GREECE: An Introduction to Corporate/Commercial
Macroeconomic Developments and 2022 Outlook
The Greek economy recorded robust growth in 2021 largely recuperating the lost ground of the previous year. According to the European Commission, Greece – following Ireland – noted the highest growth rate among the Eurozone countries. GDP growth rate is expected to reach 8.5% on the back of domestic demand and a better-than-expected tourist season, while exports also remained resilient despite significant supply disruptions in the value chains due to the pandemic. Economic recovery has been supported by accommodative fiscal and monetary policies as well as targeted measures both at the EU and national level. The general government fiscal deficit is set to decline sharply in 2022 while cash reserves remain at high levels, currently standing at approximately €31 billion.
Looking ahead, the outlook is subject to high uncertainty with risks tilted to the downside primarily driven by global macroeconomic and geopolitical conditions. Inflationary pressures are pronounced and expected to persist. World market price developments in energy and, in particular, electricity prices have led to a surge in consumer prices. Geopolitical tensions have elevated significantly following the war in Ukraine, while the accompanying economic sanctions are expected to have a significant impact in energy and food prices. At the same time, although the latest wave of the pandemic appears to have subsided, COVID-19 continues to maintain its grip on the global economy.
Transaction Activity & Market Trends
Against the backdrop of a solid economic performance and favourable market conditions, and despite the pandemic’s continued grip, the Greek M&A market had an exceptional year attracting a total of €12 billion in 2021, of which €4.3 billion resulting from mergers and acquisitions (M&A). Privatization transactions also recorded a strong rebound with deals of a total value of €3.0 billion. Dealmaking was consistently strong both in terms of value and volume. 2021 marked a year with multiple transactions each in excess of €1 billion, including Macquarie Asset Management’s €2.16 billion acquisition of a 49% stake in the Hellenic Electricity Distribution Network Operator (HEDNO), Mondelēz International’s €2 billion acquisition of Chipita S.A., a leading snack company, and Partners Group’s €1.6 billion acquisition of Pharmathen, a leading pharmaceutical and drug delivery technology company. In addition, several transactions stand out for their market impact in their respective sectors. By way of example, the acquisition of Wind Hellas S.A. by United Group is expected to create the market’s number two player in both fixed and pay-TV services, while NN Group’s acquisition of MetLife Life Insurance S.A. is projected to result in the leading life insurance company in Greece.
According to a recently published survey, a total of 76 deals were completed during 2021, while the total deal value increased by €200 million compared to 2020. Several sectors remained active throughout the year. M&A activity was largely driven by the TMT sector, accounting for almost 27% of total deal value, the Food & Beverage and Energy (15.5% and 9% respectively) and the Financial and Services sectors, amounting to 15% and 14% of total deal value, respectively. The total value of deals completed in 2021 and expected to be completed in 2022 is estimated at a whopping €8.6 billion. Notable transactions in the energy infrastructure sector include the abovementioned sale of 49% in HEDNO as well as Italgas’s acquisition of DEPA Infrastructure S.A., the holding entity owning the operators of the Greek natural gas distribution networks. Major deals in the insurance industry include the sale of AXA Insurance S.A. to Italian insurance group Generali, the divestment by National Bank of Greece of its participation in Ethniki Insurance to CVC Capital Partners, as well as the abovementioned acquisition of MetLife Life Insurance S.A. by NN Group. The food & beverage sector also recorded robust performance with a number of landmark transactions such as the aforementioned Mondelēz International's acquisition of Chipita S.A., Doordash’s acquisition of the Finnish food-delivery company Wolt Enterprises, and CVC’s indirect acquisition of a majority stake in Dodoni S.A., a leading producer and exporter of dairy products, and Vivartia, a diversified food company with a leading market position in the dairy and drinks, frozen foods and food service and entertainment industries. As regards the financial services industry, notable deals include J.P. Morgan’s strategic investment in Viva Wallet, the leading Greek fintech company, as well as the joint venture partnerships of each of National Bank of Greece, Alpha Bank and Eurobank with EVO Payments Inc., Nexi S.p.A. and Wordline, respectively, in connection with the banks’ merchant acquiring business (noting that some of these transactions have been announced but not yet completed).
