LLP; Mid Europa Partners LLP United Kingdom 2,957.31 PointPark Properties sro Czech Republic Real Estate & Construction Acquisition (100%) GIC Pte Ltd Singapore 2,4001 Mars Entertainment Group Turkey Media & Entertainment Acquisition (100%) CJ CGV Co Ltd; IMM Investment Corp; other South Korea 603.51 Helios Group Slovenia; CEE/ SEE Manufacturing Acquisition (100%) Kansai Paint Co Ltd Japan 5721 Russian Helicopters Russia Manufacturing Capital increase (25%) Russian Direct Investment Fund (RDIF); Consortium of Middle Eastern portfolio investors Russia; Greater MENA 535.71 Profi Rom Food Romania Wholesale & Retail Acquisition (100%) Mid Europa Partners LLP United Kingdom 5331 AvtoVAZ Russia Manufacturing Capital increase / Acquisition (56%) Renaissance Capital; existing shareholders Russia 413.31 Asist Ogretim Kurumlari (Doga Koleji) Turkey Education & Healthcare Acquisition (100%) Turkish private investor(s) Turkey 3622 Portfolio of 31 retail and office properties in Western Balkans BosniaHerzegovina Real Estate & Construction Acquisition (100%) Lone Star Funds United States 3503 Eldorado Ltd Russia Wholesale & Retail Acquisition (100%) SAFMAR Financial Group Russia 327.52 Florentinum building in Prague Czech Republic Real Estate & Construction Acquisition (100%) CEFC China Energy Co Ltd China 282.42 Smyk Sp z oo Poland Wholesale & Retail Acquisition (100%) Bridgepoint Capital; Cornerstone Partners United Kingdom; Poland 235.81 Letnany shopping centre Czech Republic Real Estate & Construction Acquisition (100%) Union Investment Real Estate GmbH Germany 234.12 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 32 | Emerging Europe M&A Report 2016/17 33 255 14.7bn 2012 Deals by value and volume in private equity (2012-2016) 233 12.9bn 2013 248 9.3bn 2014 2015 288 10.9bn 266 2016 28.4bn Number of deals Total value of deals (EUR) Target Country of Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Pharmacy Chain 36.6 Russia Wholesale & Retail Capital increase / Acquisition (58.1%) Rossium; Baring Vostok Capital Partners; existing shareholders Russia 229.51 Danone Russia Russia Food & Beverage Minority stake (42.5%) Groupe Danone SA France 227.32 Globalworth Real Estate Investments Ltd Romania; United Kingdom Finance & Insurance Capital increase (38.1%) Growthpoint Properties Ltd; Oak Hill Capital South Africa; United States 2001 getBACK SA Poland Services Acquisition (100%) Abris Capital Partners Poland 191.41 City Tower office building Czech Republic Real Estate & Construction Acquisition (100%) REICO investicni spolecnost Ceske sporitelny as Czech Republic 1802 1. Official data Note 1: The Private Equity deals include both entries and exits. 2. Market Estimate 3. EMIS DealWatch Estimate Top 20 emerging Europe IPOs 2016 Target Country of Target Sector Deal Value (EUR m) Moneta Money Bank as Czech Republic Finance & Insurance 658.6 (51%)1 RussNeft Russia Mining (incl. oil & gas) 473.8 (20%)1 Financial group Budushcheye Russia Finance & Insurance 170.7 (20%)1 Celon Pharma SA Poland Manufacturing 57.3 (33%)1 MedLife SA Romania Education & Healthcare 50.7 (44%)1 X-Trade Brokers SA Poland Finance & Insurance 43.3 (14%)1 Stelmet SA Poland Manufacturing 42.2 (20%)1 Baltic Horizon Fund Estonia Finance & Insurance 29.7 (n.a%)*1 Artifex Mundi SA Poland Telecoms & IT 23.3 (42.1%)1 Auto Partner SA Poland Wholesale & Retail 19.6 (33%)1 Archicom SA Poland Real Estate & Construction 16.6 (20%)1 PlayWay SA Poland Telecoms & IT 14.7 (18.2%)1 Polski Bank Komorek Macierzystych SA Poland Education & Healthcare 12.9 (25.3%)1 Cuhadaroglu Metal Turkey Manufacturing 11.3 (26%)1 Duna House Holding Kft Hungary Real Estate & Construction 8.6 (21.8%)1 i2 Development SA Poland Real Estate & Construction 7.8 (17.5%)1 Master Pharm SA Poland Manufacturing 6.6 (26.2%)1 Neo London Capital Bulgaria Real Estate & Construction 5.1 (99.5%)1 Biuro Inwestycji Kapitalowych SA Poland Real Estate & Construction 4.7 (27.4%)1 TXM SA Poland Wholesale & Retail 4.6 (12%)1 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate * Stake unknown. 