Deloitte M&A Index 2024 Q2
A bounce from the bottom. The number of European transactions increased by 5.7%. The largest Czech acquisition was the purchase of a majority stake in GasNet by the ČEZ Group for CZK 21 billion.
In the first quarter of this year, there was a slight increase in transactions on the M&A market. Their number has increased from 2,551 recorded in the last quarter of 2023 to 2,697, an increase of 5.7%. The total value of trades made over the past 12 months has also risen - specifically from $442 billion to $467 billion. The positive development is due to falling inflation, an expected reduction in euro interest rates and a positive situation on stock markets. The improving economy could lead to a further increase in activity in the M&A market in the second half of this year.
"There are three main factors behind the slight growth in the M&A market at the beginning of this year. The first is the recent recovery in financial markets, which was driven by a moderation of inflationary pressures and an expected decline in interest rates. The second is the accumulated demand for transactions combined with the gradual convergence of the price expectations of investors and business owners. And the last is the development and transformation of business models of a number of companies, where acquisitions remain a key element of corporate strategies," explains Miroslav Linhart, Partner in Charge of Financial Advisory at Deloitte.
During the first quarter of this year, 24 transactions took place in the Czech Republic. The largest acquisition was the purchase of a 55.21% stake in the gas company GasNet by the ČEZ Group from the Australian company Macquarie Asset Management for almost CZK 21 billion. Another major transaction was the sale of a 50% stake in the hotel portfolio of CPI Property Group to the Slovak company Best Hotel Properties for more than CZK 4 billion.
"In addition to these two large transactions, there were also a number of medium-sized transactions. For example, the company producing self-adhesive labels S&K Label was sold to the British company Coveris, which is the world leader in this field. This transaction demonstrates the continued interest of Western European companies in high-quality Czech companies," says Jan Brabec, Partner in the Financial Advisory function at Deloitte.
In the Czech Republic, investment activity was hampered for many months by high interest rates, which the CNB started to gradually reduce at the end of 2023. The economy is being hit hardest by weak external demand, especially from Germany, with which the Czech economy is closely linked. Last year, the domestic economy shrank by 0.4%. The biggest drag was the decline in household consumption, mainly due to high inflation and a lower standard of living. This year, there is unlikely to be a major recovery of the economy in Germany either - and due to the link to the local economy, the Czech economy cannot grow significantly either. Deloitte's forecast expects Czech GDP to grow by around 0.9% this year, mainly due to the recovery of household consumption.
"After a prolonged period of downturn in the M&A market, encouraging indicators are emerging that suggest that we are in for a positive development. We are cautiously optimistic and believe that the momentum we recorded in the first quarter will continue, especially in the energy, healthcare, industry and technology sectors," adds Brabec on the outlook for the future.
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