The volume and number of major mergers and acquisitions transactions has increased throughout Central and Eastern Europe in the first three quarters of 2010 compared to 2009, says the Allen&Overy M&A Index. According to this report, there are still significant differences between the expectations of the sellers and those of the buyers, which makes recovery in the M&A sector difficult in certain sectors and regions.
“Because price expectations are still different at the level of buyers and sellers, we notice in CEE a tendency towards including a negative earn-out element, sometimes towards 50 percent from the price of the transaction,” said Costin Taracila, managing partner of Radu Taracila Padurari
Retevoescu RTPR, the Romanian law firm which activates in association with Allen & Overy.
According to the report, the cumulated value of the CEE transactions was of over USD 50 billion in the first three quarters of 2010. The activity was generated in the past year and a half especially from selling non-core assets or assets located in non-core regions of companies. Deals came from three main areas: privatizations, telecommunications, and take-overs of family businesses.
“The moment of bug deals, be them strategic or non-core assets sale is not here yet. Although there have been some attempts at major transaction – valued over USD 100 million – over the past 18 months those did not materialize because sellers still hope for prices to increase while buyers wait for the decrease. We estimate in 2011 that business sectors will unblock, going towards a similar line to that in other CEE countries, and we will probably see M&A transactions over the mentioned value in sectors such as energy, telecommunications, pharma, maybe even finance,” Costin Taracila added.
According to the report, the M&A activity in Romania was focused on transactions under USD 100 million, especially in retail, pharmaceuticals, and medical services.