Coping With The Credit Crunch: M&a And Pe In The Cee, Hungary

Roundtable Discussion

Coping with the Credit Crunch: M&A and private equity in the CEE region

2009

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Roundtable Discussion

02

M&A and private equity in the cee region

Contents

Speakers around the table Regional M&A trends Sector activity The financing environment Corporate restructurings State intervention and privatisation Penta: Zabka case study Wolftheiss: Cross-border merger case study Historical data

03 04 04 06 08 09 10 12 16

Roundtable Discussion

03

Speakers around the table Dr Zoltán Faludi

György Herczku,

Managing Partner Wolf Theiss Budapest

Managing Director KBC Securities

Olivér Martin,

Pavel Petrik,

Director Invescom Corporate Finance

Member of the Board Carnibona (Penta Investments)

Béla Seres Partner Deloitte

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Roundtable Discussion

04

In light of current market conditions, this roundtable event held in late June in Hungary examined M&A and corporate finance related activity involving regional and international businesses in Central and Eastern Europe. The discussion looked at domestic M&A, cross-border M&A and private equity activities. The following is an edited transcript of the discussion.

Regional M&A trends Olivér Martin (OM) OM: I’m cautiously optimistic about where the market is heading. The best indicator for transaction activity in the region is always the number of buy-side enquiries that we receive. This was practically zero over the first quarter of the year and this was not particularly surprising bearing in mind the difficult macroeconomic situation in Hungary and indeed beyond. However, over the course of April and May, we have started to receive buy-side enquiries again and this is a very good indicator for us that activity is beginning to return to the market

Pavel Petrik (PP) PP: I think that the main driver for the recent drop in Hungarian M&A activity was the almost unprecedented level of market uncertainty – nobody knew how far the economy would fall. Once investors start to feel more comfortable about the situation, they will be more willing to invest again. Once there is stabilisation in the economy, or at least the perception of stabilisation, I think the market will recover.

Béla Seres (BS) BS: My belief is that if you really look at why there have not been any M&A transactions since September 2008 until very recently it was because no one was able to do any proper forecasting, or arrive at valuations, due to market volatility. Hungary, for a number of structural reasons, is one of the weakest spots at the moment in terms of the fundamental drivers of M&A activity. It’s not especially related to the macroeconomic situation, but more to do with the internal structure of the economy and the small number of independent mid-market companies owned by either local private owners or local institutional owners. This is a very different situation compared to Poland, the Czech Republic or Slovakia. Clearly, what we have seen is that the market froze over much later in these geographies than compared to Western markets. Deal-making in Warsaw continued right up until Christmas last year. Since then, however, it has slowed but is still far healthier, primarily because of these economies’ relative strengths. The same cannot be said of Hungary.

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Nonetheless, I believe the worst is over for the local market. The collapse of Lehman Brothers was 10 months ago now and I think that confidence is returning, although there will still be some tough months ahead for the majority of corporates. Consequently, I think that over the next 12 months we will see more deals than we have seen over the past year. Some corporates are now realising that they have to do something and either sell or merge with a competitor, meaning this step will be a hard but necessary decision for many owners to take.

György Herczku (GH) GH: I fully agree that the market will recover soon. The market has definitely shifted down in terms of valuations and in Hungary there are three types of deals: deals over €100m, deals between €10m and €100m and a lot of deals below €10m. The big problem for advisers at the moment is that the deals valued at o ver €100m have disappeared because of the financing environment. As far as I can recall, there has been only one deal in Hungary so far this year that is worth more than €100 million, namely the 21.2% stake that was acquired by OJSC Surgutneftegaz in MOL. On the flipside nonetheless, there is a lot of deal appetite in the sub€10m tranche and I would expect this to continue going forward. There are a few deals valued between €10m and €100m, yet while financing is probably still available in this region, the deal terms are totally different to what they were before.

Sector activity BS: Healthcare Services in general is obviously a very sexy industry for private equity because its fundamentals are extremely strong, especially as populations age across Europe. Again, Hungary does not compare well to some other countries in the region for the very simple reason that much of the system is managed well by the public sector. This is not the case in other CEE countries.

