Emerging Europe's mergers and acquisitions (M&A) market reached its highest level of activity since 2018 in terms of the number of deals last year, reflecting the resilience of the market, according to the CMS Emerging Europe M&A 2024/25 report, published in collaboration with EMIS. 

Deal flow across Central and Southeast Europe rose by 8% in 2024, totalling 1,281 transactions. However, the aggregate deal value declined sharply by 30.9%, falling to €25.72bn due to the absence of megadeals exceeding €1bn. The average deal value dropped to €20.1mn, down from €31.4mn in 2023, the report said.

Despite the fall in aggregate deal value, the increase in the number of deals indicates the market’s resilience, the report said. “Market confidence has been bolstered by improving economic conditions and a greater sense of stability as inflation continues to subside, and central banks cautiously anticipate further interest rate cuts,” according to CMS. 

This was reinforced by Radivoje Petrikić, partner at CMS Austria, who said as quoted in a CMS press release: “The levels of M&A activity demonstrate the continued resilience of CEE markets – with overall transaction volume up by 8% at a five-year high. We expect this trajectory to continue in 2025, with a higher volume of transactions across several sectors.”

The report pointed to growth estimated at around 2% for the region, spanning Central and Southeast Europe, in 2024, which is expected to rise further in 2025. Overall, growth in the region is expected to more than twice as high as in the EU. 

“Against a backdrop of geopolitical uncertainty and caution among some dealmakers, the CEE region continues to attract international investors. Although the impact of potential tariffs adds to uncertainty, sentiment remains upbeat among M&A players,” said the report. 

Looking ahead, “A mood of cautious optimism prevails among dealmakers about M&A activity in the region over the next 12 months as market conditions show potential for more deals to be done,” it added. 

Cross-border investment trends

Cross-border investment remained robust, with 776 deals recorded in 2024, an increase from 745 in the previous year. The US retained its position as the most active foreign investor by deal count, completing 102 transactions, while Luxembourg led in terms of deal value, with investments totalling €2.01bn, up from €184mn in 2023.

US-originated deals increased to 102, though their aggregate value declined to €1.26bn from €2.06bn. Meanwhile, Luxembourg’s rise in deal value was accompanied by an increase in deal numbers from 14 to 21. The UK remained the leading European investor, accounting for 68 deals worth €598mn.

Within Emerging Europe, domestic deal volumes grew from 441 to 505, with deal values rising from €1.7bn to €2.4bn. The Czech Republic emerged as a key player, with deal values increasing more than fourfold to €8.88bn.

Poland leads the region

Poland, the biggest economy in the region, retained its status as the largest M&A market, with 269 deals worth €5.77bn. However, deal volume declined by 5.3%, and deal value reached a 10-year low, reflecting the lack of megadeals. The largest transaction in Poland was CVC Capital Partners’ €427mn acquisition of a strategic stake in software company Comarch.

Romania, the second most active jurisdiction, saw a drop in deal volume from 199 to 187, with deal value declining by 53.3% to €2.59bn. Notable deals included Greece’s Public Power Corporation (PPC) acquiring a renewable energy portfolio for €700mn and Banca Transilvania’s acquisition of OTP Bank Romania for €347.5mn.

Bulgaria, Croatia and Hungary defied regional trends with increases in deal volume, rising by 7.3%, 10.8% and 10.5% respectively. However, Hungary’s deal value fell due to the absence of large transactions. Conversely, the Czech Republic and Slovakia experienced mixed outcomes, with declining deal volumes but surging values of 53.8% and 25.5% respectively.

In many of the smaller markets, overall deal volume was buoyed by a single deal, such as Czech Energeticky a Prumyslovy Holding’s €3.99bn takeover of a 33% stake in Slovakia’s Slovenske elektrarne, Podravka’s acquisition of Fortenova’s agricultural business for €333mn in Croatia and US-based Robinhood Markets’ €184.1mn takeover Bitstamp in Slovenia.