34 | Emerging Europe M&A Report 2016/17 Real estate: top 20 deals 2016 Target Country of Target Deal Type Buyer Country of Buyer Deal Value (EUR m) PointPark Properties sro Czech Republic Acquisition (100%) GIC Pte Ltd Singapore 2,400 1 Morton Group Russia Acquisition (100%) PIK Group Russia 2,050.2 2 Morton Group Russia Acquisition (100%) Sergey Gordeev - private investor Russia 1,995.2 2 Plaza Russia Acquisition / Debt-for-equity swap (99.6%) VTB Bank Russia 636.5 2 President Plaza Russia Acquisition (100%) Sberbank Russia 508.9 2 Mosmetrostroy Russia Debt-for-equity swap (41.6%) VTB Bank Russia 411.7 1 Echo Prime Properties BV Poland; Netherlands Acquisition (75%) Redefine Properties Ltd; The Pivotal Fund Ltd South Africa 362 1 Bonarka City Center in Krakow Poland Acquisition (100%) Rockcastle Global Real Estate Co Ltd Mauritius 361 1 Portfolio of 31 retail and office properties in Western Balkans BosniaHerzegovina; Croatia; Macedonia; Serbia; Slovenia Acquisition (100%) Lone Star Funds United States 350 3 Florentinum building in Prague Czech Republic Acquisition (100%) CEFC China Energy Co Ltd China 282.4 2 Q22 office building Poland Acquisition (100%) Invesco Real Estate United States 273 1 Portfolio of seven office buildings Poland Acquisition (100%) Echo Polska Properties NV Netherlands 264 1 Arena Centar Croatia Acquisition (100%) New Europe Property Investments plc South Africa 237.5 1 Letnany shopping centre Czech Republic Acquisition (100%) Union Investment Real Estate GmbH Germany 234.1 2 Portfolio of seven logistic parks of VGP Group Czech Republic; Hungary; Slovakia Acquisition (100%) VGP European Logistics * Belgium 233.3 3 City Center One Zagreb East; City Center One Zagreb West Croatia Acquisition (65%) Morgan Stanley & Co LLC United States 220 1 Porto Montenegro Montenegro Acquisition (54%) Investment Corporation of Dubai (ICD) UAE 200 2 55,000 m 2 in Oko tower of Moscow-City business centre Russia Acquisition (100%) Moscow City Government Russia 196.9 1 Buildings A and B of Gdanski Business Center in Warsaw Poland Acquisition (100%) Savills Investment Management United Kingdom 186 1 City Tower office building Czech Republic Acquisition (100%) REICO investicni spolecnost Ceske sporitelny as Czech Republic 180 2 1. Official data * The buyer is a 50:50 JV between VGP and Allianz. 2. Market Estimate 3. EMIS DealWatch Estimate 35 36 | Emerging Europe M&A Report 2016/17 37 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Bankers Petroleum Ltd * Mining (incl. oil & gas) Acquisition (100%) Geo-Jade Petroleum Corp China 394.61 Tirana International Airport Sh pk Transportation & Logistics Acquisition (100%) China Everbright Ltd; Friedmann Pacific Investment Holdings Ltd Hong Kong 81.12 Oil exploration Blocks 2-3; Oil exploration Block 4 Mining (incl. oil & gas) Minority stake (25%) Royal Dutch Shell Plc Netherlands 39.51 Oil & gas operations of TransAtlantic Petroleum in Albania Mining (incl. oil & gas) Acquisition (100%) GBC Oil Co Ltd United Kingdom 28.91 Insig Sh a Finance & Insurance Privatisation (100%) Eurosig Sh a Albania 15.81 Top 5 deals in Albania in 2016 Albania Number of deals by sector in 2016 Mining (incl. oil & gas) 3 Finance & Insurance 2 Telecoms & IT 2 Transportation & Logistics 1 Deals by value and volume in Albania (2012-2016) 12 164.1m 2013 7 47.9m 2012 5 37.4m 2014 2015 5 31m 9 2016 561.7m Number of deals Total value of deals (EUR) Appendix 2: County data and top deal lists Wholesale & Retail 1 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate * The company’s main asset is the Patos-Marinza oilfield in Albania. 38 | Emerging Europe M&A Report 2016/17 39 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) RZR Ljubija AD Prijedor Mining (incl. oil & gas) Privatisation (65%) Investment Group Overseas Israel 33.41 Fabrika Duhana Sarajevo dd (FDS) Food & Beverage Privatisation (39.9%) CID Adriatic Investments; British American Tobacco Austria; United Kingdom 21.71 Fabrika Duhana Sarajevo dd (FDS) Food & Beverage Tender offer (38.8%) CID Adriatic Investments; British American Tobacco Austria; United Kingdom 21.21 Holiday Inn Sarajevo Real Estate & Construction Auction (100%) Europa dd za ugostiteljstvo i turizam BosniaHerzegovina 14.42 MF Banka AD Banja Luka Finance & Insurance Minority stake (23.1%) KfW; Nederlandse FinancieringsMaatschappij voor Ontwikkelingslanden NV (FMO) Germany; Netherlands 4.51 Top 5 deals in Bosnia and Herzegovina in 2016 Note 1: The October stock exchange privatisation of