“THE main driver for the recent drop in Hungarian M&A activity was the almost unprecedented level of market uncertainty – nobody knew how far the economy would fall.” Pavel Petrik

Roundtable Discussion

05

PP: We are quite active in the Healthcare sector, especially in health insurance, polyclinics, outpatient care and laboratories. I would agree that Hungary is not particularly attractive for these deals because of the lack of differentiation between private and state-owned health providers. But on the other hand, Hungary can be very interesting as you can still find a relatively wide portfolio of customers who are not satisfied with the state system and require additional services. Of course, this will not be a mass product, but will specifically target certain customers. OM: I agree that hospitals are relatively good in Hungary, but, at the same time, they have very limited funds to acquire modern equipment and devices. There are businesses that specialise in providing these devices within the hospitals, and the Social Security Fund is financing the use of these devices. Equity is needed for these purchases and this creates a demand for funding. The renewable sector is another area where I see opportunities and recently, more and more financial, rather than strategic, investors are showing interest. In addition, activity in the sector will be supported by EU subsidies. Such subsidies work through a pricing system in which member states are free to opt for one of two models. The feed-in system works where a generally higher price is offered for the uptake of renewable electricity. The other is the green certificate system. Either way, private equity investors stand to benefit from such hand-outs.

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Roundtable Discussion

06

GH: I agree – the Energy sector will also see a lot of interest, especially in the renewable energy sub-space. In addition, the TMT industry is likely to see a number of M&A deals looking forward, a case in point being the recent €10m acquisition by Magyar Telekom of International System House. I also see an appetite for agro-businesses. We have already closed one deal in this segment in 2009, advising a Dutch player who acquired a competitor in Western Hungary, so there is definitely interest in this area. Furthermore, there are certainly a lot of distressed stakes for sale in the market, especially in the Automotive sector.

Dr Zoltán Faludi (ZF) ZF: Based on the number of deals we are working on across different sectors, there are certainly sectors which are relatively weak. For example, Real Estate M&A certainly slowed down, primarily because of a lack of financing. At the same time however, Energy sector deal flow is still robust, although there are a lot of energy projects going on that are still under development – they haven’t reached the stage where financing is required. The main distinction between the two industries is that of leverage – Real Estate developers, who used to receive debt financings in the region of 90% to 95% of their investments, are not going to receive that anymore. As a result, Real Estate developers and investors are putting a considerable amount of equity not only into the development phase but also into the financing of their own projects and this has impacted deal flow.

The financing environment BS: Given what has happened in recent months, I think that it is natural for banks to be more cautious. But unlike the more mature markets, it was not the prime issue constraining deal flow as acquisition finance in CEE was available for much longer, and still is, to some extent. Even last November and December, there were deals being done in Poland with a debt element. OM: I agree on the issue of deal financing – banks have actually proven to be quite strong in providing acquisition financing for the types of deals that are occurring in Hungary. However, the 80% debt to equity ratios, which were witnessed in the past, have clearly disappeared. This ratio is now much lower and the conditions attached to it are also much stricter and, as a result, whoever now has cash reserves has an advantage. Any competitive bidding processes where debt financing is required by a bidder now takes much longer than in the past. Cash is definitely king at the moment.

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“Bidders must have an extremely interesting story to get financing up to five years and this would undoubtedly be an amortising loan starting in the first year, rather than bullet financing.” György Herczku

