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Economic News
Mergers & acquisitions market in Poland – summary of 2011 and prospects for 2012
2011 marked by high level of activity on Polish M&A market
Polish mergers & acquisitions market was extraordinarily active in 2011 – such opinion is shared by the vast majority of experts. According to estimates by Goldman Sachs, which on January 31, 2012, were presented to journalists by Artur Tomala, head of Goldman Sachs Poland, the market in Poland in 2011 was worth USD 18.22 bln. Experts of the capital markets department of bank BZ WBK, in turn, estimated the 2011 worth of the Polish M&A market at the level of PLN 50-55 bln, they wrote in an article published by the business daily Parkiet on January 21, 2012.
“Last year was an exceptional and record year for the M&A market [in Poland]. The size of transactions was incomparable to the ones from recent years,” Dariusz Greszta, partner in the law firm CMS Cameron McKenna, told PAP in an interview published on February 1, 2012. “Last year also marked a breakthrough in terms of global private equity funds’ entering Poland. The funds had been interested in the Polish market but never on a scale witnessed last year. Large transactions attracted global players to our market,” Greszta added.
Changes on the mergers & acquisitions market in the CEE region and Poland (figures for 2011-2013 are estimates./forecasts)
source: bank BZ WBK, report M&A Market: Structure, Volatility and Acquisition Premiums from November 2011
The largest transaction in 2011 was the purchase of a 100% stake in telco Polkomtel by Zygmunt Solorz-Żak’s company Spartan Capital Holdings. The total worth of the transaction amounted to PLN 18.1 bln, the sum including debt and dividend. Alongside the sale of Polkomtel, which, according to Greszta, was “the transaction of the year … both in terms of its size and its importance for the telecom sector,” the largest transactions in 2011, ones that “were significant to the shape of specific sectors of the economy,” were the deals involving BZ WBK Żabka, Emitel Dialog, TVN and Aster. Among them, the CMS Cameron McKenna partner highlights the sale of convenience stores chain Żabka by fund Penta Investments to fund Mid Europa Partners: “A significant influence on the private equity sector … was exerted particularly by the sale of Żabka, due to its exceptional return on investment.”
Shares of specific sectors in M&A transactions in CEE region and Poland (in terms of transactions’ worth) in the years 2000-2010
source: bank BZ WBK, report M&A Market: Structure, Volatility and Acquisition Premiums from November 2011
Decline in activity on Polish M&A market in Q4 2011
Even though the general picture of Poland’s M&A market in 2011 is positive, some symptoms of limitation of investors’ activity were perceivable in the last months of the year. According to the January 16 press statement by advisory Ernst & Young, the number of Poland’s mergers & acquisitions fell by 39% y/y in Q4 2011, while the pooled worth of such transactions declined by 75% in the same period. Such a steep decline of M&As’ pooled worth resulted in the lowering of the average value of M&A transactions in Poland to USD 103 mln in Q4, the lowest level among all the 12 European countries analyzed by Ernst & Young.
The “saturation level” of the M&A market in a given region – the ratio of the M&A market value to the GDP in the region in the years 2000-2010 (white font)
source: bank BZ WBK, report M&A Market: Structure, Volatility and Acquisition Premiums from November 2011
“Data on economic growth, industrial output and consumption do not indicate that Poland’s corporate sector should have any problems. Many companies ‘sit on their cash’ – they are ready for investments, including takeovers, but they fear a rapid deterioration of macroeconomic situation,” Bartłomiej Smolarek, head of investment advisory department in Ernst & Young, said, quoted in the statement. “On the one hand this risk aversion is understandable, on the other hand, however, the difficult situation in the eurozone creates attractive opportunities for the Polish companies to conduct cross-boarder takeovers,” Smolarek added.
Polish mergers & acquisitions market in 2012 – experts’ expectations
According to forecasts of bank BZ WBK, enclosed in its report M&A Market: Structure, Volatility and Acquisition Premiums from November 2011, the worth of takeovers in Poland will decrease by some 30% y/y in 2012, and return to the 2011 level only in 2013.
Even after excluding the sale of Polkomtel from the 2011 list of Poland’s mergers & acquisitions, the forecast total worth of Poland’s M&A market in 2012 should be some 10% lower than last year, and this “with optimistic assumptions concerning economic situation and the implementation of privatization plans,” BZ WBK experts estimate in their already mentioned article published in Parkiet.
Dariusz Greszta of CMS Cameron McKenna also expects the coming months to be more difficult for the Polish M&A market than the year 2011, with the average value of single transaction likely to be lower than the one seen last year. “In 2012, I do not expect many transactions as spectacular [as the ones observed in 2011] – Greszta told PAP.
As the CMS Cameron McKenna partner points out, in 2012 the number and worth of M&As might remain burdened by the eurozone crisis, even though many companies and funds still are in a good financial situation and in theory could afford investments. “A limitation [in this respect] is the availability of acquisition loans, and this is an offshoot of the troubles experienced by the banks of the eurozone,” Greszta said. According to him, the year 2012 might turn out to be “the year of the buyer”, with sellers finding it more difficult to negotiate satisfactory transaction conditions.
Slightly more optimistic expectations are expressed by director of Goldman Sachs Poland, Artur Tomala. “We are seeing an increasing interest in emerging markets on the part of investors. This wave will be slowly reaching Poland – we will witness a continuous inflow of new [financial] means to our country. We are observing a high level of interest in Poland,” Tomala says. “Poland’s market is fragmented in the majority of its sectors, so there might be some further consolidation,” Tomala believes, yet makes a reservation similar to the remarks by Greszta, namely that “the size of single transactions will rather not be big.”
A visible improvement on the Polish mergers & acquisitions market, just as on the equity market, is expected by Goldman Sachs no sooner than “in the second half of the year and in 2013.”
Source - Polish Press Agency, Economic Service
Author : Investor Relations Department
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