BR’s 17 leaders to watch: Dragos Paval – Dedeman

After growing the Dedeman DIY business to 45 stores and estimated sales of over EUR 1 billion in 2016, Dragos Paval, its founder, is now looking to diversify his and his family’s investments by setting up two investment funds.

Dragos and Adrian Paval look set to become the only Romanian entrepreneurs whose business has passed the EUR 1 billion sales milestone in a decade. Some 24 years after founding the Dedeman DIY retail business along with his brother, Adrian Paval, he announced last year that he would set up two investment funds. The move is part of a strategy to diversify the business and create alternative sources of income beyond DIY retail. Given that the two have a combined fortune of some EUR 950 million, which puts them second in the Capital 300 richest Romanians ranking for 2016, their potential for new investments is significant.

One will be a real estate investment fund while the other will be set up for investments in Romanian companies, both startups and mature firms, according to the businessman. Dragos Paval is already rumored to be in the running to buy AFI Europe Romania’s office park in the Cotroceni area of Bucharest, which is estimated to come with a price tag of about EUR 150 million.

BR’s 17 business leaders to watch in Romania this year

As part of the same business diversification strategy, Paval bought a 28.9 percent stake in local bricks manufacturer Cemacom this February. This happened shortly after Finnish investment fund KJK sold its 27.9 percent stake in the company’s shares.

Dragos Paval has come a long way since starting the Dedeman business with a small 16 sqm store in Suceava, eastern Romania, back in 1992. After graduating in mathematics he began working as an IT specialist for a state company in Bacau, but soon decided to set up his own business, where he was later joined by his brother Adrian.

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“It took us ten years to grow the business from a small store to a 4,000 sqm format and that is because we started from scratch. In the early years we were bringing in the goods from wholesale stores in Bucharest using my father-in-law’s Dacia Break car, but I was still making ten times more than as a state employee,” Dragos Paval told ZF in 2009.

Over the years the siblings have proved to have a coherent development strategy for Dedeman, which has grown to become the largest DIY retailer on the local market, and this despite strong competition from established international players, especially in the years before the crisis. The strategy included buying the land for the stores they later developed, taking a low-price approach, working extensively with local suppliers and gradually developing their network, starting with their home region of eastern Romania and only later coming to Bucharest.

Such measures helped local player Dedeman reach and later consolidate its position as the leader of the Romanian DIY market, while international rivals such as Praktiker, BauMax and Obi struggled after 2008 to the point where they had to sell or exit the local market. Unlike its international competitors, the company has managed to maintain a steady expansion rhythm over recent years, reaching a network of 45 outlets at the end of last year, which is estimated to generate a turnover of over EUR 1 billion, according to company data.

The two plan to further expand the Dedeman network and in March they will open their largest store yet, in the Baneasa area of Bucharest, close to the only Ikea outlet in the capital.

Dedeman is the largest player on the Romanian DIY market. It had a network of 45 stores at the end of 2016 and its owners were planning to reach a turnover of over EUR 1 billion that year. The company is on track to hit the target, given that in the first semester it posted a 26 percent turnover increase to a total of some EUR 500 million. The previous year it reported a EUR 980 million turnover.