Roundtable Discussion

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PP: Our view is that deal financing is not really an issue. However, in this particular area, the one advantage that private equity has over corporate competitors is their approach to risk. I think that private equity is capable of bearing higher risks than strategic investors, with corporates tending to shy away from distressed driven M&A. Indeed, private equity is looking to conduct deals in areas that strategic players don’t want to touch, even if the industry is relatively fragmented. And this is exactly the type of space that private equity players will move into and look to undertake buy-and-build strategies, ultimately looking to provide a silver plate to strategic players in the future. ZF: What we are also seeing is that deal-making is taking longer due to documentation. Banks are updating their existing standard documentation to so-called LMA standards that we use for financing transactions, and now they are much more cautious looking at the provisions. This process certainly takes time and law firms and banks are now working together to find a best practice approach to this. GH: Bidders must have an extremely interesting story to get financing up to five years and this would undoubtedly be an amortising loan starting in the first year, rather than bullet financing. Furthermore, the margins are at least double what they were a year or two ago. From a sector perspective, there are certainly industries where banks are more willing to provide finance. Indeed niches such as Food & Beverages, Energy and Healthcare have not been greatly impacted by the downturn. In these types of industries, the banks are still willing to provide financing on relatively attractive terms. However, banks are still demanding more equity and this becomes even more severe when other sectors are taken into consideration. For example, if a company is operating in the Automotive or Real Estate industries, then it would find it very difficult to secure any kind of M&A financing at the moment.

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Roundtable Discussion

08

Corporate restructurings and distressed driven M&A situations BS: I expect that in the months and years to come, distressed sales will increasingly come to market despite there being little activity so far. Notably, there is no Chapter 11-style legislation across the region and it’s important to recognise that regional commercial bankers simply have no experience handling large loan book issues. They have little experience simply because there has not been a recession in this region. In comparison, the Anglo-Saxon markets have witnessed a marked increase in distressed M&A since the onset of the downturn. ZF: I believe that in the medium term, the volume of restructurings will rise, especially cross-border restructurings of multinational businesses. The process will be driven by a number of factors, firstly, the crossborder merger directive has been recently implemented in the CEE and this is a very good legal tool. The legislative package for the liberalisation of the Energy sector also provides an outlet for cross-border restructurings. Its implementation will facilitate the splitting up of all European Energy distribution assets from their existing companies. When this comes about, all of these companies will be looking for a new owner. However, corporate restructurings are complex from a legal viewpoint, especially since regional authorities are increasingly regulating the M&A markets. At the same time, governments are using the downturn to reshape national champions, particularly in the Agriculture and Energy sectors, although this could fall foul of EU antitrust laws. While I expect a wave of corporate restructurings to hit the region in the future, there have to date been very few cases where a banker has been willing to accept an unsolicited offer from a third party buyer for a debt package and force the equity owner out of the business. OM: After the collapse of Lehman Brothers, market values fell heavily which, in many cases, meant that there was barely any equity left in small businesses. Owners of many struggling businesses are relatively inexperienced and as a result, I would expect that distressed sales will pick up in a couple of months as owners begin to realise that they have to act to save their business. At the moment, many are in survival mode and hoping to renew short-term financing facilities to overcome the liquidity problems - they are generally reluctant to initiate any sale.

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Activity will also be kick-started by pressure from the banks. The problem is the banks are still waiting because their covenants are based on audited reports which only came to light a month ago and they still don’t know what they have on their balance sheets. Big institutions need time to evaluate situations and only after that can they start to think about taking steps with regards to these companies. The problem is that the banks haven’t faced these conditions before, their price expectations are quite high at the moment and they mostly think these credits are fully recoverable. Nevertheless, I believe that once the process starts, any potential restructurings will come very quickly. The problem with such restructuring negotiations is that a banker needs to see some business prospects on the horizon. If the company’s not performing as initially expected then the banks are more inclined to search for a new owner with some experience in restructuring, rather than keep on the existing owner, who, in recent years, was perhaps just riding the wave of market optimism. On the other hand, business owners are still hoping that the situation will either improve or the state will intervene, which I think is a problem as the state, in most instances, is not capable of evaluating which companies are capable of survival. In my mind, any state subsidisation, or state aid just distorts market conditions. It’s also bad for the private equity community because it’s prolonging the negative impact of the downturn. Peering into the crystal ball a little bit further, I think that the bulk of restructurings will fall into two categories. On the one hand, there are large corporates that have too much debt on their balance sheets and are forced to sell some of their assets. Yet in many cases, these assets may still perform relatively well and represent an excellent opportunity for equity players in the region. Another type is where the underlying asset itself doesn’t perform and then you really have to undertake a total restructuring of the business. I think there are also opportunities there, but they are more difficult to make money from and carry much more risk.

