“A significant change (from last year i.e.) is the rising interest in closing deals, beyond merely starting processes whose completion was left to the conditions on the market,” Mihai Pop said.
Investors are now seeing Romania as a potential manufacturing El Dorado for Western Europe. The results of the exports (which rose by 10% in the first quarter) and an increase in the number of investors (foreign direct investments rose by 30% in the first three months of 2014 but remain low compared with the boom years) show deals are needed in order to catch up with the West, Mihai Pop says.
Another advantage of Romania is the size of its market, about 20 million people, while the weaknesses include the lack of legislative perspective and “the negative implications over business plans seen on multiple occasions not long ago.”
“Because of the macroeconomic situation in the region, the tension in the former Soviet space and the economic results of Romania, especially the increase in GDP, the shift to investment grade and the announcement of the introduction of the euro (as of January 1, 2019 – i.e.), Romania is now in an interesting position for investors who are looking at the local market more carefully, so we can describe the sentiment as being positive, with an improvement outlook even.”
A number of deals have been closed in Romania since the beginning of the year such as the takeover of sanitation company Romprest, of World Class (a fitness center network), of Praktiker (do it yourself retailer), and Lemarco (sugar plants). More important, however, is the signal coming from the international mergers and acquisitions (M&A) market, where the first quarter of 2014 was the busiest in three years and ended with growth of 33%.
Several groups have announced plans for international acquisitions or mergers such as the merger of Lafarge and Holcim, GE’s interest in Alstom and Pfizer’s in AstraZeneca, which spells a busy year.
“What’s more important is the marketing effect generated by the significant deals that show entrepreneurs and companies that postponed M&As it’s a good time to resume them,” Mihai Pop said.
According to Anuarul Top Tranzactii (M&A Deals yearbook) compiled by ZF, the local M&A market stood at EUR1.3 billion last year and in the first few months of 2014, slightly up on 2012, driven by initial public offerings and sales of portfolios by banks.
(English version by Loredana Fratila-Cristescu)