A general introduction to technology mergers and acquisitions in Hungary

All the questions

Insight

As in other Central and Eastern European (CEE) countries, the transactional landscape of technology mergers and acquisitions in Hungary is fundamentally determined by the activity of two market segments with very different characteristics: capital-backed technology investments -venture capital (VC) and private equity (PE), and significant investments in major acquisitions by strategic players, mainly from the telecommunications sector.

Venture capital and private equity backed deals in CEE more than doubled in total investment value, from around €1.7 billion in 2020 to around €4.15 billion euros in 2021, the highest value recorded in the last decade.2 Moreover, despite the economic crisis caused by the covid-19 pandemic and the military conflict between Russia and Ukraine, the number of companies that have obtained venture capital and private equity investments has reached an all-time high. from 672 last year, indicating increased interest in investing in the region. .

Even with such an increase in business activity, the performance of the Hungarian market was amazing in 2021, as 241 companies based in Hungary received investments from venture capital and private equity firms, which is the highest number. higher in all CEECs, representing 36% of the total number of CEECs. companies that have received venture capital/PE investments.3 The technology sector remained one of the main targets for investors, second only to the consumer goods and services sector, which is indicated by the fact that the amount of investment in this sector increased by around 24% in 2021.4

The success stories of Hungarian start-ups, such as mobile app development platform provider Bitrise, computer-aided design modeling software developer Shapr3D or automated driving technology pioneer AImotive, show always a clear upward trajectory; however, in 2021 the (partial) releases turned heads in the Hungarian market.5

Finally, as we explain in Section IV.iv, despite the legislator’s attempt to clarify ambiguous parts of the Foreign Direct Investment (FDI) law,6 the material provisions remained unclear, which led to increased communication between investors and the government, and ultimately resulted in protracted proceedings.

Year in review

As mentioned above, the most exciting deals of 2021 and the first half of 2022 were the (partial) exit of the founders of big data superstar Starschema and crypto cloud service provider Tresorit.

First, in 2021, parcel service giant Swiss Post acquired a majority stake in Tresorit, a Swiss-Hungarian company that offers cloud-based, encrypted file sharing and collaboration services.

Second, in 2022, the founders of Starschema, a Hungarian company offering data visualization and engineering services, left their company by selling their shares to HCL Group, a global technology company listed on the Indian stock exchange.

Both transactions were recognized by experts as excellent examples of successful strategic acquisitions in the CEE region, which clearly suggests that the Hungarian market has reached a new level of maturity, where not only promising technology companies in the development phase Seed or venture capitalists receive funds, but strategic players and private equity firms also enter the market to seek exit and buyout opportunities.

In addition, such progress in the Hungarian market is also demonstrated by the successful Series B fundraising of anti-fraud platform SEON, which recently secured a total of $94 million in funding, the largest investment ever. ever received by a Hungarian tech start-up.

Finally, regional VC/PE hubs such as Széchenyi Funds (SZTA) have started exploring investment strategies focused on investing in other VC funds, which has already resulted in two successful deals. . In 2021, SZTA invested approximately €16 million in the Euroventures V Coop fund, managed by Euroventures, one of the most successful Hungarian venture capital firms with over 50 successful exits and a total capital under management of 180 million, and in the second quarter of 2022, SZTA became Flashpoint’s first institutional investor when it successfully secured $102 million in total commitments for its Flashpoint VC III fund.

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