Bonsalijek is not included. Note 2: The two transactions for FDS were three months apart and involved different sellers. Bosnia and Herzegovina Deals by value and volume in Bosnia and Herzegovina (2012-2016) 21 19 98.3m 152m 19 52.7m 20 72m 21 98.1m Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Manufacturing 8 Real Estate & Construction 3 Wholesale & Retail 3 Finance & Insurance 2 Telecoms & IT 2 Food & Beverage 2 Mining (incl. oil & gas) 1 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 40 | Emerging Europe M&A Report 2016/17 41 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) United Bulgarian Bank Finance & Insurance Acquisition (100%) KBC Group Belgium 610.01 Industrial property Kremikovtzi Manufacturing / Real Estate Acquisition (100%) First Investment Bank AD Bulgaria 137.42 Devin JSC Food & Beverage Acquisition (93.3%) Spadel SA Belgium 112.03 Overgas Mrezhi Energy & Utilities Acquisition / Capital increase (61.4%) Sasho Donchev - private investor Bulgaria 103.41 Tokuda Hospital Sofia Education & Healthcare Acquisition (100%) Acibadem Saglik Yatirimlari Holding Turkey 65.01 Sofia Airport Center Real Estate & Construction Acquisition (100%) Revetas Capital United Kingdom 55.02 SRP Solar Bulgaria Energy & Utilities Acquisition (100%) Energy MT Bulgaria 34.02 Dundee Precious Metals Mining (incl. oil & gas) Capital increase (10%) European Bank for Reconstruction and Development (EBRD) International 31.41 Logistics centre in Gorubliane Real Estate & Construction Acquisition (76%) Speedy Group Bulgaria 23.61 Retail Park Plovdiv Real Estate & Construction Acquisition (100%) bauMax Bulgaria Bulgaria 18.02 Top 10 deals in Bulgaria in 2016 Bulgaria Deals by value and volume in Bulgaria (2012-2016) 73 83 1,489m 1,240m 69 1,067m 63 698.9m 86 1,367.6m Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 16 Manufacturing 13 Telecoms & IT 12 Wholesale & Retail 12 Energy & Utilities 4 Mining (incl. oil & gas) 5 Other 8 Finance & Insurance 9 Services 7 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 42 | Emerging Europe M&A Report 2016/17 43 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Arena Centar Real Estate & Construction Acquisition (100%) New Europe Property Investments plc South Africa 237.51 City Center One Zagreb East; City Center One Zagreb West Real Estate & Construction Acquisition (65%) Morgan Stanley & Co LLC United States 2201 Four Konzum stores and shopping centres of Agrokor dd Real Estate & Construction Acquisition (100%) Tower Property Fund Ltd South Africa 66.41 Portfolio of five retail and office properties Real Estate & Construction Acquisition (100%) Lone Star Funds United States 56.53 Arenaturist dd Real Estate & Construction Acquisition (74.2%) PPHE Hotel Group Netherlands 49.21 Koncar Elektroindustrija dd Manufacturing Privatisation (20.5%) Erste & Steiermarkische Bank dd; Privredna Banka Zagreb dd (PBZ); Zagrebacka Banka; InterCapital Securities; Raiffeisen Bank International AG Croatia; Austria 47.71 Imperial dd Real Estate & Construction Privatisation (50.1%) Valamar Riviera dd Croatia 34.61 Intesa Sanpaolo Card doo Finance & Insurance Minority stake (31.2%) Mercury UK Holdco Ltd United Kingdom 34.11 Suncani Hvar Real Estate & Construction Privatisation (29.9%) Prime Tourist Resorts Slovakia 18.81 Atlantic Grupa dd Food & Beverage Minority stake (4%) Allianz ZB Croatia 14.73 Top 10 deals in Croatia in 2016 Croatia Deals by value and volume in Croatia (2012-2016) Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 18 Manufacturing 6 Telecoms & IT 6 Wholesale & Retail 6 Media & Entertainment 3 Energy & Utilities 1 Other 2 Finance & Insurance 6 Food & Beverage 4 52 492.5m 45 419.3m 41 1,071m 52 867.6m 43 611m 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 44 | Emerging Europe M&A Report 2016/17 45 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Energeticky A Prumyslovy Holding as Energy & Utilities Acquisition (62.8%) Daniel Kretinsky - private investor; Managers of EPH Czech Republic 3,1423 PointPark Properties sro Real Estate & Construction Acquisition (100%) GIC Pte Ltd Singapore 2,4001 J&T Finance Group SE Finance & Insurance Acquisition (41%)* CEFC China Energy Co Ltd China 8613 Florentinum building in Prague Real Estate & Construction Acquisition (100%) CEFC