Gulf Investors Bolster M&A Activity in Emerging Europe Amidst Economic Challenges

By?Velizar Velikov, Head of EMIS M&A Database

I lead the EMIS M&A Database, "EMIS DealWatch", which combines proprietary M&A and ECM research, news, deal valuations and league tables with sophisticated screening tools to deliver a comprehensive coverage of emerging markets deal activity.?Since 2010, I have been covering and valuing M&A deals across global emerging markets.

Emerging Europe's M&A market continues to draw foreign investment, thanks in part to active Gulf investors, despite the broader economic challenges the region faces, including persistent inflation.

In recent years, the robust macroeconomic fundamentals, stable currencies, and favorable regulatory environments have made the region an increasingly attractive destination for foreign investment. However, over a year following Russia's invasion of Ukraine, economies in the area grapple with the lingering impact of energy price shocks and anticipate slow growth. According to the latest forecasts from the European Bank for Reconstruction and Development (EBRD), Central Europe is projected to achieve a modest economic growth rate of just 0.5%, while Southeast Europe will have a more robust expansion of 2.0%.

As expected, the economic headwinds did lead to a decline in dealmaking, particularly in cross-border transactions. For the first nine months of 2023, inbound M&A transactions in Emerging Europe decreased by 13% year-on-year to approximately 280 deals, according to EMIS data. The United States, the leading foreign investor in the region, saw a significant 45% year-on-year decrease, resulting in just 40 M&A investments. The U.S. maintained its lead as the top foreign investor by deal count, yet the overall transaction value dropped to EUR 1.5bn.

Nonetheless, the combined value of inbound M&A investments in the region remained relatively stable, with slightly over EUR 12bn, largely due to notable cross-border investments totaling nearly EUR 4.0 bn from Gulf investors.

The most significant inbound M&A deal featured UAE-based Emirates Telecommunications Group (e&), which agreed to acquire a controlling 50% stake in PPF Telecom's assets in Bulgaria, Hungary, Serbia, and Slovakia from PE firm PPF for up to EUR 2.5bn. The second-largest deal involved TAWAL, a subsidiary of Saudi Telecom Company, purchasing the mobile tower infrastructure of BC Partners-backed United Group in Bulgaria, Croatia, and Slovenia for EUR 1.2 bn.

These deals placed the UAE as the top foreign investor, with Saudi Arabia ranking fourth. Notably, these transactions were also the two largest M&A deals in the Emerging Europe telecoms market for Q1-Q3 2023. Gulf investors also expanded their M&A presence into sectors such as Internet & IT, transportation, and logistics.

With expectations of economic recovery in Emerging Europe in the coming year, a rebound in M&A activity is anticipated, presenting compelling investment opportunities for Gulf investors to further diversify their overseas portfolios.

For the latest M&A data and news, visit our EMIS M&A Monitor.

For any questions, please feel free to?contact us?or?request a demo?for a tailored demonstration of the EMIS Platform.

For more frequent updates, join our newsletter?here?to explore weekly installments of analysis, data, and news on companies, countries, and industries in emerging markets.

You can also find EMIS on?Twitter?and?Facebook.