“In Hungary there is not a great deal left for sale. However, I see a lot of opportunities and an increasing number of tenders in neighbouring countries.” Dr Zoltán Faludi

Roundtable Discussion

09

State intervention and privatisation PP: Privatisations are off the radar for the moment although Hungarian companies are still heavily reliant on state bail-outs. Looking forward there are some possibilities for privatisation in Hungary, for example, within the Utilities or Public Services sectors. I would doubt that any of this will come through in the short term as I don’t believe that any political party or government will be willing to deregulate the market to such an extent. BS: I think you can clearly not expect many privatisations to take place anytime soon. There is nothing in state ownership that would be ready for privatisation and at the same time, there is little political will to sell. However, I do expect that in certain public services, the role of private investment will increase. These might be in areas such as municipal services, municipal public transport, water and wastewater treatment, or just simply waste management. In essence, I believe that more and more public services are going to be organised by private businesses. ZF: In Hungary there is not a great deal left for sale. However, I see a lot of opportunities and an increasing number of tenders in neighbouring countries. In terms of privatisation, what really concerns me is the amount of political influence in any process. This causes issues for investors and infringes on the reliability, transparency and security of the country’s legal framework.

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Roundtable Discussion

10

PENTA INVESTMENTS CASE STUDY

ZABKA • Industry: Food Retail - Convenience • Seat: Poznan, Poland • Total stake of: 100% • Penta involved in the investment: since 2007 Zabka is the largest chain of convenience stores in Poland, established in 2000, offering food and other goods in downtowns and busy residential areas. Zabka stores are managed by independent business entities according to a business relationship agreement. In 2007 Penta won an international tender, organized by the Warsaw advisory company CAG. Penta succeeded from among several Polish and foreign interested parties thanks to a combination of the highest price and the best purchase conditions. The transaction volume exceeded €150m. Penta’s ambition has been to keep and support the strategy of Zabka aimed at extending the number of stores. Besides that, Penta has brought a new focus on territorial expansion. Since April 2008, Zabka has started to provide its services in Prague, in the Czech Republic. Currently it operates approximately 50 stores. Currently Zabka investment represents three lines: • Zabka - convenience concept Poland, where more than 2,000 shops are being operated and 200 shops being opened annually; • Zabka – the new format shops Freshmarket, established in 2009 in Poland; • Zabka Czech Republic - convenience and supermarket concept. Key figures (2008): • Annual revenues of €440m • EBIDTA of €18m

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Roundtable Discussion

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Cross-Border Merger Case Study There is an ever-increasing demand in the business sector to find the easiest way for companies to cooperate and restructure themselves across borders. This demand was supported by the European Directive 2005/56/EC of the European Parliament and the Council on cross-border mergers of limited liability companies (Directive) by proposing a simplified legislative framework. The legal basis of the Directive is article 44 of the EC Treaty with regard to the freedom of establishment. The Directive has been implemented into the Hungarian legal system by the Act CXL of 2007. Furthermore, Hungary has implemented the Council Directive 90/434/ EEC of 23 July 1990 on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office, of an SE or SCE, between Member States (‘Merger Directive’) and Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘VAT Directive’) so that the tax treatment of cross-border mergers is also harmonised. In the following case study, we are introducing a scenario where a crossborder merger is conducted between two companies which have their registered seats in different member states of the EU, a pre-condition for the application of cross-border merger law (cross-border element). 1. Background 1.1 Company A is a limited liability company duly registered under Austrian law. 100% of its quotas are held by a holding company registered in Austria. Company B is a limited liability company and duly registered under Hungarian law. 100% of its quotas are held by a holding company registered in Slovenia. 1.2 Company B would merge into Company A by way of an absorption and, following the merger, Company A would keep its legal entity. 2. Universal succession 2.1 It is a general characteristic of cross-border merger law that the company being acquired ceases to exist and all of its assets and liabilities are transferred to the new entity (universal succession). However, additional procedures need to be conducted and rules remain applicable, for example, for the registration of the change of ownership in the case of real estates and registered movables. In the case of permits and licenses, the notification of the issuing authorities is mandatory and, in particular cases, the approval of the issuing authority needs to be obtained as well. 2.2 If the company being acquired has more members, then they too become members of the new entity; however, any shareholder of the predecessor company may decide not to participate (i.e. remain a shareholder) in the successor company (an ‘exiting shareholder’). In such a case, the exiting shareholder is entitled to the relevant portion of the net assets of the predecessor company.