China Energy Co Ltd China 282.42 Tratova Strojni Spolecnost Services Acquisition (100%) CEFC China Energy Co Ltd China 2401 Letnany shopping centre Real Estate & Construction Acquisition (100%) Union Investment Real Estate GmbH Germany 234.12 City Tower office building Real Estate & Construction Acquisition (100%) REICO investicni spolecnost Ceske sporitelny as Czech Republic 1802 Portfolio of four logistic parks of VGP Group Real Estate & Construction Acquisition (100%) VGP European Logistics** Belgium 133.33 Enterprise Office Center Real Estate & Construction Acquisition (100%) RSJ Group; Eduard Kucera - private investor; Pavel Baudis - private investor Czech Republic 111.51 Portfolio of 10 small format retail assets Real Estate & Construction Acquisition (100%) Palmer Capital United Kingdom 102.61 Top 10 deals in Czech Republic in 2016 Czech Republic Deals by value and volume in Czech Republic (2012-2016) 153 5,708.9m 102 1,279m 171 5,017.7m 143 3,395.9m 202 8,739.6m Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 49 Manufacturing 38 Telecoms & IT 27 Wholesale & Retail 17 Finance & Insurance 9 Education & Healthcare 8 Other 22 Energy & Utilities 15 Services 17 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate Note 1: The July stock exchange tender offer from Avast for AVG is not included. Note 2: The February stock exchange tender offer from China Energy Company for Pivovary Lobkowicz is not included. * After the deal, CEFC will own 50% of J&T Finance. ** The buyer is a 50:50 JV between VGP and Allianz. 46 | Emerging Europe M&A Report 2016/17 47 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Erste Bank Hungary Zrt Finance & Insurance Minority stake (30%) Government of Hungary; EBRD Hungary; International 249.51 Millennium Towers Real Estate & Construction Acquisition (100%) CA Immobilien Anlagen AG Austria 175.01 MKB Bank Zrt Finance & Insurance Privatization (100%) Blue Robin Investments SCA; Pannonia Nyugdijpenztar; MINERVA Capital Fund Management Luxembourg; Hungary 120.11 Nordic Light office building Real Estate & Construction Acquisition (100%) Erste Asset Management Austria 67.01 Two logistic parks of VGP Group Real Estate & Construction Acquisition (100%) VGP European Logistics * Belgium 66.73 Five Accor-branded hotels in Budapest Real Estate & Construction Acquisition (100%) Orbis SA Poland 64.11 14 hotels of Hunguest Hotels Zrt Real Estate & Construction Acquisition (100%) Konzum Befektetesi es Vagyonkezelo Nyrt Hungary 57.12 Park Atrium Real Estate & Construction Acquisition (100%) Corpus Sireo Germany 50.02 Vaci Corner Offices Real Estate & Construction Acquisition (100%) Zeus Capital Partners LP Greece 48.32 FHB Mortgage Bank Co Plc Finance & Insurance Minority stake (14.7%) Takarekbank Zrt Hungary 26.23 Top 10 deals in Hungary in 2016 * The buyer is a 50:50 JV between VGP and Allianz. Hungary Deals by value and volume in Hungary (2012-2016) 102 1,502.1m 102 729m 134 773.4m 162 1,974.7m 136 1,195.7m Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 44 Manufacturing 21 Finance & Insurance 19 Telecoms & IT 10 Media & Entertainment 6 Other 13 Wholesale & Retail 9 Energy & Utilities 7 Transportation & Logistics 7 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 48 | Emerging Europe M&A Report 2016/17 49 Food & Beverage 1 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Porto Montenegro Real Estate & Construction Acquisition (54%) Investment Corporation of Dubai (ICD) UAE 2002 Delta City Shopping Centre in Podgorica Real Estate & Construction Acquisition (100%) Homestead Group Holdings Ltd; Hyprop Investments Ltd United Kingdom; South Africa 751 New Tobacco Plant AD Podgorica (NDKP) Food & Beverage Privatisation (100%) BMJ Industries FZ-LLC UAE 201 Lipka Hotel Real Estate & Construction Acquisition (100%) Silk Resort & Spa Montenegro 6.91 Ruza Vjetrova Hotel Resort Real Estate & Construction Acquisition (100%) Karisma Hotels Adriatic doo (KHA) Croatia n.a. Top 5 deals in Montenegro in 2016 Montenegro Deals by value and volume in Montenegro (2012-2016) Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 4 Wholesale & Retail 1 Finance & Insurance 1 Mining (incl. oil & gas) 1 2013 12 57.6m 2012 7 93.9m 10 115.8m 2014 2015 16 96.3m 2016 8 301.9m 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 