Transactions of the year 2021: corporate appetite for mergers and acquisitions remains strong
The Hungarian mergers and acquisitions market continued its relatively strong activity despite the ongoing coronavirus pandemic in 2021. The market saw further consolidation of the banking system, several large-scale acquisitions in the information technology and telecommunications and energy transactions.
To give a contextual snapshot on which to judge this year’s numbers, it’s worth remembering that the M&A market started to come alive in 2020, and analysts expect 2021 to be a year just as well. responsible for mergers and acquisitions. According to international consultancy firm EY, around 105 completed deals were recorded last year, for a total estimated value of more than $ 5.69 billion (HUF 1.68 trillion).
The number of transactions increased by 4% compared to 2019, while their value increased by 7.5% in 2020 compared to the previous year. As for transparency, there was a notable development in 2020: financial data was disclosed in 32% of cases; in 2019, this ratio was only 19%.
Technology was the most popular sector for investors; a total of 22 transactions were concluded in the IT field. In more than half of M&A transactions, domestic firms acted as buyers; the ratio of foreign companies was only 29% in 2020. At the same time, the percentage of Hungarian companies making acquisitions abroad increased by 1% in 2020 compared to 2019. Capital companies -risk have been quite active in 2020, with 22 agreements concluded during the year.
As for 2021, although the pandemic is still determining global markets, according to experts at EY, the size of the transaction market in Hungary has not decreased. It remains active and, in line with international trends, the interest of domestic and foreign investors in favorable opportunities is increasing.
Many of the negotiations that began before the restrictions were introduced have continued. The pandemic has hampered progress in terms of timing, however, particularly in the SME sector.
Consolidation of the Hungarian banking system continued in 2021, with the ongoing integration of member institutions of a Hungarian mega-bank, known for now at least as Magyar Bankholding.
The holding, made up of three banks: MKB, Budapest Bank and Takarékbank, started operating about a year ago after the National Bank of Hungary (MNB) approved the merger and the shares of the lenders were transferred to a joint holding company.
In November, the holding company announced the timetable for a two-stage merger: first, Budapest Bank and MKB will merge under the name MKB Bank Nyrt. next spring, the Takarek group will then join the group in the second quarter of 2023, creating the second largest commercial bank in Hungary.
The merger, however, will leave the ownership structure of the group unchanged. According to current plans, Magyar Bankholding will appear on the Hungarian Stock Exchange in 2025 and also enter international markets in the same year.
In 2012, Prime Minister Viktor Orbán said he wanted at least 50% of banks in Hungary to be state or state owned. Several state acquisitions made it possible to achieve this goal, as in the cases of Takarékbank, Budapest Bank and Erste Bank, and in October another bank joined the Hungarian ranks.
100% Hungarian-owned MagNet Bank Zrt. acquired the Hungarian subsidiary of Hypo-Bank Burgenland AG, Sopron Bank Zrt. Following the sale, Hypo-Bank did not leave Hungary but said it plans to focus on serving businesses in Hungary, mainly in the area of real estate finance.
With this acquisition, MagNet Bank acquired a branch network in western Hungary and almost doubled its market share. The bank has been profitable in the domestic market for the past 25 years and has served over 50,000 clients in several M&A transactions, including the 2013 acquisition of Banco Popolare Hungary.
Hungary’s largest lender, OTP Bank, was also active in 2021 in the region. The group announced in June that it had signed an agreement to acquire 100% of the capital of Nova KBM. With the largest acquisition in the history of the OTP group, it would become the market leader in Slovenia, the financial institution announced in June. The transaction is expected to be financially finalized in the second quarter of next year after obtaining the necessary prudential approvals.
In November, OTP Bank announced the acquisition of Alpha Bank’s Albanian subsidiary, Alpha Bank Albania, for 55 million euros. The transaction is expected to be financially finalized in the second quarter of 2022. With a market share of nearly 5% of assets, Alpha Bank is the eighth largest bank in the country, active in both the personal and corporate segments.
It currently operates a network of 34 branches and is present in all major Albanian cities. This is the second acquisition by OTP in Albania: SGAL bank, then owned by Société Générale, was acquired by OTP in 2019.