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3. Competition law aspect It should be added that apart from industry-specific regulatory notification or licensing requirements, a merger may be subject to Hungarian or EU merger control depending on whether certain turnover thresholds of the participating groups of companies are exceeded. Unless EU merger control thresholds are met (which we do not set out in detail) the Hungarian competition act (Act LVII 1996 on the prohibition of unfair trading practices and unfair competition) requires the prior authorisation of the merger as well as the agreement from the Hungarian Competition Authority. 4. Steps of the merger As a first step, a decision of the general meeting of both Company A and Company B is needed to start the merger process. Further decisions are then required to begin carrying out the merger process, such as instructing the management to prepare the common draft terms of cross-border merger, to draft a statement of assets and liabilities for both companies and to select an auditor. The applicable law contains a list of compulsory particulars that constitute the minimum content of the common draft terms, which must be published as prescribed by law at least one month before the date of the general meeting which is to decide on them. At least thirty days before the date of the general meeting, the common draft terms must be published by the company in the Official Journal in the countries of registration of Company A and Company B. The management of the merging companies must prepare a report on the proposed cross-border merger for the members and employees that explains the legal and economic aspects of the cross-border merger and its implications on creditors and employees. The management report must include all implications of the cross-border merger to employees. If there is a workers’ council, the report must be made available to the workers’ council (or the employees) at least 30 days before the common draft terms of the cross-border merger is approved by the supreme body of the merging company. The workers’ council has the right to provide an opinion which is to be attached to the management report.

An independent auditor’s report on the merger must be drawn up. It will not be required if all the members of each of the companies involved in the merger have so agreed. The auditor’s report and the proposed crossborder merger report must be made available at least one month before the date of the general meeting to the shareholders, notwithstanding that the statements of assets and liabilities and inventories need to be approved by an accountant. If there is a supervisory board at either of the two companies, the supervisory board must offer an opinion on the proposal for the crossborder merger issued by the management of the company for the first general meeting. The approval of the supervisory board may be required for the cross-border merger if so provided in the Articles of Association. However, if the supervisory board refuses to grant its approval of the respective decision, the management of the company may convoke the general meeting to replace or substitute – as the case may be – the resolution of the supervisory board. On the basis of the documents referred to above, the general meeting of both Company A and Company B must decide on the approval of the common draft terms of the cross-border merger and about the draft statement of assets and liabilities and draft inventories for the merging companies and for the successor. Following the execution of the common draft terms, Company A and Company B must publish two consecutive notices in the Official Journal within eight days after the approval of the common draft terms by all companies. 5. Worker participation The general principle as regards the employees’ rights of participation is that national laws governing the company resulting from the crossborder merger will apply, which is Austrian law in our case. We note that under Hungarian law, if the resulting company has more than 200 employees, the establishment of a supervisory board is mandatory and the participation of the employees needs to be one third of the members of the supervisory board.