50 | Emerging Europe M&A Report 2016/17 51 Services 33 Food & Beverage 18 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Grupa Allegro Telecoms & IT Acquisition (100%) Cinven; Permira Advisers LLP; Mid Europa Partners LLP United Kingdom 2,957.31 Bank Pekao SA; Pioneer Pekao Investment Management; Pekao Pioneer PTE; Dom Inwestycyjny Xelion Finance & Insurance Minority stake (32.8% in Bank Pekao) PZU SA; Polski Fundusz Rozwoju SA Poland 2,508.31 Cable business of Multimedia Polska Telecoms & IT Acquisition (100%) Liberty Global Plc United Kingdom 690.91 Echo Prime Properties BV Real Estate & Construction Acquisition (75%) Redefine Properties Ltd; The Pivotal Fund Ltd South Africa 3621 Bonarka City Center in Krakow Real Estate & Construction Acquisition (100%) Rockcastle Global Real Estate Co Ltd Mauritius 3611 Q22 office building Real Estate & Construction Acquisition (100%) Invesco Real Estate United States 2731 Portfolio of seven office buildings Real Estate & Construction Acquisition (100%) Echo Polska Properties NV Netherlands 2641 Elektrownia Polaniec Energy & Utilities Acquisition (100%) Enea SA Poland 244.31 Smyk Sp z oo Wholesale & Retail Acquisition (100%) Bridgepoint Capital; Cornerstone Partners Sp z oo United Kingdom; Poland 235.81 Raiffeisen Leasing Polska SA Finance & Insurance Acquisition (100%) PKO BP Poland 195.81 getBACK SA Services Acquisition (100%) Abris Capital Partners Poland 191.41 Buildings A and B of Gdanski Business Center in Warsaw Real Estate & Construction Acquisition (100%) Savills Investment Management United Kingdom 1861 Focus Mall Piotrków Trybunalski; Focus Mall Zielona Góra Real Estate & Construction Acquisition (100%) Rockcastle Global Real Estate Co Ltd Mauritius 1611 Galeria Warminska shopping centre Real Estate & Construction Acquisition (100%) Rockcastle Global Real Estate Co Ltd Mauritius 1501 Gdansk Transport Company SA Transportation & Logistics Acquisition (29.7%)* NDI Autostrada Poland 146.91 Gdansk Transport Company SA Transportation & Logistics Minority stake (30%) DIF; Swiss Life Asset Management Ltd Netherlands; Switzerland 141.51 Novago Sp z oo Services Acquisition (100%) China Everbright International Ltd Hong Kong 1231 Konstruktorska Business Center in Warsaw Real Estate & Construction Acquisition (100%) Golden Star Estate BV Netherlands 1201 Axtone Sp z oo Manufacturing Acquisition (100%) ITT Inc United States 106.31 Echo Polska Properties NV Real Estate & Construction Capital increase (12.2%) n.a. n.a. 103.61 Top 20 deals in Poland in 2016 Note 1: The September stock exchange tender offer from Finaccess Mexico for AmRest Holdings is not included. Note 2: The April stock exchange tender offer from Alior Bank for Bank BPH is not included. * After the deal, NDIA will own 55% of Gdansk Transport Company. Poland Deals by value and volume in Poland (2012-2016) Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 71 Manufacturing 38 Telecoms & IT 31 Other 30 Wholesale & Retail 25 Finance & Insurance 20 279 11.2bn 363 331 9bn 11.6bn 285 4.5bn 346 6.3bn Transportation & Logistics 13 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 52 | Emerging Europe M&A Report 2016/17 53 Food & Beverage 11 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Profi Rom Food Wholesale & Retail Acquisition (100%) Mid Europa Partners LLP United Kingdom 5331 E.ON Distributie Romania SA Energy & Utilities Minority stake (30%) Allianz SE Germany 217.52 Globalworth Real Estate Investments Ltd Finance & Insurance Capital increase (38.1%) Growthpoint Properties Ltd; Oak Hill Capital South Africa; United States 2001 OMV Petrom SA Mining (incl. oil & gas) Minority stake (6.4%) SIF Moldova; other Romania 168.11 Shopping City Sibiu Real Estate & Construction Acquisition (100%) New Europe Property Investments plc South Africa 1001 Albalact SA Food & Beverage Acquisition (94.8%) Groupe Lactalis SA France 72.51 Banca Transilvania Finance & Insurance Minority stake (2.9%) undisclosed private investors n.a. 54.61 Metropolis Center Real Estate & Construction Acquisition (100%) PPF Group NV Czech Republic 502 Green Group Services Acquisition (82%) Abris Capital Partners Poland 502 Covalact SA Food & Beverage Acquisition (99.4%) Groupe Lactalis SA France 40.92 Top 10 deals in Romania in 