ZF organized in partnership with EY the “ZF Top Tranzactii (ZF Top Deals) – How local leaders see the progress of the economy and the M&A market in 2014” event on Wednesday, presenting the most important deals of 2013 and of the first few months of this year, as well as the short-term trends.
“We identified some very interesting trends in 2013. After a flat number of transactions in 2010-2012, we saw significant increase in 2013,” said Florin Vasilica, partner, head of transaction advisory services with EY.
“A sector that will probably be very busy in 2014 is the telecom, media and technology sector. Software and IT remain attractive, generating very big and interesting deals.”
The M&A market increased by several percentage points to EUR1.3 billion last year, according to ZF estimates. The most important deal of the year was the IPO of Romgaz, which raised EUR390 million. The shares were oversubscribed by a factor of 13 on the retail segment and by a factor of five on the corporate segment, which showed investment appetite for state-run company IPOs is there.
“We expect Electrica and Complexul Energetic (Energy Complex – CE) Oltenia’s IPOs, as well as Romtelecom’s (…) this year,” said Dana Mirela Ionescu, chairman and chief executive officer of Raiffeisen Capital & Investment, one of the arrangers of Romgaz’s IPO.
Consultants also believe that besides the expected IPOs, the banking and telecom sectors will the main actors of the M&A market with many high value transactions.
“Many banks will be consolidated eventually in the Romanian banking sector. We can’t know how many will be left but there will probably be much fewer very soon,” said Marinel Burduja, general manager of Banca Romana de Credit si Investitii (BRCI), a newly established bank after businessman Dorinel Umbrarescu took over the ATE Bank license.
“We expect to see deals in the telecom sector in 2014, especially on the cable TV service segment. We are talking convergence of mobile telephony, fixed telephony and cable TV service providers here,” Florin Vasilica said.
Investment funds, too, will be active this year, largely selling some of the companies they own. They made their investments during the boom years 2007-2008 and the crisis forced them to hold on to their stakes longer than they would normally do, so they will be pressured to sell, consultants say.
“Unfortunately, the crisis extended our ownership of a company. We cannot sell in times of dramatic crisis, so we hold on to our companies longer, which can affect our return,” said Cristian Nacu, Enterprise Investors partner.
“We will try to overcome this time of crisis and sell when better days arrive.”
As for acquisitions, investment fund managers said they have the money and are willing to buy but the quality of supply does not meet their standards.
“It’s not about a lack of capital or interest in Romania, but about a lack of attractive projects. What we are most interested in is growth and we don’t always find a company wherein we see growth potential,” said Dan Farcasanu, investment manager of private equity fund Resource Partners.
The optimal deal for his firm in Romania he said, is worth EUR10 million to EUR15 million, because the market is not developed enough for deals in the range of tens of millions of euros.
The statements come after Romania saw a surprising economic growth of 3.5% last year, exceeding analyst and business sector expectations. The growth was mainly because of the industry, especially the automotive industry and agriculture.
However, “we being surprised to see this growth means it does not show. It primarily comes from export of cars and machinery and from agriculture and shows that not much of it stays in the country. Consumer spending did not go up or even went down slightly. The only thing that grew by 10% is deposits, which shows there is a lack of confidence in the market,” said Cristian Nacu.
As long as consumer spending does not increase, private equity funds are not willing to invest, the Enterprise Investors representative added.
(English version by Loredana Fratila-Cristescu)