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Hungary: M&A Trends on CEE Markets in 2020 – Impact of COVID-19

Hungary: M&A Trends on CEE Markets in 2020 – Impact of COVID-19

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Every spring DLA Piper publishes its annual M&A intelligence report. This past spring, we could only speculate on the effects of the pandemic as COVID-19 had just hit Europe. Informed by our experience of the past few months, we have recently published our updated M&A Global Report. Below we highlight a couple of trends that are impacting CEE. 


COVID-19 has affected businesses in many different ways. The vast majority of deals have been adversely affected (usually by being delayed or postponed), causing a significant slowdown. However, in certain rare cases the pandemic has actually accelerated deals. The recently announced consolidation in the Hungarian banking sector is a prime example.

Conditional Deals

Most of us predicted in spring that the number of conditions to closing would increase. Parties involved in deals chose the opposite: they have tended to opt for deal certainty, and where possible, have chosen simultaneous signing and closing. Where there is split signing and closing, new types of conditions appeared, with the introduction of new/extended foreign investment screening regimes being the most obvious. These often catch intra-EU transactions as well – a somewhat unexpected development. Given that approval conditions are often vaguely worded in the makeshift laws, the new screening procedures often cause delays in transactions (and sometimes even incentivize parties to try to find a transaction structure where screening can be lawfully avoided). 

Active Sectors: IT, Food and Beverages

The pandemic has required all businesses to adopt to new requirements, with home office/flexible working becoming the norm in several segments. Web-driven sales/distribution have also been on a constant rise. It’s no surprise that technology has been our most active sector. We have also seen increased activity in the food and beverages sector. Recently we have seen growing investor interest in the private healthcare segment – most likely as a reaction to the struggle of national healthcare systems with capacity constraints.

Deal Types: Increase in Asset Deals

The vast majority of transactions continue to be structured as share deals, where the buyer acquires all or the majority of the shares of the target. Nevertheless, we have come across a significant increase in minority share deals, too (with investors sometimes contemplating a gradual investment to manage the heightened uncertainty). We have also seen an increase in the proportion of asset sales over the 2019 numbers, although not as much as we anticipated in the spring (this may be explained by the fact that despite the challenging market conditions, target businesses are not (yet) in such a critical situation that would justify buyers taking the usually much more complex asset transaction route). 

MAC Clauses

Although global statistics show that there is no material change in the use of Material Adverse Change (MAC) clauses, we have definitely seen that parties spend much more time negotiating over them, including their consequences. Given that several points of the “boilerplate” MAC clauses have become reality in the past few months (from export restrictions to curfew and protests), it’s no wonder that parties are reading these clauses much more closely. 

Pricing: Completion Accounts

We predicted that the uncertainty associated with the pandemic would result in a significant shift from the locked box pricing mechanism to completion accounts. Our experience shows that there has been a perceivable increase in the use of completion accounts – it appears that the volatile market circumstances make the use of locked box arrangements too risky for buyers.

Security and Limitation of Sellers’ Liability

Escrow and purchase price retention is still in the minority. However, where an escrow mechanism is used, we see that the amounts are larger and the escrow periods are longer than before. This also seem to be true of the limitations on seller liability: we have seen longer periods, higher caps, and lower thresholds.

The above is, of course, only a middle of the road snapshot of our COVID-19 experience. It would be good, though, if it soon turned out that in fact this was an end of the road experience and things can get back to normal.

By Gabor Molnar, Partner, and Biborka Jojart, Senior Associate, DLA Piper Hungary

This Article was originally published in Issue 7.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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