2016 Romania Deals by value and volume in Romania (2012-2016) Number of deals Total value of deals (EUR) 136 1,977.6m 150 1,185.0m 131 118 1,464m 2,240.8m 119 3,071.8m Number of deals by sector in 2016 Real Estate & Construction 21 Manufacturing 20 Telecoms & IT 17 Mining (incl. oil & gas) 9 Other 20 Services 11 Finance & Insurance 15 Wholesale & Retail 12 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 54 | Emerging Europe M&A Report 2016/17 55 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Rosneft Mining (incl. oil & gas) Privatisation (19.5%) Glencore Plc; Qatar Investment Authority Switzerland; Qatar 10,2001 Bashneft Mining (incl. oil & gas) Privatisation (50.1%) Rosneft Russia 4,726.81 Morton Group Real Estate & Construction Acquisition (100%) PIK Group Russia 2,050.22 Morton Group Real Estate & Construction Acquisition (100%) Sergey Gordeev - private investor Russia 1,995.22 Vankorneft ZAO Mining (incl. oil & gas) Minority stake (23.9%) Indian Oil Corporation Ltd; Oil India Ltd; Bharat Petroleum Corp Ltd India 1,804.51 Uralkali Minority stake (20%) Dmitry Lobyak - private investor Belarus 1,486.93 Mining (incl. oil & gas) Acquisition (100%) Otkritie Holding Russia 1,367.91 Sibur Holding Minority stake (10%) Silk Road Fund Co Ltd China 1,262.32 Taas-Yuryakh Neftegazodobycha Mining (incl. oil & gas) Minority stake (29.9%) Indian Oil Corporation Ltd; Oil India Ltd; Bharat Petroleum Corp Ltd India 1,0001 Verkhnechonskneftegaz Mining (incl. oil & gas) Minority stake (20%) Beijing Enterprises Group Co Ltd China 9911 Irkutskenergo Energy & Utilities Minority stake (40.3%) En+ Group Russia 938.61 Vankorneft ZAO Mining (incl. oil & gas) Minority stake (11%) ONGC Videsh Ltd India 853.21 Mail.ru Group Telecoms & IT Acquisition (15.2%)* MegaFon Russia 711.51 M.Video Wholesale & Retail Acquisition (57.7%) SAFMAR Financial Group Russia 6853 Plaza Real Estate & Construction Acquisition / Debt-for-equity swap (99.6%) VTB Bank Russia 636.52 Russian Helicopters Capital increase (25%) Russian Direct Investment Fund (RDIF); Consortium of Middle Eastern portfolio investors Russia; Greater MENA 535.71 President Plaza Real Estate & Construction Acquisition (100%) Sberbank Russia 508.92 Nizhnekamskneftekhim Minority stake (25%) TAIF Group Russia 499.61 AvtoVAZ Capital increase / Acquisition (56%) Renaissance Capital; existing shareholders Russia 413.31 Mosmetrostroy Real Estate & Construction Debt-for-equity swap (41.6%) VTB Bank Russia 411.71 Top 20 deals in Russia in 2016 Note 1: The July stock exchange privatisation of 11% in Alrosa is not included. Note 2: The two deals for Morton Group in Russia involve the co-owner of PIK Group Sergey Gordeev first buying Morton through his company Horus Real Estate Fund and then selling it to PIK. * MegaFon will acquire the majority of the voting rights in Mail.ru. Russia Number of deals by sector in 2016 640 43.3bn 791 69.8bn 728 29.9bn 882 99bn 683 18.7bn Deals by value and volume in Russia (2012-2016) Number of deals Total value of deals (EUR) Manufacturing 95 Telecoms & IT 105 Real Estate & Construction 66 Finance & Insurance 68 Services 38 Mining (incl. oil & gas) 68 Other 104 Wholesale & Retail 55 Agriculture & Farming 41 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 56 | Emerging Europe M&A Report 2016/17 57 Food & Beverage 1 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Timok copper-gold project* Mining (incl. oil & gas) Acquisition / Capital increase (n.a.%)** Nevsun Resources Ltd Canada 442.51 Delta City Shopping Centre in Belgrade Real Estate & Construction Acquisition (100%) Hyprop Investments Ltd; Homestead Group Holdings Ltd South Africa; United Kingdom 127.81 Fabrika Automobila Priboj ad (FAP) Manufacturing Acquisition / Debt-for-equity swap (94.5%) Government of the Republic of Serbia Serbia 711 Zelezara Smederevo Manufacturing Privatisation (100%) Hebei Iron And Steel Co Ltd China 46.71 KBM Banka ad Finance & Insurance Acquisition (89.5%) Andrej Jovanovic - private investor; Bojan Milovanovic - private investor Serbia 17.73 ZeroCorp Ltd Media & Entertainment Acquisition (100%) Catena Media Malta 151 Avala Film ad Media & Entertainment Minority stake (20%) Sebre as Czech Republic 101 Mlekara Sabac Food & Beverage Auction (100%) MI Finance doo Serbia 7.71 