November052011
Allen & Overy opened its Budapest office in 1993, so just like the HVCA, we will be celebrating our 20th anniversary shortly. With offices in Bratislava, Bucharest, Prague and Warsaw, Allen & Overy remains one of the most important players in the legal market in Central and Eastern Europe. The CEE region is a key market for us and, unlike many other law firms, we remain committed to maintaining a long-term presence, as evidenced by the location of our regional leveraged finance team in Budapest.
The M&A landscape in Hungary has evolved over the last 20 years from the privatization era to the emergence of local, regional
and international private equity houses and leveraged finance in the market to the re-appearance of trade buyers and rising interest from investors in Asia.
In the 1990s and early 2000s in Hungary (and indeed across Central and Eastern Europe) the privatization of state-owned enterprises such as banks was the dominant source of work. Investor appetite was high with the belief that the many inefficiencies inherent in state-owned enterprises could be stripped out of the businesses. Different approaches were taken with companies such as MOL, TVK, and FHB mortgage bank, choosing to go public in high profile IPOs. Others such as Postabank were seen as ideal targets for other regional private banks. Allen & Overy were the law firm of choice to act on these and many other privatizations.
The private equity boom of the early to mid 2000s around the world was repeated in Hungary, even attracting the bulge bracket investors from the US and UK. Deals such as Fibernet and Euromedic were well received by investors and bankers alike and have kept those involved (including Allen & Overy) busy for a number of years. Whilst the number of private equity led transactions has slowed in the last 2 or 3 years, transactions such as Provimi pet foods have completed. On the whole, despite the emergence of some very aggressive structures in Western Europe, most leveraged financing structures in Hungary remained within sensible limits.
Despite the global crisis, M&A has continued and we have started to see the return of trade buyers and greater investment interest from Asia. In early 2011, Allen & Overy completed the acquisition of certain cable TV assets from Fibernet by Liberty Global International and assisted Wanhua, the Chinese industrial company, in acquiring BorsodChem from Permira. Chinese and Indian investors are known to be looking at other assets in Hungary and across the CEE which may provide ideal opportunities for private equity funds looking to exit.
With the continuing difficulties in th e financial world, th e future for M&A in Hungary remains uncertain. Many market participants comment on a lack of decent businesses or a lack of willing sellers or management for private equity investment which would suggest that the prospects for new primary transactions are relatively low. However,with many PE funds still holding significant amounts of cash in their funds and with interest from trade buyers increasing, we may see more exits from existing deals. Either we trust that Allen & Overy will continue to be the leading player in the market in Hungary and across the region.
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Allen & Overy is an international legal practice with approximately 4 750 staff, including some 480 partners, working in 39 offices
worldwide. Our Budapest offi ce consists of 25 lawyers including two resident partners.
