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Domestic deals dominated the deal activity in 1Q24, while outbound deals almost doubled in value in YoY terms
Domestic deals continued to dominate deal activity in terms of both deal value and volume in 1Q24, though activity dipped from previous quarters. The CEE region recorded 125 domestic deals worth US$2.3b in the first quarter of 2024, down both in YoY and QoQ terms.
Similarly, inbound deal activity also lost momentum in 1Q24 as it recorded 72 deals worth US$1.2b, down 46% in deal value and 35% in deal count compared with 1Q23. The US, the UK, Germany and Switzerland were the most active acquirers for CEE-based targets.
On the outbound front, deal value almost doubled in 1Q24 (reaching US$1.9b) compared with 1Q23 as companies look to expand outside their headquarter country for capability enhancement. Germany, Italy and Finland were the most attractive target countries for CESA-based acquiror companies.
M&A activity in the CEE region is poised for an uptick in 2024
Despite ongoing geopolitical uncertainties, the macroeconomic outlook for 2024 is expected to stabilize and provide a boost to M&A activity. The CEE region is poised to benefit from improving market conditions, including decreasing inflation and interest rates, which will make borrowing cheaper and stimulate economic growth. Fiscal policy will continue to play a crucial role in shaping the region's M&A outlook, with countries like the Czech Republic focusing on fiscal consolidation and Poland likely to receive a fiscal boost from EU funds.
In response to evolving megatrends like climate change and the integration of cutting-edge technologies like generative AI (Gen-AI), companies are compelled to swiftly transform their business models to stay competitive in the present landscape. This urgency drives corporations toward M&A as a potent strategy to facilitate rapid transformation, enabling them to align with the emerging trends.
Furthermore, there is a significant amount of pent-up demand for deals, particularly from private equity (PE) firms, which have accumulated a large amount of dry powder (US$2.6t globally in 2023 as per a report from CapitalIQ) that needs to be deployed. To address this, PE firms are likely to adopt strategies such as joint ventures with strategic partners, acquiring minority stakes, and using continuation funds to enter new sectors or make acquisitions.
Overall, the CEE region is expected to see an increase in M&A activity in 2024, driven by improving market conditions, pent-up demand, and strategic opportunities in various sectors. This aligns with the findings of the recent EY CEO Outlook Pulse Survey, which indicates that more CEOs and investors anticipate an M&A uplift in 2024, with increased acquisitions and divestitures.