Roundtable Discussion

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6. Operation of Company A in Hungary following the merger Following the merger, Company A can operate in Hungary either cross-border from Austria or through establishing a branch office or a subsidiary in Hungary. We note here that according to the relevant ECJ case law and Hungarian laws, if the operation in Hungary can qualify a permanent establishment because the services rendered through permanent representatives do not have a cross-border characteristic anymore, Company A will be obliged to establish a branch office. We note that in case of a financial service provider in the EEA, there are more beneficial rules applicable to obtain operation permits for branch offices than for subsidiaries. 7. Approval by the Company Court Management of Company B must file an application for the issuance of the pre-merger certificate to the Hungarian Court of Registry. The Hungarian Company Court must issue a pre-merger certificate attesting to the proper completion of the pre-merger acts and formalities. The management of Company A must file an application for registration with the Austrian Court of Registry. The merger is legally effective upon registration of the merger in the Austrian Commercial Register in compliance with the relevant Austrian laws. After registration of the merger in the Austrian Commercial Register, the Hungarian Court of Registry deletes Company B from the registry of companies upon notice of the registration of the merger received from the Court of Registry of the absorbing (successor) company. 8. Tax aspects Based on the Act CXL of 2007, legal succession resulting from crossborder transformation of companies is recognised by Hungarian tax law. Thus, in general, rights and obligations pertaining to the legal predecessor (i.e. Company B) will transfer to the successor company (i.e. Company A). The economic presence of Company A in Hungary following the merger should qualify as a permanent establishment for tax purposes, unless it terminates its business activity in Hungary. Consequently, Company A should register a branch office with the Hungarian court of registration.

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Roundtable Discussion

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8.1 Corporation tax Hungary implemented the EU Merger Directive into the Hungarian tax law introducing the concept of qualified transformation (referred to as ‘merger’ by the Merger Directive). Hungarian taxpayers meeting the requirements set forth for qualified transformations may opt for a beneficial corporate tax treatment. In the course of the merger, the transfer of assets and liabilities of Company B could either be performed at book value or at fair market value for book purposes. In case the transformation is performed at book value, there should be no Hungarian corporate tax effect either at Company B or Company A. However, in case Company B decides to revalue its assets and liabilities for book purposes, i.e. if the transformation is performed at fair market value, the revaluation difference between the book value and the fair market value of the assets and liabilities shall adjust the corporate tax base and thus, in case of a potential gain, it could result in Hungarian corporation tax liability at Company B. Applying the referred beneficial rules of qualified transformation, the corporate tax liability arising from the revaluation gain can be deferred; Company A and Company B shall determine the corporate tax liabilities as if the transformation had not taken place. 8.2 Value added tax In line with the relevant EU regulation, transfer of assets and liabilities during the transformation is not subject to Hungarian value added tax, provided that certain requirements are met. The most important of the referred requirements is that the transformation would be subject to Hungarian value added tax if Company A does not qualify as a Hungarian taxpayer following the transformation. 8.3 Transfer tax Transfer of real property held by Company B during the transformation is not subject to transfer tax in Hungary; however, as of 1 January 2010, this exemption will apply to qualified transformations only. 8.4 Local taxes No local tax liability would arise in relation to the transformation. by János Tóth, György Kovács and Mihály Harcos

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Roundtable Discussion

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Historical data Top deals Q3 2008-Q1 2009 Cee Announced date

Status

07-Apr-09

Deal value (€m)

Target company

Target dominant sector

Target dominant country

Bidder company

Bidder dominant country

Seller company

Seller dominant country

C

JSC Gazprom Neft (20% stake)

Energy, Mining & Utilities

Russia

OAO Gazprom

Russia

ENI SpA

Italy

3,089

30-Mar-09

C

Bashkir Oil and Energy Group

Energy, Mining & Utilities

Russia

AFK Sistema

Russia

Agidel-Invest LLC; Inzer-Invest LLC; UralInvest LLC; Yuryuzan-Invest LLC

Russia

1,894

02-Jun-09

P

OAO Rostelecom (40% stake)

TMT

Russia

Deposit Insurance Agency; Vnesheconombank

Russia

KIT Finance

Russia

1,513

30-Mar-09

P

MOL Hungarian Oil and Gas Public Ltd Company (21.2% stake)

Energy, Mining & Utilities

Hungary

OJSC Surgutneftegaz Russia

OMV AG

Austria

1,415

18-Nov-08

C

Masshtab (49.91% stake)

