Date: 12th January 2022
Although the pandemic hit corporate activity hard in 2020, acquisitions in the first half of this year didn’t just rebound but hit record levels as buyers announced US$2.5 trillion of deals globally. Despite concerns over the new strain of the virus, domestic and foreign companies remain bullish about Greek M&A activity in 2022.
In March, Lambadarios Law Firm (LLF) advised Piraeus Bank on the €300 million sale of its merchant acquiring unit to Euronet Worldwide and the formation of a long-term strategic partnership between the bank and the payments firm. At the time, the transaction represented the first of its kind in the Greek market and has since been replicated by the remaining three systemic banks in Greece.
The accelerated shift away from cash is heating up the battle for scale in Europe’s so-called paytech market, and the Greek market is proving very attractive. Greece has a cash penetration that remains high and a card transaction rate per capita that is more than twice below the average of European countries.
“These four sizable deals are going to change the landscape quite significantly because it means that four new large global players are going to enter Greece,” says LLF managing partner Constantinos Lambadarios. “Suddenly, we have the merchant acquiring businesses in Greece change hands over one year from the banks to the four main global players (French firm Worldline, Italian firm Nexi, and US firms Euronet and EVO Payments). Furthermore, the country’s leading NSP provider Cardlink also changed hands being acquired by Worldline.” With Europe’s paytech market undergoing significant consolidation, these four Greek transactions will continue into 2022, buffered by strong underlying macroeconomic trends: GDP growth, a fall in unemployment, as well as regulations encouraging electronic payment. It is hoped that the Greek paytech market will also benefit next year from the return of tourism, one of the most important sectors of the Greek economy and a key pillar of its economic growth (34 million tourists visited Greece in 2019, making it one of the most visited countries in Europe and the world).
Multinational corporations (MNCs) and domestic companies are extremely confident about the outlook for Greek merger and acquisition (M&A) activity in 2022.
Based on data from the EY European Investment Monitor (EIM), an extensive database processed by EY that monitors greenfield investments, Greece recorded a significant increase in foreign direct investment (FDI) in 2020 despite Covid. And the perception of the country as an investment destination continues to improve after a decade of economic crises, with investors citing Greece’s comparative advantages of ‘quality of life’, ‘transport, logistics and telecommunications infrastructure’, and ‘local labour skills’.
Meanwhile, a survey by EY earlier this year suggested that one of the biggest lessons that Greek companies learned from the global financial crisis was that those companies that made acquisitions during a time of crisis outperformed those that retreated and retrenched. As a result, they intend to make M&As a strategic priority in the year ahead.
“M&A is one of those areas that is fuelled by sentiment and in that sense it’s very similar to what happens with the stock market,” says Lambadarios. “At this moment, everybody has a positive outlook of the Greek economy. We have a stable government including a very capable Minister for Development and Investments, which is quite crucial. There is a positive climate around Europe, and this is coupled with the fact that it is one of the few times in recent history that we feel we hold quite a strong geopolitical position.”
In addition to sentiment, Lambadarios says that M&A is one of the areas that needs financing to make transactions happen. “It happens to be a good time for financing right now. The four systemic banks in Greece are healthy and they are providing acquisition finance for a number of high-profile transactions.” Complementing this finance capability is the participation of large international financial institutions, such as the European Bank for Reconstruction and Development (EBRD), in both equity capital market transactions as well as debt. “So, all of these factors create a positive momentum for next year that is quite supportive of an upward trend for 2022,” says Lambadarios.
Private equity has landed
More than three-quarters of those Greek executives planning M&A deals in 2022 said they will be primarily considering cross-border targets, according to EY. And their overwhelming expectation is that much of their growth over the next three years will come from Europe (with their top five investment destinations all within the EU, in addition to the UK).
“Greek corporates are much healthier, and their executives more bullish over finding opportunities, so I wouldn’t be surprised if 2022 is the year that Greek corporates look outside of Greece,” says Lambadarios. “But I also see a lot of cross-border work coming into Greece, either in privatisations or large investors in the energy, real estate, tourism or banking sectors.”