Sándor Csányi, Chairman and CEO of OTP, said at the time that OTP wanted to be the biggest bank in the Albanian market. He predicted this would be achieved primarily through organic growth, but if a suitable target was found, an acquisition would be considered, he said.
Digital banking is one of the trends that primarily define the future of banking. In October, the Hungarian company W.UP and the Czech company Banking Software Company (BSC) announced their merger. The two are in the process of forming a new group of companies called Finshape to facilitate international expansion.
The merged digital banking technology provider will accelerate digital developments for banks by combining low-code platforms and data-driven personalization solutions. The transaction involved PortfoLion Capital Partners, one of the leading venture and private equity firms in Central and Eastern Europe, providing a strong backdrop for further expansion in Europe, Asia and the Middle East, have indicated the companies.
IT and telecom
The most active player in the IT sector is the technology company 4iG. His aim is to become one of the key players in the Hungarian and regional IT and telecommunications market, and he has done a lot to achieve this in recent months, adding several national and regional assets to his portfolio.
According to the latest announcements, 4iG is now expanding its telecommunications portfolio in the Western Balkans region after entering into a definitive sale agreement with Cetel Telekom, which owns a majority stake in Turkish Çalik Holding, to purchase an 80.27% stake in ALBtelecom.
ALBtelecom is Albania’s leading fixed internet and television provider, the owner of the country’s largest optical network and a major mobile operator with its own network. Following the approval of the Albanian authorities, the acquisition of a majority stake in ALBtelecom is expected to be finalized in January 2022. The parties have not disclosed the value of the transaction.
In mid-October, 4iG declared that Hungaro DigiTel Kft., A joint subsidiary of 4iG and Antenna Hungária Zrt. (which owns a 25% stake) has reached a definitive agreement with the Israeli company Space-Communication Ltd. to acquire a 51% stake in the company. Again, the value of the transaction was not disclosed; however, market estimates put it at $ 65 million.
Announced in July and executed in October, 4iG also acquired 100% of the capital of Telenor doo Podgorica (Telenor Montenegro). Once again, 4iG declined to disclose how much it had offered owner PPF Telecom Group as part of the deal. Telenor Montenegro is the leading mobile operator in the south of the Slavic country, with a turnover of 44 million euros in 2020.
However, the biggest deal the IT company made this year was the acquisition of the Hungarian branch of cable service provider Digi. 4iG announced at the end of November that it had acquired the Hungarian interests in Digi from the Romanian group RCS & RDS. The value of the transaction is 625 million euros, which is equivalent to approximately 232 billion HUF. The transaction could be finalized in January 2022 following a regulatory procedure.
The number of employees of the Digi Group in Hungary exceeds 3,000. In 2020, its consolidated turnover was HUF 70 billion and its adjusted EBITDA reached HUF 19 billion. Digi has 61 customer service offices in major cities in Hungary, while its subsidiary Invitel has 16 more.
4iG has also partnered with state-owned digital terrestrial broadcaster Antenna Hungária. In August, the two sides announced that they had reached a cooperation agreement.
The objective here is for the parties to combine public and private capital to create a strategic telecommunications and infrastructure company which, in addition to competitive market services, places great importance on national interests within the industry.
In the meantime, Antenna Hungária has finalized the acquisition of telecommunications service provider MVM NET from public energy company MVM Energetika Zrt. MVM Net, which provides the availability of critical telecommunications services, primarily within the MVM Group, as well as to state and wholesale customers, will change its name to AH NET Távközlési Zrt.
Consolidation of the energy market also continued in 2021. In April, MVM Energetika signed a purchase agreement with Émász Zrt. to buy 100% of Émász Hálózati Kft. With this acquisition, MVM guarantees a secure technical background for electrical services to nearly one and a half million customers. Andrea Máger, minister without portfolio responsible for national asset management, said the transaction is another step in building the business that will allow MVM Group to cover the entire domestic energy value chain and to become a key player in the market at the regional level.
She recalled that MVM and E.ON had signed an agreement in the fall of 2019, under which MVM would buy Émász Hálózati this year.
In March, OPUS Global signed a purchase agreement with the Swiss group MET for the acquisition of 50% of MS Energy Holding AG, with which OPUS will acquire a 49.57% stake in Tigáz Földgázelosztó Zrt.
This article first appeared in the print issue of the Budapest Business Journal on December 17, 2021.