Romanian M&A market soars 86 percent to USD 901 mln in H1, says E&Y

The M&A market in Romania grew by 86 percent to USD 901 million in the first semester and the average deal size gained 67 percent, but analysts at Ernst & Young (E&Y) warn this is not a come-back and deal making is likely lose steam in the second semester.

The market experienced a slight increase in the number of sealed deals to 67 on H1, according to the M&A Barometer published by the professional services firm E&Y.

The disclosed deals are up 74 percent to USD 384 million. Transaction value was disclosed only for 26 deals, resulting in a disclosure rate of 39 percent.

“This year kicked off with the long-awaited revival of transactions, as the market registered activity in many sectors, especially real-estate, services, FMCG, manufacturing or telecom and media,” said Florin Vasilica, partner and director of the Transaction Assistance department at E&Y Romania.

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The growth is sustained by large individual deals such as the acquisition of Prio Foods oil factory by Bunge, the purchase of Rombat by Metair Investments and the acquisition of MKB Romexterra Bank by the investment fund PineBridge Investments.

The M&A market was evenly split between local and foreign investors in the first semester. However, the deal making appetite of investment funds and private equity has reduced. Their presence has dropped to a first half 19 percent. Funds are focusing on selling overdue maturity investments or can’t find interesting targets in Romania, according to E&Y.

In terms of disclosed deals, the real estate sector was the most dynamic at USD 22.1 million. It was followed by Food and Beverages, Manufacturing, Energy&Mining and Banking and Financial Services.

The acquisition of eMag by Naspers and Ringier’s purchase of online jobs portal Ejobs show the potential of the online sector, expected to be confirmed for the remaining of this year and especially 2013, according to E&Y.

“After an early 2012 marked by foreign investors’’ interest in the local market, the difficult political context and the complicated situation in Europe have dramatically changed this trend. Thus, I expect 2013 to be dominated by the sale of distressed companies, of sales or consolidations in different sectors, such as the privatizations that Romania needs to continue doing,” said Vasilica.

Romania agreed with the IMF to sell minority stakes in several state-owned energy companies on the Bucharest Stock Exchange. Other companies will be sold to strategic investors.

In the year to date, the government was able to sell a 15 percent stake in grid operator Transelectrica, in a secondary public offering (SPO). The listings of Romgaz, the gas supplier, and Hidroelectrica, the hydro-power generator have been rescheduled for 2013. An audit of gas deposits is needed in the case of Romgaz, while Hidroelectrica entered in insolvency and expects a loss of around EUR 100 million. This is due to the drought that dramatically reduced the power output.

Transgaz, the operator of the gas pipe network, will list a 15 percent stake later this year, in an SPO. Nuclearelectrica, the nuclear power generator, delayed its listing for next year.

Ovidiu Posirca

Data source of charts: EY analysis, DealWatch, Zephyr