Real Estate

Russia

Avgur Estate

Russia

Investbuilding Group

Russia

1,189

27-May-09

P

OAO Novatek (13.3% stake)

Energy, Mining & Utilities

Russia

Volga Resources SICAV SIF SA

Luxembourg

Cartagena Development Inc

Russia

1,125

02-Sep-08

C

INA Industrija Nafte dd (22.15% stake)

Energy, Mining & Utilities

Croatia

MOL Hungarian Oil and Gas Public Ltd Company

Hungary

14-May-09

C

Kompania Piwowarska SA (28.1% stake)

Consumer

Poland

SABMiller plc

United Kingdom

Kulczyk Holding SA

Poland

818

31-Jul-08

C

Nova Television Bulgaria TMT

Bulgaria

Modern Times Group MTG AB

Sweden

Antenna Group (Greece)

Greece

620

03-Mar-09

C

OJSC Polyus Gold (20% stake)

Russia

Suleiman Kerimov (private investor)

Russia

Vladimir Potanin (private investor)

Russia

541

Energy, Mining & Utilities

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870

Roundtable Discussion

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Hungary Announced date

Status

Target company

Target dominant sector

Target dominant country

Bidder company

30-Mar-09

P

MOL Hungarian Oil and Gas Public Ltd Company (21.2% stake)

Energy, Mining & Utilities

Hungary

30-Sep-08

C

Hungarian Power Companies Ltd (assets); Matra Power Plant Zrt (assets)

Energy, Mining & Utilities

04-Aug-08

C

ASA Epitoipari Kft

12-Dec-08

C

29-May-09

P

Bidder dominant country

Seller company

Seller dominant country

OJSC Surgutneftegaz Russia

OMV AG

Austria

Hungary

Matra Power Plant Generation Co

Hungary

Hungarian Power Companies Ltd; Matra Power Plant Zrt

Hungary

Construction

Hungary

Consolis Oy Ab

Finland

Papai Hus Zrt

Consumer

Hungary

Papa 1913

Hungary

International System House Ltd

TMT

Hungary

Magyar Telekom plc

Hungary

Deal value (€m) 1,415

208

100

Vectigalis

Hungary

17

10

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Roundtable Discussion

18

Overall M&A trends in CEE

300

Geographic split of CEE M&A activity H1 2009: VOLUME 40,000

9%

Russia

2% 250

3%

200 25,000 150 20,000

Value of deals (€m)

30,000 Volume of deals

Poland

2%

35,000

Czech Republic

4%

38%

Ukraine

5%

Hungary Slovakia 9%

100

Bulgaria

15,000 50

Romania

Serbia & Montenegro Other

10,000 12%

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009

16%

5,000

Volume of deals Value of deals (€m)

Overall M&A trends in Hungary

Geographic split of CEE M&A activity H1 2009: VALUE

2,500

20

1% 1%1% 2%

5% Russia Hungary

7%

2,000

Poland

1,500 10

Value of deals (€m)

Volume of deals

15

Romania Macedonia

9%

Serbia & Montenegro Lithuania

1,000

Other 5 500

74% 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009

0

Volume of deals Value of deals (€m)

CEE Roundtable: post-event report www.mergermarket.com/events/

Geographic split of Hungarian M&A activity H1 2009: VOLUME 6%

Transportation

18%

6% 6%

Roundtable Discussion

19 Geographic split of Hungarian M&A activity H1 2009: VOLUME 6%

2% Energy, Mining & Utilities

Consumer

Construction

Energy, Mining & Utilities

Other

Industrials & Chemicals 6%

TMT 17%

Business Services Construction Financial Services

12%

Defence

12%

17%

92%

Deal size split of Hungarian M&A activity Q3 2008-Q2 2009: VOLUME 1% 1%1% 2%

5% Russia Hungary

7%

Poland Romania Macedonia

9%

Serbia & Montenegro Lithuania Other

74%

CEE Roundtable: post-event report www.mergermarket.com/events/

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