11 June 2024

Deloitte M&A Index 2024 Q2

Bounce off the bottom. The number of European transactions increased by 5.7%. The largest Czech acquisition was CEZ Group's purchase of a majority stake in GasNet for CZK 21 billion.

Deloitte M&A Index 2024 Q2 page-0001

The M&A market saw a slight increase in transactions in the first quarter of this year. The number of deals rose from 2,551 recorded in the last quarter of 2023 to 2,697, an increase of 5.7%. The aggregate value of deals completed in the last 12 months also rose - specifically from $442 billion to $467 billion. The positive development is due to falling inflation, the expected reduction in euro interest rates and the positive sentiment on the stock markets. The improving economy could lead to a further increase in M&A activity in the second half of this year.

"There are three main factors behind the slight growth of the M&A market at the beginning of this year. The first is the recent recovery in financial markets, which has been driven by easing inflationary pressures and an expected fall in interest rates. The second is pent-up transaction demand combined with a gradual convergence of price expectations among investors and business owners. And the last is the development and reshaping of business models of many companies, where acquisitions remain a key element of corporate strategies," explains Miroslav Linhart, leading partner in Deloitte's Financial Advisory.

value

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 CEZ Group for just under CZK 21 billion from the Australian company Macquarie Asset Management. Another significant 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 ones. For example, the sale of the label company S&K Label to the British company Coveris, a world leader in this field. This transaction demonstrates the continued interest of Western European companies in quality Czech companies," says Jan Brabec, partner in the Financial Advisory Department at Deloitte.

In the Czech Republic, investment activity has been hampered for many months by high interest rates, which the CNB began to cut gradually at the end of 2023. The weak foreign demand, especially from Germany, with which the Czech economy is closely linked, is having the worst impact on the economy. Last year, the domestic economy contracted by 0.4%. The biggest drag was a fall in household consumption, mainly due to high inflation and a lower standard of living. Germany is unlikely to see a major economic recovery this year either - and the Czech economy cannot grow significantly because of its link to it. The Deloitte forecast expects Czech GDP to grow by around 0.9% this year, mainly due to a recovery in household consumption.

prediction

"After a prolonged period of decline, encouraging indicators are emerging that suggest that we may be in for a positive development in the M&A market. I am cautiously optimistic and believe that the momentum we saw in the first quarter will continue. This is especially true in the energy, healthcare, manufacturing and technology sectors," Brabec added on the outlook for the future.