Leading sectors 

In terms of deal value, the leading sectors identified in the report were energy and utilities, real estate and construction, and food and beverages. Transactions in the energy and utilities sector shot up by 162% to €9.75bn. Real estate and construction grew by 77.2%, reaching €5.65bn, with deal volume rising from 158 to 194.

However, the in the telecoms and IT sector, deal volume fell from 279 to 260 and value plummeted from €9.7bn to €1.93bn. In the manufacturing sector, deal value dropped to €1.12bn in 2024 from €6.55bn in 2023 despite stable transaction numbers.

According to Horea Popescu, partner at CMS Romania, the M&A sector in the region “is undergoing an exciting period of transformation, driven by regulatory changes, new technologies, energy transition and evolving business strategies”. 

Popescu singled out the finance and insurance sectors as having “notable levels of activity”, and forecast further consolidation in the insurance market. 

The report also highlighted the healthcare and pharmaceuticals sector. “The appeal of healthcare and pharmaceuticals is amplified by an ageing population, regulatory reforms, modernisation of CEE healthcare systems and increased government spending to create better healthcare infrastructure. Prominent deals include the sale of healthcare service providers and equipment suppliers, as well as pharmaceutical and biotechnology companies.” 

Strategic investors target the region 

One significant change in recent years is the emergence of strategic buyers that are increasingly surpassing private equity (PE) firms in deal-making, said CMS. Strategic buyers, often operating within the same industry as their acquisition targets, typically aim to acquire businesses that enhance their existing operations and align with their long-term strategic objectives.

Several factors contribute to this development. Unlike private equity firms, which often adopt a shorter-term investment horizon, strategic buyers tend to prioritise long-term value creation by integrating acquisitions into their existing operations to generate synergies. Furthermore, many strategic buyers benefit from strong financial positions and access to capital, enabling them to pursue acquisitions more assertively, according to the report. In contrast, PE firms may encounter limitations due to fundraising challenges and restricted capital resources.

“The CEE region has demonstrated strong economic growth and increasing stability, making it an attractive destination for strategic investments,” said Rodica Manea, partner at CMS in Romania. 

“In particular, countries such as Poland, the Czech Republic, Romania and Hungary have become M&A hotspots due to their favourable business environments and growth prospects. The region has also seen a surge in FDI, with strategic buyers from Western Europe, the US and Asia looking to expand their footprint. This influx of international capital is pushing up valuations, making the market both more competitive and more dynamic.”

Still, private equity deal volume rose by 12.6% to 278 transactions in 2024, though aggregate deal value declined by 11.4% to €13.88bn. Key transactions included Blackstone’s €470mn acquisition of logistics assets in the Czech Republic and Slovakia and CVC Capital Partners’ €2bn acquisition of Partner in Pet Food in Hungary.

Helen Rodwell, partner at CMS Czech Republic, said: “Private equity investors continue to take an interest in Central and Eastern Europe and, with private equity deal volumes increasing by 12.6% last year, the investment landscape remains dynamic. In recent years, partnering with local capital has proven to be an additional route to market in the region – giving rise to additional opportunities and competitive advantage for the larger private equity houses.”

Optimistic outlook

The outlook for Emerging Europe remains optimistic, supported by economic recovery, competitive costs and innovation. The report anticipates continued growth in M&A activity across diverse sectors.

“The outlook for CEE in 2025 is positive. Beyond geopolitical challenges, reasons for optimism include: renewed prosperity, economic competitiveness, increasing digitalisation and energy transition. Dealmakers and investors in emerging Europe look set to capitalise on opportunities presented by growing businesses in the CEE region, which is home to some very well-managed companies with enormous potential,” says the report.

“Despite some short-term challenges, dealmaking in the CEE region remains attractive for international investors, as shown by higher deal volumes in a range of countries and sectors last year,” said Popescu. “As optimism looks set to become the hallmark of 2025, buyers will continue to capitalise on the region’s diverse investment opportunities.”