CEE M&A Monitor February 2025

Introduction

Thank you for your interest in the second M&A Monitor for Central and Eastern Europe by Dealsuite. This report consolidates research performed by Dealsuite, the leading tool for M&A transactions. It contains statistics and trends for the CEE M&A mid-market (enterprises with a revenue between €1 million and €50 million) over the second half of 2024.

The aim of this study is to create periodic insights that improve the CEE market’s transparency and to serve as a benchmark for M&A professionals. We are convinced that sharing information within our network leads to an improved quality and volume of deals.

I Transactions

Increase Reported in Buy- and Sell-side Transactions

The advisors that took part in this research were involved in the following number of transactions in the second half of 2024:

Some of the businesses sold involved a respondent on both the sell- and buy- side. Therefore, we cannot sum up the sell- and buy-side transactions to get to a total number of transactions.

The number of buy-side transactions performed by the survey respondents is 151, the number of sellside transactions is higher, at 197.

After a turbulent period of high interest rates and inflation, 2024 brought a welcome shift in the market. The interest rate cuts earlier in the year contributed to an improved economic climate. Already in H1-2024, we observed a significant level of activity in both buy-side and sell-side transactions, a trend that continued in the second half of the year. The gradual recovery of market confidence appears to be ongoing, laying the foundation for further growth in the region. In H2-2024, the number of buy-side transactions increased by 3%, while sell-side transactions rose by 5%.

51% of the transactions had a deal size above €7.5 million, and 49% were below this threshold.

The median transaction size in H2-2024 falls within the €5 to €7.5 million range. Transaction sizes in CEE are slightly increasing in H2-2024, the number of transactions in the segment below €2.5 million decreased from 23% (H1-2024) to 13% (H2-2024). The number of transactions above €10 million in deal size rose from 32% in H1-2024 to 41% in H2-2024, rising above the European average.

Figure 3 shows the annual revenue of companies offered for sale on Dealsuite in H2-2024. Depending on the transaction timeline, some of these deals will either be completed or fall through in H1-2025. We can consider this data a tentative forecast of the size of companies likely to be sold in the coming quarters. The platform data for H2-2024 shows that 33% of the deals listed on Dealsuite have a turnover of between 1 and 3 million €. 28% of companies have a turnover of more than 10 million €. This data can be seen as a preliminary estimate of the size of companies that are likely to be sold in the coming quarters.

The revenue sizes posted on Dealsuite provide a fair representation of the market. Approximately 30% of companies in Europe have a revenue over €10 million, aligning closely with the 28% of companies listed on Dealsuite. This demonstrates that the M&A industry has fully embraced online deal sourcing via Dealsuite. In CEE specifically, we saw an even higher percentage of companies with a revenue of over €10 million being sold in H2-2024.

II Assignments

68% of CEE-advisors report an increase in the number of assignments in H2-2024

The results are explained in more detail in Figure 4 below. These are assignments received in H2-2024 and completed in H2-2024, however, it is worth noting that some of these projects may be completed during a later period or canceled.

In H2-2024, 16% of advisors reported a similar number of transactions as in H1-2024, while 16% noticed a decline. Meanwhile, 68% of advisors reported an increase in the number of assignments, which can be seen as a strong indicator of growth in H1-2025.

III EBITDA-multiples in CEE

The average EBITDA-multiple increased from 5.2 to 5.3

Sell-side advisors defined the average EBITDA multiple by industry. In this edition, the advisors were asked to revise the industry multiples from H1-2024. The results are shown in Figure 5.

The average EBITDA multiple increased in H2-2024, rising from 5.2 to 5.3. Most sector multiples followed this upward trend, while the Automotive, Transportation & Logistics sector remained stable at 4.3, and the Retail Trade sector at 4.2.

The results of this study provide a starting point for the applicable sector-multiples. They therefore offer a good benchmark for cross-checking company valuation in the near future.

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Largest Spread Reported in Healthcare & Pharmaceutics and Agri & Food sectors

A sector can contain various types of companies with different characteristics. As a consequence, businesses in a specific sector may also vary in EBITDA multiple. Figure 6 shows the spread of EBITDA multiples per sector. For some sectors, a wider spread in EBITDA multiples is reported, compared to sectors that contain a higher proportion of similar companies. Based on the research data, it can be stated with 95% certainty that the true value of the parameter lies between the two boundaries of the confidence interval.