AIK Banka ad Finance & Insurance Minority stake (6.3%) MK Group doo; M&V Investments ad; Serbia 7.71 Aerodrom Ketering doo Services Acquisition (50%) Serta UAE 2.41 Top 10 deals in Serbia in 2016 * Nevsun will execute the deal by acquiring Reservoir Minerals, one of the owners of the Timok project, and subsequently increasing its capital. ** Stake unknown. Serbia Deals by value and volume in Serbia (2012-2016) Number of deals by sector in 2016 41 860.9m 25 29 752.1m 159m 44 666m 51 921.3m Number of deals Total value of deals (EUR) Real Estate & Construction 5 Manufacturing 6 Telecoms & IT 3 Finance & Insurance 6 Services 1 Other 2 Wholesale & Retail 2 Media & Entertainment 3 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 58 | Emerging Europe M&A Report 2016/17 59 Food & Beverage 5 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Central Shopping Center in Bratislava Real Estate & Construction Acquisition (100%) Allianz SE Germany 1751 Portfolio of logistics and light industrial assets Real Estate & Construction Acquisition (100%) Macquarie Group Ltd Australia 70.33 Portfolio of six retail parks Real Estate & Construction Acquisition (100%) IMMOFINANZ Group Austria 59.33 Aupark Piestany shopping centre Real Estate & Construction Acquisition (100%) New Europe Property Investments plc South Africa 39.51 Logistic park of VGP Group Real Estate & Construction Acquisition (100%) VGP European Logistics * Belgium 33.33 Top 5 deals in Slovakia in 2016 * The buyer is a 50:50 JV between VGP and Allianz. Slovakia Deals by value and volume in Slovakia (2012-2016) 49 2016 428.5m 2013 49 717.9m 2012 38 2,767m 58 472.5m 2014 2015 47 1,854.9m Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 14 Manufacturing 6 Telecoms & IT 6 Finance & Insurance 3 Services 2 Wholesale & Retail 6 Education & Healthcare 3 Energy & Utilities 4 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 60 | Emerging Europe M&A Report 2016/17 61 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Helios Group * Manufacturing Acquisition (100%) Kansai Paint Co Ltd Japan 5721 Portfolio of 23 retail and office properties Real Estate & Construction Acquisition (100%) Lone Star Funds United States 282.63 Cimos Group Manufacturing Privatisation (92.3%) TCH Cogeme Italy 1101 Planet Tus shopping centre in Koper Real Estate & Construction Acquisition (100%) Greenbay Properties Ltd Mauritius 561 Gen-i doo Energy & Utilities Acquisition (50%) GEN-EL doo Slovenia 45.11 Intersport Group Wholesale & Retail Acquisition (100%) Enterprise Investors Poland 34.51 Sava dd Finance & Insurance Debt-for-equity swap (45.1%) Kapitalska druzba (KAD); Slovenian State Holding (SDH) Slovenia 29.41 ETI Elektroelement dd Manufacturing Acquisition (76%) Andlinger & Company United States 27.51 Istrabenz Plini doo Energy & Utilities Acquisition (51%) Societa' Italiana Acetilene e Derivati SpA (SIAD) Italy 24.22 Perutnina Ptuj dd Food & Beverage Minority stake (26.1%) SIJ – Slovenian Steel Group Slovenia 22.81 Top 10 deals in Slovenia in 2016 Note 1: The January stock exchange tender offer from Heineken for Pivovarna Lasko is not included. * Most of the revenues of Helios Group are attributable to its Slovenian unit. Slovenia Deals by value and volume in Slovenia (2012-2016) 49 1,329.2m 38 960m 34 376m 39 923.3m 62 870.8m Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 7 Manufacturing 13 Telecoms & IT 4 Finance & Insurance 8 Services 3 Wholesale & Retail 4 Education & Healthcare 2 Energy & Utilities 2 Other 6 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 62 | Emerging Europe M&A Report 2016/17 63 Food & Beverage 7 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Mars Entertainment Group Media & Entertainment Acquisition (100%) CJ CGV Co Ltd; IMM Investment Corp; other South Korea 603.51 Asist Ogretim Kurumlari (Doga Koleji) Education & Healthcare Acquisition (100%) Turkish private investor(s) Turkey 3622 Menzelet HEPP; Kilavuzlu HEPP Energy & Utilities Privatisation (100%) Akfen Holding Turkey 361.51 Odea Bank Finance & Insurance Capital increase (35.9%) IFC; EBRD; Bank Audi; undisclosed Middle East investors International; Lebanon; Greater MENA 3061 Borajet Havacilik Transportation & Logistics Acquisition (100%) SBK Holding Turkey 247.62 Sebenoba wind power