Bain&Co: The value of strategic acquisitions dropped in Poland to USD 10bn in 2023

The total value of mergers and acquisitions by strategic investors has almost halved in Poland to around USD 10bn in 2023, according to estimates by international advisory firm Bain & Company. The reason for the collapse was the lack of 'mega-transactions' similar in scale to Orlen's acquisition of PGNiG and Lotos Group in 2022, as well as persistently high interest rates and an uncertain geopolitical situation.

The lack of consensus on how the market will develop further causes significant differences in the valuations expected by buyers and sellers. In Bain & Company's annual survey of more than 300 board members of global companies, more than two-thirds of buyers cited differences in expected valuations as a factor hindering deals, and about two-thirds of sellers said they were holding off on transactions while waiting for valuations to improve. Similar mechanisms in Poland brought the total number of acquisitions involving strategic investors in 2023 to 272, a year-on-year decline of 23%. Bain & Company's estimates do not include direct acquisitions of companies by private equity funds, it stated.

"Our analysis shows that the value of acquisitions involving industry investors in Poland was the lowest in five years. Already 2022 would have been a weak year if not for Orlen's acquisitions of PGNiG and Lotos. For the past two years, transactions have not been facilitated by the high cost of raising capital and geopolitical and macroeconomic turbulence. This year we can expect some, but not a leap, improvement in the situation. With inflation slowing down and expected interest rate cuts, some optimism should return to the market," said Bain & Company partner Paweł Szreder.

Only three industries in Poland saw a total increase in deal value in 2023. The purchase of a stake in gaming company Techland by Chinese conglomerate Tencent Holdings and STS Holding by UK group Entain were the biggest deals of last year in Poland and contributed to a fourfold increase in deal value in the high-tech sector. The healthcare and life sciences sector saw a 79% increase in value, while the advanced manufacturing and services sector saw a 4% increase.

However, the increase in deal value in these sectors did not compensate for declines in all other areas, most notably in the energy and natural resources sector, which is most responsible for the weaker M&A market performance last year.

"The trends we observed in Poland last year are in line with global and European trends. The value and number of M&A transactions worldwide fell slightly compared to 2022, but the difference compared to the record year 2021 was already very significant. In Poland, this dynamic would be similar if we exclude the megatransactions completed by Orlen in 2022. History shows that downtime in the transaction market rarely lasts more than two years, so we enter 2024 with tentative optimism," Szreder concluded.

According to the Bain & Company report, the global value of strategic M&A deals fell by 6% in 2023 and their number by 12% compared to 2022. In the European (EMEA) market, the total value of company purchases by strategic investors fell by 18% and their number by 14%.

Source: Bain&Co and ISBnews