CEE and Central Asia – Mixed results

In 2024, the M&A landscape in Central and Eastern Europe (CEE) and Central Asia presented a mixed picture. While the overall deal volume dropped significantly, the value of these deals saw a slight increase.

Central Asia has evolved into an economic hub, attracting investments, and facilitating mergers and acquisitions. This growth was driven by economic restructuring, geopolitical developments, and regional infrastructure initiatives. However, traditional M&A transactions remain underdeveloped in Central Asia due to significant public sector involvement.

At the same time, over the past two decades, CEE became a prime destination for mergers and acquisitions. The region boasted a thriving economy, a highly skilled yet cost-effective workforce, easy access to EU markets, and a business-friendly environment. This positive trend has continued, creating new investment opportunities as CEE developed further.

Emerging M&A trends in Central Asia and beyond

In Central Asia, traditional M&A activity is limited due to the dominance of state-owned enterprises (SOEs) and public sector partnerships. However, Kazakhstan and Uzbekistan are taking the lead with active privatisation initiatives and significant transactions.

Kazakhstan's strategic geographical position and its efforts to modernise the economy have attracted both domestic and international investors.

The banking sector has experienced significant changes, such as Lesha Bank’s acquisition of Bereke Bank for $146 million and the debt restructuring deal of the state-owned Development Bank of Kazakhstan, involving bondholders and a debt exchange valued at $335 million.

In 2024, Kazakhstan’s mining and metal industry also witnessed several notable transactions. Solidcore Resources acquired a 55% stake in Tin One Holding, an Astana-based intermediary, owned by Lancaster Group Kazakhstan for a total of $82 million. As part of a comprehensive privatisation plan, an investor group consisting of Metaleen Investments Holdings and TSP Aluminyum acquired a 55% interest in Tau-Ken Temir, a steel mill operator, owned by the Kazakhstani state-owned Sovereign Wealth Fund Samruk-Kazyna. Concurrently, the group also acquired a 55% interest in Silicon Mining LLP. Both transactions had a combined value of $10 million.

The petroleum and natural gas sectors have also undergone major developments. Fincraft Group acquired around 26.9% stake in Tethys Petroleum, an Aktobe-based producer of crude petroleum and natural gas, for a total value of $16 million. In turn, QazaqGaz, acquired the entire share capital of an Almaty-based natural gas distributor, from Samruk-Kazyna.

Additionally, Kazakhstan has become a significant player in the telecommunications and IT sectors. This expansion is driven by a growing population, increasing smartphone adoption, and expanding communication services.

Major deals in this sector include the consolidation of several telecom companies to improve service delivery and expand market reach. In the IT sector, Kazakhstan has experienced a surge in acquisitions aimed at enhancing technological capabilities and fostering innovation. A notable example is the finalisation of the sale of Mobile Telecom-Service, which operates under the Tele2/Altel brands, to Qatari Power International Holding by Kazakhtelecom, the largest telecommunication company in Kazakhstan.

Uzbekistan has also been active in privatisation, with major deals in industries such as energy and power, transportation and infrastructure, media and entertainment, and others.

Thus, Petroleum Technology Group became the owner of Chinoz Oil Refinery, a producer of crude petroleum and natural gas, which was previously part of the state company Uzbekneftegaz.

Cotton Logistics acquired a 35% stake in Uztemiryulkonteyner, a Tashkent-based provider of freight transportation arrangement services, from the Uzbekistani state-owned agency, for a total of $15 million.

Smart Fast Stroy has won the tender to privatise the International Hotel in Tashkent, offering more than $41 million for the property.

Alfa Invest Insurance Company acquired 100% of the government stake in Tashkent New Palace, for a total of $20 million.

Despite these high-profile transactions, M&A activity in Kyrgyzstan, Tajikistan, and Turkmenistan remains sparse, typically driven by state-backed initiatives rather than private-sector M&A. Cross-border activity is significant, with major deals originating from the US, UK and Netherlands by value, and the US, UK, and Germany leading by volume.

Expanding further into Asia, Mongolia's M&A activity is gradually evolving, particularly in sectors like mining, banking, and insurance. The government is promoting privatisation and restructuring to attract foreign investment. However, the overall M&A landscape in Mongolia is still developing, with many deals driven by state-backed initiatives or strategic collaborations.

Resilience and growth in M&A markets

In 2024, the M&A markets in CEE showed resilience despite significant geopolitical uncertainty. Transaction volumes declined by over 25%, but values were up close to 15%. Transactional value in CEE was up year on year, but down compared to the period from 2020 to 2022.

The trend toward larger transactions is clear, with increasing cross-border investments.

The values of transactions, for instance, were €6.0 billion (inbound) and €350 million (outbound) in Poland, €2.4 billion (inbound) and €2.3 billion (outbound) in Czech Republic, €1.1 billion (inbound) and €630 million (outbound) in Hungary.

Overall, Poland continued to be a leader in the business services sector in CEE in 2024, offering numerous benefits to investors, such as economic stability, strategic location, and a skilled workforce.

Among the largest deals were transactions in the information technology sector. For instance, CVC Capital Partners, along with private investors, acquired around a 62.8% strategic stake in Comarch, a leading Polish IT company, for $442.6 million.

One of the remarkable Polish transactions in 2024 was the acquisition of 100% of the shares of VeloBank S.A. from the Bank Guarantee Fund in Poland by a consortium led by Cerberus Capital Management, along with the European Bank for Reconstruction and Development and the International Finance Corporation, for an estimated $266.105 million. This deal is expected to strengthen the bank’s financial and operational foundations, enabling dynamic development and expansion in the Polish banking market.