Corporate Governance
Arguably the most important development within 2021 on the legal framework applicable to Greek corporates was the long awaited entry into force on 17 July 2021 of Greek Law 4706/2020 regulating the new corporate governance framework for listed companies. The new provisions focus primarily on the composition and operation of the board of directors. Listed companies are obliged to adopt a suitability policy for the selection of board members, in accordance with guidelines provided by the Hellenic Capital Market Commission, whilst the law sets forth fit-and-proper principles and formal conditions for the composition of the board. The distinction under the previous regime between executive, non-executive and independent non-executive members remains, however the new provisions further delineate the responsibilities of each group and strengthen the role of independent non-executive members. The new corporate governance framework provides for the mandatory establishment of a Remuneration Committee and a Nomination Committee and introduces changes to the operation of the Audit Committee, while also including provisions on the company’s Operating Regulation and Internal Control Systems.
Although it is too soon to assess the impact of this new corporate governance framework on the Greek market, first impressions are encouraging and suggest a shift towards a more efficient and credible capital markets system, enhancing transparency and competitiveness.
In addition to the above, a draft bill transposing certain company law provisions of Directive (EU) 2019/1151 was submitted in July 2021 for public consultation by the Ministry of Development and Investments. The bill introduces rules on disqualification of directors pursuant to article 13i of the Directive, setting out an exhaustive list of cases under which a person is prohibited from exercising any form of management powers in legal entities that are subject to registration with the Greek General Commercial Registry (GEMI) – effectively all major corporate forms under Greek law. Restrictions include convictions for several criminal offences, breach obligations under the capacity of company liquidator, as well as disqualification in any other member state. Disqualified individuals are registered with a special registry kept by GEMI.
Reforms of Insolvency Code
Another legislative highlight within 2021 was the recent amendment, by means of Greek Law 4818/2021, of the new (Greek) Insolvency Code (which came into force in 2020). This amendment introduced, inter alia, a significant change in the consequences of bankruptcy as regards the validity of contracts entered into by the debtor. Contrary to the provisions of the previous insolvency code, as per which the outstanding bilateral contracts maintained, in principle, their validity, the declaration of bankruptcy now causes the automatic termination, without any penalty imposed on the debtor, of all pending and permanent contracts of the debtor unless within 60 days the bankruptcy administrator considers that they serve the smooth progress of the bankruptcy operations or the improvement of the value of the liquidation of assets. This arrangement gives greater discretion to the bankruptcy administrator and is beneficial for a more efficient administration of the bankruptcy estate. Depending on whether assets of the bankruptcy estate are sold individually or as a functional whole, the new Insolvency Code allows for the possibility of keeping some contracts in force if necessary (to preserve the operation of the debtor’s business), in which case specific provisions under the new Insolvency Code shall apply.
Digital era
The COVID-19 pandemic exacerbated the often-experienced delays in getting deals across the finish line, whether in the context of private acquisitions, public tenders, securing necessary financing (etc.), due to various aspects of the Greek public system’s bureaucracy.
This included the difficulties in issuing and collecting necessary judicial certificates and other necessary documents regarding an entity. In this respect, the Ministries of Justice and Digital Governance initiated a process of issuing the Single Certificate of Judicial Solvency, which consolidates into one 25 previously applicable court certificates on solvency matters of an entity, providing for easy application through an e-platform (solon.gov.gr) and leading to the issuance of the consolidated certificate in a matter of a few business days. This initiative has already contributed significantly to the decongestion of the courts and the reduction of bureaucratic burdens for citizens and businesses.
A further noteworthy step towards embracing the digital era was the issuance of Decision 322/2021 by the Ministers of Digital Governance and State, which, following the recent enactment of Greek Law 4727/2020 on Digital Governance, outlined the rules and provided important clarifications on the lawful use and circulation (including certification) of electronic documents.
What is more, in the spirit of the digitalization of the processes of issuing and updating certificates, by virtue of Decision 9747/2021 by the Minister of State, natural persons may verify and update principal and contact information held with credit and financial institutions, for the purposes of anti-money laundering and Know Your Customer’s policies, digitally through the Single Digital Portal of Public Administration (gov.gr). The so-called eGov-KYC application is an optional process carried out via the respective website of each banking or other institution. It can be accessed only via the personal platform credentials of each natural person.