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Jul 05, 2023 14:35 EEST
July 5 (SeeNews) - Croatian independent M&A advisory company Vestibule Partners said on Wednesday it expects to close six more transactions by the end of this year amidst an ongoing consolidation in a number of domestic sectors and growing appetite of foreign private equity funds for regionally-present businesses.
“The overall value of these transactions is expected to be up to 100 million euro ($109 million),” Tomislav Kovalisko, managing partner of Vestibule Partners, told SeeNews in an interview.
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On the sell-side, he expects to complete a further five transactions to sell local companies in the sectors of energy-related engineering, building materials, food, specialised retail, and health and beauty.
On the buy-side, Vestibule Partners is advising a potential buyer of a regionally-present food production company from former Yugoslavia, a takeover which is likely to be finalised in the next six months.
"The M&A market has accelerated. The local market is in a process of consolidation - there are a lot of foreign corporations entering the Croatian market, some of the existing players have started consolidation, and more and more private equity funds come as buyers as Croatia is becoming more attractive for them," he said.
Earlier this year, Vestibule Partners wrapped up a transaction in which it advised French-headquartered group of regional leisure parks Looping Group as buyer of Aquacolors, one of Croatia’s largest aquatic parks. Last year, the same investor bought another Croatian water park, Istralandia.
Kovalisko said Croatia’s entry in the eurozone and the Schengen area at the beginning of the year contributed to its attractiveness in terms of foreign investments but the main drivers on the domestic M&A market are different.
"Right now we are witnessing a generation transition, the founders of businesses are transferring them to their children. However, sometimes this is not possible and the owners are selling their companies," he explained.
In his view, the perception of the sale process among the local family-run companies has also changed.
"A couple of years ago, many owners of business considered the sale of their companies a failure. Now, they realise that the sale is a natural process and a peak that the owners achieve when they have developed a successful business, which somebody wants to take over, develop further and incorporate into another business system," Kovalisko commented.
CONSOLIDATION UNDER WAY, PRIVATISATIONS AHEAD
Consolidation is already under way in Croatia’s health and beauty sector. Vestibule Partners expects further consolidation in the sectors of retail, construction, building materials, food, and financial services.
For Kovalisko, a positive example for a local company expanding by acquisitions is local electrical concern Koncar Group [ZSE:KOEI], which took over several local companies last year.
The sale of engineering company Telenerg-Inzenjering to Koncar was one of the three M&A transactions in Croatia last year, in which Vestibule Partners was a sell-side advisor. It also advised the sale of waterworks company Vodoprivreda-Zagorje to local construction materials trader BMD Stil, and sale of food supplement producer Nemus Lex to Stada d.o.o., a Croatian affiliate of German pharmaceuticals manufacturer Stada.
State-owned Croatian companies also offer interesting investment opportunities but privatisation would not be on the agenda of the government before the general elections next year, Kovalisko said. As potentially interesting future privatisation cases he pointed to food and pharmaceuticals company Podravka, Hrvatska Postanska Banka, postal services provider Hrvatska Posta, units of railway company Hrvatske Zeljeznice and power utility Hrvatska Elektorprivreda, as well as debt-ridden Croatia Airlines, some healthcare and educational services providers and Zagrebacke Ceste, the street maintenance company in the capital.
THE USUAL SUSPECTS
Some two-thirds of Vestibule Partners' clients are local companies and one third are foreign private equity funds, looking for acquisition opportunities on the Croatian market and in other former Yugoslav countries. "We often receive requests for the whole region of former Yugoslavia, including Slovenia," Kovalisko said.
In his words, Slovenian companies are the "usual suspects" and mostly likely buyers whenever a Croatian company is put up for sale.
"Slovenia is very attractive market, with a lot of small and medium-sized exports oriented and efficient companies. We love their work ethics and mindset, the Slovenian capital Ljubljana is just an hour and a half drive off to Zagreb and Slovenian companies have participated in the sale processes of all Croatian companies," he added.
For foreign investors, Serbia and North Macedonia are interesting markets, with attractive companies in Serbia’s construction, building materials, mining and food sectors and North Macedonia’s food, pharmaceuticals, and distribution companies but the investments depend on the political stability in these countries and both of them have to improve their regulation to provide safety to foreign investors, Kovalisko said.
Vestibule Partners is member of group of independent M&A advisory companies Pandion Partners, which is active globally.
($ = 0.919 euro)
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