A rather busy M&A market in the Czech Republic – with the IT, industrial, and energy sectors spearheading economic bustle – will soon face important legislative updates regarding the tax system and labor regulations, according to Kinstellar Partner Karla Rundtova.
“I would say that, perhaps surprisingly, we have seen that the M&A market has been quite busy lately,” Rundtova begins. “There were a few huge deals completed at the start of 2023, and, just recently, a new major deal was announced – a bidding process for the Packeta sale.” With such strong levels of transactional activity, it stands to reason to assume that the market is in good shape: “I am rather optimistic, we do see a lot of investor interest out there,” she adds.
Of course, there are some instances where there are slowdowns. “Real estate has not been as successful as it could be, overall,” Rundtova continues. “But we do see strong activity on the logistics and retail parks front. Perhaps there will not be as much M&A work, but with the new construction law incoming and ESG considerations permeating every discussion – there will for sure be work for lawyers,” she says.
And, talking about work, there seems to be a lot of it coming from outside of the European Union. “We see a lot of interest in the region, mostly coming from outside of the EU, which raises FDI screening mechanism considerations,” Rundtova says. “So much are we engaged with this line of work that we have set up a dedicated service line for it.”
Focusing on specific sectors that have demonstrated high levels of activity, Rundtova says that “tech, industrial (including defense), and automotive are leading the pack.” Specifically, she reports that “the COVID-19 crisis and the subsequent supply shortages, coupled with the energy prices shift have all influenced the companies in the automotive industry to adapt their portfolios. We are seeing a number of divestments and restructurings ongoing,” she explains. “Also, the automotive industry continues to be hugely impacted by the EU green deal – there is a lot of movement spurred on by it, for example, when it comes to battery production.”
Furthermore, Rundtova reports there has been a lot of talk about financial technologies. “With fintech being a part of a lot of ongoing debates – and the subject of a lot of client inquiries – it would seem that it is here to stay when we talk about the financial markets,” she says. According to her, investors are particularly interested in the regulatory conditions surrounding fintech, as well as in the direction those may evolve.
Finally, providing insights on recent legislative movements of note, Rundtova mentions the tax and labor frameworks. “Given the economic situation and the situation with the state budget, significant tax changes and other budget-saving measures have been announced just recently, such as an increase of the corporate income and real estate taxes, changes regarding VAT, pensions, social and health insurance contributions, the cancellation of certain state subsidy programs, etc.,” she says. Additionally, the labor code stands to be overhauled in a significant way, making way for stricter regulations of “widely used agreements for part-time work, temp work, or work outside the employment relationship. This will likely have a significant impact on the labor market,” Rundtova notes.