Local M&A market tops EUR 4 billion this year (Deals of the Year)

In the first ten months of the year the M&A volume exceeded EUR 4.1 billion, most of it resulting from the high-impact acquisition of Rompetrol by KazMunaiGaz, which represents close to half of the total amount.

Overall, the M&A activity in Romania in 2007 was more dynamic than in 2006 and the average deal value for the 3Q period rose to EUR 14.9 million if one does not take into account the Rompetrol transaction, said Radu of PwC.
“Including all transactions that have been disclosed since the beginning of 2007, nine deals have exceeded EUR 67.7 million as value per deal and around 10 deals had values ranging from EUR 33.8 to 67.7 million. The most active sector regarding the total number of transactions concluded has been the construction sector, closely followed by the financial services, retail & wholesale and food & beverage sectors,” said Radu.
Its multi-faced investment potential has put Romania at the top of investors' preference lists.
The country is the hottest destination for potential M&A activity in the Central and Eastern European region, according to a report by KBC Securities, the integrated European Equity House of KBC Group, together with CMS and PENTA Investments last month.
Bulgaria came in second. Both countries were also chosen as the prime targets for private equity buyouts in CEE.
The report included the views of 100 managers in regional countries, and more than half of them voted Romania as investors' destination of choice in CEE.
Overall, M&A in the region has experienced tremendous growth over recent years, with deal volumes having increased dramatically throughout the region. This is estimated to continue over the next 12 months with 72 percent of respondents expecting M&A activity to increase or increase greatly. Only one percent of those interviewed thought that activity in the region would decline.
Another key finding of the study that further boosts Romania's perspectives for future investments is that the majority of CEE corporates will keep their acquisitions within the region.
A large majority (77 percent) of those interviewed anticipate making acquisitions in CEE exclusively, as they think the region has higher growth potential than EU or Western countries.
The feeling is similar within Romania. Local mergers and acquisitions will exceed EUR 15 million per transaction this year, said the former executive manager of BCR, Nicolae Danila. His prediction was rooted among other reasons in the fact that Romania is second in CEE in terms of growth rates after Slovakia.
“The local M&A market is expected to follow the same upward trend in 2008 as it is still far away from reaching saturation level and it is regarded as having the highest potential for mergers and acquisitions in the CEE region. The construction sector is forecasted to remain the most dynamic in 2008, followed by retail & wholesale or the financial services sectors, while even higher expectations come from the
pharmaceutical sector,” predicted Radu.
Next year is also expected to bring more mergers and acquisitions with strategic investors which will try to ensure a market entry and increase market shares by acquiring mature local businesses, said Catalin Grigorescu, managing partner with bpv Grigorescu.
The competition in retail will hot up on segments which have been covered by local companies for years.
One such sector is the furniture market, which is predicted to witness some takeovers in the coming period.
“This year we saw high-profile M&A projects, significant transactions in media, telecom and FMCG; next year this process will be even more intense. And we could see some surprising moves on the market; a market with a dynamic which competes with the one in Western and Central European countries,” says Manuela Nestor, coordinator partner at Nestor Nestor Diculescu Kingston Petersen (NNDKP).
Generally, analysts and investors say the M&A sector has no place to go but up in the coming year.
“I expect M&A transactions to increase in both numbers of deals as well as in terms of value. As the economy grows, an increasing number of entrepreneurs will look to exit or raise financing to further fuel their company's growth,” said Matei Paun, partner with Balkan Advisory Company (BAC).

Ana-Maria David