M&A valuations in Central Europe: Seller expectations vs. buyer realities

Slovenia is a small but active M&A market, providing attractive opportunities for foreign investors.  

It has largely followed the broader European M&A trend, with the boom year of 2021 followed by a period of relatively subdued activity. However there have still been notable transactions, including in banking, energy and technology.

To find out more about M&A in Slovenia we spoke to Marko Klobas, Partner at CSA. He shared insights on the state of the market, company valuations, and cross-border deals.

Q. Can you tell me a bit about your company and your role?

CSA is a financial advisory firm based in Slovenia specializing in M&A advisory services, business and real estate valuations, and tax advice. Our clients include both large businesses and SMEs in Slovenia and surrounding countries.

My role as a partner and manager is split between business development, M&A sourcing and execution, and team leadership. I work closely with a great bunch of talented professionals, and we do our best to give our clients the highest quality service.

Q. How has the market been so far in 2025?

It’s been interesting! But M&A activity has always been quite moderate in Slovenia and the surrounding area, both in volume and value, so it’s not like the more mature markets.

In 2025, we’ve seen an increase in M&A activity so far. Slovenia is home to many successful and technologically advanced companies offering high-quality products and services, which continue to attract strong interest from both strategic and financial buyers. In addition, the generation of entrepreneurs that built their businesses in the 1990s and early 2000s is now retiring, either passing the company on to the next generation or looking for somebody to acquire, or just help them grow.

There are still a lot of opportunities, so I don’t think there will be too much disruption this year. Strategics might be a bit more risk-averse, but they are still pushing demand quite hard. PE groups are sitting on a lot of dry powder and actively seeking different types of investments in the region. And of course it’s getting easier to borrow money, and that helps encourage deals.

Q. Tech M&A is an increasing focus in many CEE countries. Is that the case for you too?

Tech companies are definitely popular, especially if they have a developed product that’s easy for a strategic to promote. We also have an increasing number of deals in healthcare and energy, and even some more traditional areas such as manufacturing. But the tech companies are easier to match with buyers.

Q. With it becoming easier to raise capital in the past 12 months, are companies becoming more confident in their valuations?

Maybe, but there are conflicting pressures. Cash flows are more difficult to predict because of market and risk premium factors, pushing values down. On the other hand, lower interest rates make capital cheaper and affect the discount value which pushes values up. 

If you look at some of the multiples, there have always been spikes, but at the moment valuations are volatile and this will need to stabilize for us to get a clearer picture in future.

Q. A recurring theme last year was the gap between what sellers and buyers reckoned was an accurate valuation. Have you noticed that gap narrowing at all?

It’s always a mismatch! Especially with first time sellers who compare their business with companies they see on the stock exchange and don’t realize that their valuation is unrealistic for a smaller firm in a smaller market. 

Potential buyers are looking to mitigate all the risks so they will always set a lower valuation. The role of the advisor is to assess the real value of the company and try to bring the two sides together. But I do think that sellers now understand that what they want is not necessarily achievable and they accept that they may need to compromise on certain aspects of the deal.

Q. What valuation methods do you typically rely on, and are they the same for different industries?

In order to estimate the value you need to understand a business and its dynamics; what the product is, how the customers perceive it, what the market is. We use several methods, starting with discount cash flow because that lets you model predictions for future cash flow when you use the appropriate discount rate. 

We combine that with a market-based approach, looking at comparable transactions, multiple comparable verticals of listed companies and putting them all together to see how different valuation models affect the value. 

But a key challenge for us is the limited availability of data in our region. Our capital markets are still not fully developed so there is a shortage of transparent transaction data which is why we use other valuation methods as well.

Q. Does a lot of your work come from outside investors wanting your local expertise?

Yes, when there are a lot of new investors that’s exactly where we can help. Our firm has excellent knowledge of the local markets and we’re known to have a lot of experience advising clients of all sizes.

Q. For cross-border deals, how significant are political, regulatory or foreign exchange risks?

Our region is interesting because some of the neighboring countries are EU members, others are not yet, or are in the EU but not the Eurozone. The most important thing is to understand what the differences are between the countries and how they affect the risk premium for deals. 

So yes, we need to be aware of variations in regulations and policy and keep an eye on exchange rates, although generally the currencies in this region are not that volatile so they don’t really pose a higher risk.

Q. Do you approach all sectors in a similar way?

Valuing businesses across different sectors follows core principles, but the specific application of those principles – and the choice of models – can vary significantly depending on the industry’s characteristics. There are different models for estimating value, for instance for financial institutions, but the main thing is the state of the company from a cash flow perspective and that might depend on whether it’s still growing, or a mature company. 

For instance, tech companies might have higher growth rates while financial institutions could be more complex, therefore different valuation models need to be used. There could be differences in the multiples, depending on how attractive and how developed the industry is. For mature companies with little growth potential the valuation multiples can be significantly lower, compared to a company in an industry with the potential for rapid growth. 

For example, when tech companies are developing a particular software or a new service it’s quite difficult to predict how profitable that might become. That’s quite challenging, compared with mature companies with predictable year-on-year cash flows that don’t change much.

Q. You work with both PE firms and strategics. Do they have a different approach to valuations, is one more aggressive at negotiating than the other?

Yes, absolutely! Private equity firms tend to be more financially driven. Their valuation approach is typically based on detailed financial models, target returns, and clearly defined investment horizons. That often makes them more disciplined — and in some cases, more aggressive in negotiation as well. Strategic buyers, on the other hand, usually have a longer-term view. They’re often looking for synergies, market expansion, or technology integration, so they may be willing to pay a premium if the target fits into their broader strategic plan.

The negative stereotype of the PE companies is still sometimes present with the first time sellers. But that is really changing with the new generation. Sellers today are much more aware of their options and are increasingly seeing private equity not just as a source of capital, but as a growth partner. 

PE firms have done a great job of demonstrating that they can bring in not just money, but also operational expertise, governance, and strategic input. So the perception has shifted — they’re no longer seen as just financial buyers, but as enablers of the next phase of growth.