A lot of recent M&A deal activity has been driven by private equity, with many funds having large amounts of available funds seeking out assets and corporates in a number of sectors. “Private equity has landed in Greece and has already completed a number of deals,” says Lambadarios. A few funds have even started looking at smaller ticket deals (€10-30 million) instead of just very large deals because they see the potential of the Greek market, he adds. “We have really high calibre employees in Greece, so the human capital is very strong in terms of expertise. A number of multinationals have set up business in Greece during the past few months and they have all been impressed by the high quality of employees available in Greece. We are still very competitive in terms of salaries compared to other countries in Europe (such as Germany or the Netherlands). And the cost of living in Greece is not that high compared to other jurisdictions, so people want to move to and work in Greece as part of acquisitions.”
Although market sentiment is strong, there is no doubt that the global pandemic had devastating consequences for sectors such as retail, leisure and travel. This led to a number of distressed assets sitting on the balance sheets of the four systemic banks, the bulk of which have since been acquired by various opportunistic funds banking on future growth.
However, recent M&A activity hasn’t been driven purely by companies in crisis, with ‘Covid-proof’ sectors such as logistics, real estate, energy, infrastructure and technology booming. For example, in a landmark transaction for the domestic IT sector, LLF last year advised Epsilon Net SA and Space Hellas on their acquisition of SingularLogic, the leading Greek Enterprise Software Solutions provider and one of the largest integrated IT solutions groups in Greece.
With much M&A activity requiring on-the-ground operational due diligence, Lambadarios says that one of the repercussions of the pandemic in Greece is that deal-making is focused more on those sectors that are recognisable worldwide, and less on sectors where investors need the opportunity to travel to Greece.
“You need to be able to travel to a market in order to identify opportunities … for example, visit a site and conduct a technical due diligence for energy assets as well as real estate assets. This was not possible for the last two years. So, while you could do a desktop M&A for some assets, you wouldn’t be able to do the same for others.” “Now that travelling restrictions are eased,” he adds, “there is more interest in asset classes that are the strengths of the Greek market because investors can once again visit the country and identify opportunities. These include renewables (due to the weather in Greece), infrastructure (as Greece is looking ahead to renewed investment and an aggressive development project plan set by the Ministry of Transport) and of course real estate and hospitality (as tourism represents a large part of Greek GDP).”
In the energy sector, the Greek Government has been promoting amendments to the country’s renewable energy sector (RES) regulatory regime with the aim of increasing RES participation in Greece’s energy mix. “We have advised on numerous transactions in the renewables sector,” says Lambadarios. “This includes offshore wind, where we will have a new legal framework in the next few months, and LNG, which has become a cornerstone of the energy market in Greece.”
An example of this is the development of a Floating Storage Regasification Unit (FSRU) in Alexandroupolis, a port city in the north of Greece. This is destined to become an energy hub for the broader eastern Mediterranean area, further strengthening the geopolitical position of Greece.
LLF is also looking forward to helping Greece’s burgeoning start-up community with their M&A activity in 2022. “Greece’s start-up ecosystem has matured a great deal over the last 10-15 years,” says Lambadarios. “There have been many examples of fantastic start-ups that have achieved great rounds of financing and good exits as well, so there are a number of success stories out there. They will continue to mature as Greece has a very competent workforce in terms of engineers and computer scientists and so on.”
“We do speak about Greek entrepreneurs now whereas a few years ago it was a term reserved for those from Silicon Valley and other great centres of innovation around the world,” he adds. “Greece now enjoys a very strong start-up ecosystem, which has been having a positive effect on this type of activity, so I would definitely put this in the ‘high probability category’ as a trend for 2022.”
In preparation of servicing this growing client demand, LLF recently hired Lefkothea Nteka as head of the firm’s Antitrust and Competition practice. “Any significant M&A needs detailed merger control analysis to secure transaction certainty for clients,” says Lambadarios. The firm remains on the lookout for transactional corporate M&A lawyers to boost its team in the above sectors.
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