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IV Multiples in Relation to Company Size

Big difference between multiples for large and small companies

The size of a company can influence the average paid EBITDA multiple. For the first time, the impact of the so-called Small Firm Premium on the average EBITDA multiples for SMEs in Central Eastern Europe (CEE) is being analyzed. Specifically, companies with an EBITDA ranging from €200,000 to €10,000,000 are considered. This EBITDA range is a realistic representation of SMEs in CEE and is therefore used to express the size of a company.

Research has shown that the smaller a company is, the greater the chance that the expected cash flows will not be realised (Damodaran, 2011; Grabowski and Pratt, 2013). Consider, for example, the dependency on certain customers or suppliers, or the dependency on specific technical know-how that can quickly diminish when staff leave. This can have a significant impact on the returns and thus on the value of a company. The higher risk premium that applies to smaller companies (the so-called Small Firm Premium) causes a value-reducing effect. As a result, the EBITDA multiples paid for larger companies are on average higher than the multiples paid for smaller companies.

The results of this monitor survey confirm that companies with a low EBITDA have a lower multiple than companies with a high EBITDA. The influence of company size on EBITDA multiples paid is presented in Figures 7A and 7B.

The difference in the EBITDA multiple between companies with a normalised EBITDA of €200,000 and €10,000,000 is 2.6 (4.1 compared to 6.7).

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V Cross-border Transactions

A comparison of EBITDA multiples between different countries highlights the advantages of cross-border deals. For example, it can be beneficial to buy a particular company abroad, or to sell a company to an international buyer. Figure 8 shows the differences in EBITDA multiples between European markets.

In CEE, companies in Healthcare & Pharmaceutics are recognised with the highest sector multiple. In the Western European market the highest sector multiple is found in Software Development.

VI Deal Success Rates

59% of sell-side assignments result in a closed deal

In the current CEE market, there are an average of 5.7 buyers per company listed for sale (Dealsuite Monitor, August 2024). However, not every sell-side assignment results in a successful deal. Figure 9 shows the most common reasons why sales processes are prematurely terminated.

68% of the advisors cite unrealistic valuation expectations from the seller as the main reason for deal terminations. 11% of advisors indicate that shifts in market conditions during the transaction process are the primary cause.

On average, 59% of sell-side assignments result in a closed deal, while 41% of transactions are discontinued early. Compared to neighboring countries, this is a relatively low success rate. The success rate in the DACH region, for example, is slightly higher at 62%, while in the Benelux region, it stands at 78%. Recent findings indicate a shift in the success rates of M&A deals: of the 59% of sell-side assignments that ultimately result in a transaction, an increasing proportion is considered successful. Twenty years ago, 70% of closed deals failed because the outcomes did not meet expectations, whereas today, an average of 70% of closed deals are deemed successful (Bain & Company, 2023). Several factors contribute to this improvement, including the fact that mergers and acquisitions are now more frequently pursued for diverse strategic purposes rather than solely for scaling and cost savings. This demonstrates that M&A, in most cases, genuinely creates value (Dealsuite Trends Report, 2024).

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VII Outlook

Vast Majority of Advisors Positive About 2024 and Optimistic for 2025

Assessing the performance of the CEE M&A mid-market is based on many factors, including the willingness of entrepreneurs to sell their businesses, funding availability, macroeconomic developments etc. An interpretation of these factors is needed to determine how the market will develop. The survey included both assessments of the M&A mid-market in H2-2024 (retrospective) and H1-2025 (projection).

The vast majority of advisors look back on H2-2024 with satisfaction (72%). The outlook for H1-2025 appears even more promising, with 75% of advisors expressing positive expectations.

IX Method

The majority of M&A transactions take place in the mid-market. This report uses the definition of a midmarket company as having a revenue between €1 and €50 million. The survey was sent to 442 M&A advisory firms. Considering their combined input, they represent an essential part of the M&A mid-market in Central and Eastern Europe. Out of the total of 442 advisory firms, we received 105 respondents (24% response rate).

Sources used:

• 105 survey responses from key CEE M&A advisory firms

• Bain & Company. (2023, March 28). How companies got so good at M&A.

• Damodaran (2011). Equity Risk Premiums (ERP).

• Dealsuite M&A mid-market trends report 2024• Dealsuite M&A Monitors 2015 - 2024

• Dealsuite transaction data 2015-2024

• Field, A. (2011) Discovering Statistics SPSS. Third edition, SAGE publications, London. 1 -822

• Harding, D., & Rovit, S. (2004). Mastering the merger: Four critical decisions that make or break the deal. Harvard Business Press

This research was conducted by Jelle Stuij, and Roos Bijvoet. For further questions, please contact Tim Lammar or Mihai Coca-Constantinescu.