Was the rise of M&A deals in Croatia a blip?
M&A deals in Croatia increased by 60% to 2021: 69 deals compared to 2020’s 43. The largest of the M&A deals in Croatia was the UK's Nomad Foods' acquisition of Fortenova for EUR 492 million.
Was this just a blip, the result of unique events? Or will we see even more M&A deals in Croatia?
Why did M&A deals in Croatia increase?
The Croatian economy came tearing out of Covid, for one thing, with a 2021 growth rate of 10.4% (compared to 7.4% in the UK).
But the trend in deal value, if not number of deals, was visible before anyone had heard of Covid.
Another obvious answer is that Croatia is producing some really exciting companies which multinationals are keen to get their hands on, with plenty of tech expertise in a highly trained multilingual work force. Unsurprisingly, it was tech and healthcare sectors which saw the steepest incline in M&A deals.
As well as being in the EU, Croatia offers a reliable legal system and access to Eastern Europe (and for digital nomads and HNWs, a Mediterranean climate).
Equally, Croatian businesses can benefit from access to international expertise and networks so maybe more keen for a takeover rather than straight investment.
So: something of a hidden jewel that is no longer hidden.
How have recent events affected M&A deals in Croatia?
Covid challenges caused small/medium businesses to struggle when it comes to adapting and gaining capital. Online businesses that sprung up in the pandemic haven’t fared too well either. Despite government assistance, many companies have failed to keep up and have either shut down or been absorbed by larger companies.
Like everwhere else, inflation, interest rates and supply chain issues are piling on the pressure. Croatia's trade with Ukraine and Russia is obviously affected by war and sanctions, while the region as a whole is reliant on Russian energy.
The World Bank remains optimistic, however, citing EU structural and investment funds as a great opportunity for the country to accelerate income convergence with the rest of the EU.
Having an independent currency could also mean that as some investors run for the cover of the Euro and the Dollar, any fall in the Kuna makes Croatian businesses look even more attractive for overseas buyers, and Croatian businesses more in need of an international partner.
Given the changing global risk profile, buyers are likely to insist on dotting the i's and crossing the t's in due diligence. A great Croatia M&A legal adviser will be essential to getting the deal to completion.
Whatever happens, Croatia is now firmly on the map as a destination for M&A capital.
If you find yourself in need of assistance for M&A deals in Croatia, please reach out to us for a conversation.
Produced by Amirali Khezrey and Juwaria Merchant 26/05/2022