plant; Karakurt wind power plant; Samli wind power plant; Ayvacik wind power plant; Kapidag wind power plant; Belen Atik wind power plant Energy & Utilities Acquisition (100%) Guris Insaat Turkey 244.31 Almus HEPP; Kokluce HEPP Energy & Utilities Privatisation (100%) Gulsan Holding Turkey 224.91 Koc Finansal Hizmetler Finance & Insurance Minority stake (4.7%) Koc Holding Turkey 201.31 AlternatifBank Finance & Insurance Minority stake (25%) Commercial Bank of Qatar Qatar 200.51 Turkiye Petrolleri Petrol Dagitim Wholesale & Retail Privatisation (100%) Zulfikarlar Holding Turkey 144.51 Mado Gida Services Minority stake (40%) Venture Capital Bank; Al Sraiya Holding Bahrain; Qatar 140.22 TFI TAB Gida Yatirimlari AS Services Capital increase (9.9%) The Goldman Sachs Group Inc; EBRD; Credit Suisse Group AG United States; International; Switzerland 135.11 MSC Gemi Acenteligi Transportation & Logistics Minority stake (30%) United Agencies Ltd Switzerland 129.71 Ronesans Holding Real Estate & Construction Capital increase (n.a%)* IFC International 122.71 Polisan Boya Manufacturing Acquisition / Capital increase (50%) Kansai Paint Co Ltd Japan 104.11 Adiguzel HEPP; Kemer HEPP Energy & Utilities Privatisation (100%) Bereket Enerji Turkey 100.71 Peyman Kuruyemis Food & Beverage Acquisition (100%) Bridgepoint Capital United Kingdom 98.22 Netas Telekomunikasyon Telecoms & IT Minority stake (48%) ZTE Corp China 94.71 Tesco Kipa Wholesale & Retail Acquisition (95.5%) Migros Ticaret Turkey 92.41 Kalenobel Manufacturing Acquisition (90%) Mondi Group United Kingdom; South Africa 901 Top 20 deals in Turkey in 2016 Turkey Deals by value and volume in Turkey (2012-2016) Number of deals by sector in 2016 Number of deals Total value of deals (EUR) 183 2016 5.2bn 2013 343 11.4bn 2012 331 16.6bn 2015 240 12.5bn 262 2014 14bn Real Estate & Construction 13 Manufacturing 33 Telecoms & IT 23 Finance & Insurance 18 Services 20 Wholesale & Retail 33 Energy & Utilities 20 Other 16 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate * Stake unknown. 64 | Emerging Europe M&A Report 2016/17 65 Top 10 deals in Ukraine in 2016 Target Sector Deal Type Buyer Country of Buyer Deal Value (EUR m) Ukrsotsbank Finance & Insurance Acquisition (99.9%) Alfa Group Consortium Russia 296.33 MV Cargo group company Transportation & Logistics Acquisition (51%) Cargill Inc United States 90.9*1 Ellada Oilseed Crushing Plant Food & Beverage Acquisition (100%) Kernel Holding SA Ukraine 87.11 Astarta Holding Agriculture & Farming Minority stake (10%) Fairfax Financial Holdings Ltd Canada 34.21 Piramida Shopping Mall Real Estate & Construction Acquisition (100%) Dragon Capital Investments Ltd Ukraine 21.92 Foros sanatorium Real Estate & Construction Privatisation (100%) Federation of Trade Unions of the Republic of Tatarstan Russia 16.71 Viasat Ukraine Telecoms & IT Acquisition (85%) 1+1 Media Group Ukraine 16.12 Terminal Brovary Real Estate & Construction Acquisition (100%) Rozetka.ua Ukraine 14.61 Radisson Blu Hotel Kiev Podil Real Estate & Construction Acquisition (100%) Sergei Tigipko - private investor Ukraine 9.22 Indar Manufacturing Minority stake (29.3%) Georgian Industrial Group Georgia 4.31 * The deal value represents the amount of investment into the project. Ukraine Deals by value and volume in Ukraine (2012-2016) 54 605.3m 249 4,768.3m 342 2,245m 111 833.1m 140 504.9m Number of deals Total value of deals (EUR) Number of deals by sector in 2016 Real Estate & Construction 9 Manufacturing 4 Telecoms & IT 8 Finance & Insurance 15 Wholesale & Retail 4 Energy & Utilities 3 Other 5 Mining (incl. oil & gas) 3 Transportation & Logistics 3 1. Official data 2. Market Estimate 3. EMIS DealWatch Estimate 66 | Emerging Europe M&A Report 2016/17 67 About us CMS offices worldwide About CMS Founded in 1999, with 65 offices in 38 countries worldwide, CMS is a full-service top 10 international law firm, based on the number of lawyers (Am Law 2016 Global 100). With over 3,400 lawyers worldwide, CMS has longstanding expertise both at advising in its local jurisdictions and across borders. CMS acts for a large number of Fortune 500 companies and the FT European 500 and for the majority of the DAX 30. Revenues totalled EUR 1,01bn in 2015. 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