Another notable deal on the Polish market was the acquisition of Selt, one of the largest manufacturers and distributors of sun visors in Europe, by Grupa Kęty, a company dealing in aluminum processing, for around $97.6 million.

The M&A market in the Czech Republic saw significant activity from financial sponsors, including established private equity funds, family offices, and high-net-worth individuals.

Notable players like Genesis Capital and Penta Hospitals were active buyers in multiple local transactions, highlighting their influential presence. The biggest deal was also domestic – the Czech state-owned CEZ acquired a 55.21% interest in Gasnet, a natural gas distributor, for $924.209 million.

Ukraine's M&A market showed remarkable strength despite the ongoing conflict. In 2024, M&A activity remained stable. The combined value of announced and completed M&A deals in Ukraine for 2024, including corporate deals, tech sector venture capital transactions, and state-owned property privatisations, amounted to $1.2 billion.

The largest deals were in the IT, technology, and telecommunications sectors, such as an investment round that attracted $200 million by Creatio (developer of a no-code platform for business process automation) and the acquisition of Datagroup-Volia and lifecell by the NJJ consortium for $120 million.

Compared to the previous year, the value of M&A deals in 2024 in Ukraine decreased by 30%. However, the investment market is evidently undergoing a notable revival, as reflected by the growing volume of transactions.

Sector dynamics

Central Asia and CEE are witnessing remarkable growth in several key investment sectors, including energy, renewable power generation, transportation and logistics, manufacturing, telecommunications and IT, manufacturing, and technology.

In recent years, infrastructure investments in Central Asia, particularly those driven by China’s Belt and Road Initiative, have dominated the region. Investments have been directed towards energy, transportation, and manufacturing sectors, including industrial facilities such as car factories and bottling plants in Kazakhstan and Uzbekistan. Notably, the TAPI pipeline (Turkmenistan-Afghanistan-Pakistan-India) is a key infrastructure project that underscores the region’s focus on energy infrastructure development.

In terms of sectors, consumer continues to lead in CEE and Central Asia accounting for close to 25% of deals. This growth is driven by the region’s ongoing digital transformation, urbanisation, demographic changes, and investments. The industrials sector has seen a significant rise, with deal value increasing by 85% year on year, supported by automation, high-tech production, and reshoring trends.

In the energy sector, there has been robust activity reflecting global shifts towards sustainable energy solutions. The region is intensively upgrading its energy infrastructure to enhance reliability and efficiency, reducing dependency on Russian energy imports.

Regulatory landscape and legal trends

Regulatory oversight remains a crucial factor shaping the M&A landscape across CEE and Central Asia.

In Central Asia, the regulatory environment is complex, particularly in light of the significant presence of SOEs. Uzbekistan's privatisation initiatives have enhanced transparency, while Kazakhstan is balancing towards private sector engagement. Tajikistan and Kyrgyzstan are focusing on consolidating their banking sectors to ensure financial stability. Mongolia has introduced legal reforms to improve transparency and align with international standards, especially in commercial law and environmental regulations.

ESG considerations are gaining prominence in these dealmaking processes. Buyers are increasingly conducting thorough ESG due diligence, while sellers are under pressure to demonstrate strong sustainability credentials to attract investment. This trend is expected to grow as ESG regulatory frameworks evolve. The introduction of the EU Foreign Subsidies Regulation adds another layer of complexity, requiring companies involved in transactions to disclose subsidies received from non-EU governments, further tightening regulatory scrutiny.

In the CEE region, there is a dominant trend towards regulatory alignment with EU laws. Governments are modernising legal frameworks to meet EU standards. For example, Bulgaria is aligning with the EU Green Deal by introducing stricter emissions regulations and promoting green projects. Estonia is pushing for green financing under the EU Taxonomy Framework, reflecting the digitalisation of administrative processes. Corporate governance is evolving with a growing emphasis on ESG criteria, leading to new regulations on sustainability reporting.

Renewable energy laws are being enhanced across the region to meet EU climate goals, including energy projects and grid modernisation. In data protection and privacy, countries such as Bosnia are implementing GDPR-like regulations to ensure stronger security standards. Turkey is modernising its legal framework to align with international standards, particularly in civil rights and environmental protection. EU financial regulations are enhancing financial market transparency, while changes in labour laws are aligning with EU standards, making the region more attractive for investment and economic growth.

Outlook and growth potential 

In conclusion, the M&A landscape in CEE and Central Asia is set for growth despite geopolitical and economic challenges. Stabilising financial conditions, like decreasing inflation and financing costs, are creating cautious optimism. Key sectors such as technology, energy transition and industrial manufacturing are expected to drive M&A activity, with strategic cross-border investments playing a significant role.

In Central Asia, infrastructure investments under the Belt & Road Initiative and privatisation reforms in Uzbekistan and Kazakhstan are expected to boost market activity. Geopolitical shifts with Russia and China may create new opportunities for strategic investors. The energy sector, especially renewable energy projects, is anticipated to grow, supported by sovereign wealth funds and private capital investors.

The CEE region remains attractive for M&A activity due to its strong economic fundamentals, including a skilled labour force, proximity to Western Europe, low transport and labour costs, and developed infrastructure. These advantages are expected to support M&A activity in 2025, particularly in Poland, Romania, and Hungary. The trend towards larger transactions and cross-border deals is likely to continue, driven by efforts to reduce dependence on Russia and diversify investment strategies. Overall, the region's resilience and strategic initiatives are set to positively shape its M&A trajectory in the coming months.