The Romanian mergers and acquisitions market was dominated by domestic transactions in 2013, with 56% of the total number of deals. In 2013, Polish investors were the most important foreign investors on the Romanian market, with 4 transactions, followed by investors from the UK, Turkey, USA (each with 3 transactions) and Russia, with 2 closed deals.
Of the total 147 completed transactions, 63% represent deals closed by strategic investors, while the rest were closed by financial investors. The financial investor percentage increased in 2013 compared to 2012, highlighting a growing easiness for PEs to match their portfolio in Romania.
After 5 years of economic repositioning, 2013 has brought to Romania notable transactions in banking, consumer goods and real estate. Locally, these sectors went through a consolidation process, but have implications derived from international markets. 2014 foresees transactions through which big players will continue to strengthen their position, either buying distressed competitors or vertically integrating the sector and achieving strategic positions against existing competitors on the market. The Manufacturing sector was the most active target industry (by number of transactions), accounting for 19 deals in 2013. This was followed by Energy & Mining (17 deals) and Telecom & Media (15 deals).
In terms of value, the largest transactions occurred in the Banking & Financial Services, followed by Real Estate and Retail & Wholesale.
HIGHLIGHTS – 2013
? Number of closed transactions in Romania: 147
? Estimated Romanian market size: USD 1.09bn
? Top three most active industries in Romania (by volume):
1. Manufacturing (19 deals)
2. Energy & Mining (17 deals)
3. Telecom & Media (15 deals)
? Top three most active industries in Romania (by value):
1. Banking & Financial Services
2. Real Estate
3. Retail & Wholesale
? Top 3 countries by number of transactions made in Romania: Poland, UK and Turkey
? Average deal size of deals over USD 100mn: USD 268mn
? Average deal size of deals below USD 100mn: USD 10mn
? Disclosure rate of transaction value or deal size: 39% (applying this disclosure rate we estimated the total transaction value of the M&A market)
Current trends affecting the M&A market
The transactions arena in 2013 has been marked by three major trend lines, which have shaped the M&A market and beyond.
? The consolidation of the financial sector was the most important trend on the market, with major transactions in banking and insurance, but also covering other areas, including leasing. Two transactions, RBS Romania - Unicredit Tiriac Bank and Citibank - Raiffeisen Bank, are the most coveted transactions of the banking industry since the privatization of BCR to Erste Bank, and have put pressure on the players to post growth or to niche, thus pressing for additional transactions to happen in the coming period.
? The second trend comes from the IPOs and SPOs (initial and secondary public offerings), and the more active role taken by the local stock exchange, but as these successes come from state owned companies, it remains to be proven if local listings are a real solution for private business owners.
? The third trend shows that more and more significant players enter insolvency protection. The large players’ insolvencies occur as the market economy’s natural solution for crowded sectors, not having the maturity or the capital to enter proper M&A activities, give away to more mature and potent players.
Less activity in the energy sector can in itself be considered as another marker of the past year but, for the moment, the transaction focus has not disappeared, it has only shifted towards operational wind farms and solar parks, nonrenewable energy generating projects and oil & gas exploration.
As an outlook for 2014, we can see a continuance of transactions in the financial sector mainly from PE funds looking to obtain liquidities from precrisis investments, additional converting of insolvencies into M&A, and a mild resurgence of the real estate sector, with focus on top tier occupied properties, valued on cash generating power.
Considering private equity funds, we expect to maintain a constant number of acquisitions, similar to that in 2013, but with a more intense flow of disinvestment which will mark the next two years.
‘From a sectorial perspective, the financial services sector will further strengthen, with a focus on banking services and we will see a slight recovery in transactions on the real-estate market’, added Mihai Pop.
The EY Barometer regarding the mergers and acquisition market in Romania – 2013
EY’s M&A Barometer is a summary and analysis of publicly disclosed information accumulated from reputable databases, such as DealWatch and Zephyr.
M&A activity and data includes private to private transactions and excludes: acquisitions of minority stakes below 15%, majority shareholder further acquisition of minority interest, real estate transactions (except when the target and/or buyer was a real estate company or real estate fund), capital market transactions (except for transactions that resulted in a change of control), acquisitions of licenses, joint venture agreements, greenfield investments, IPOs, privatizations, multi country deals (the value of these deals was ignored in each country, but the number was counted in), internal reorganizations.
M&A activity in CSE
Although the countries under review vary in size, background and economic growth, most of them have experienced an increased M&A activity in terms of volume in 2013 compared to 2012, while the M&A market has shown a decrease in only 4 countries. The total volume in CSE increased by 32.4%, however a 5.7% decline in estimated value can be observed in 2013 compared to 2012.
More specifically, we observed a majority of domestic transactions - 52% of all deals. Also noteworthy is the fact that transactions were dominated by strategic investors, and the most active target industry was Services while, in terms of value, the largest transactions occurred in the Telecom & Media, Banking & Financial services and Energy & Mining sectors.
Number of M&A transactions in CSE
Turkey was the most active country in terms of deal volume in 2013, closing 343 transactions during the respective period. It was followed by Bulgaria and Poland closing 290 and 270 deals respectively. The total number of transactions increased in the region from 1,108 deals in 2012 to 1,467 in 2013, representing a 32.4% growth year on year. Also, the M&A market showed an increase from 2012 to 2013 in most countries, based on the number of transactions, except for Romania, Poland, Serbia and Slovenia.
Estimated transactions value of the market
The total 2013 estimated transaction value on the CSE market was USD 39.4bn, down 5.7% from the previous year. This decline can mainly be attributed to a USD 6.8bn drop in Turkey’s estimated market value due to the lack of similar megatransactions appearing in 2012, while in most of the countries the estimated transaction values increased from 2012 to
The Czech Republic ranked first with an estimated value of USD 10.6bn, followed by Turkey (USD 9bn) and Poland (USD 8.8bn). The significant increase in Greece, Bulgaria and Hungary is mainly due to the increase in the number of transactions with a value over USD 100mn.
Investor population – Strategic and financial
The vast majority of deals were closed by strategic investors in all countries, except for Bulgaria, resulting in an overall proportion of 67% in the region. The share of financial investors was the highest in Bulgaria, followed by Romania, the Czech Republic and Greece. The share of financial investors in Bulgaria increased due to the significant increase in the number of transactions executed by private individuals in 2013.
Direction of transactions
The CSE transaction market was once again dominated by domestic transactions in 2013 (52% of the total number of deals) which represents a 1% point decrease compared to 2012, while outbound transactions remained at the same level as in 2012.
Domestic transactions were most popular in Poland, in the Czech Republic and Turkey. Turkey had the biggest number of outbound transactions (40 deals) - followed by Poland (30) and the Czech Republic (21).
The proportional share of outbound transactions was the highest in Greece, the Czech Republic and Turkey. The proportional share of inbound transactions was the highest in Hungary and Slovakia, followed by Bulgaria and Slovenia. The most active country in transacting within the region was the Czech Republic (20) in 2013.
The Services sector was the most active target industry (by number of transactions), accounting for 176 deals in 2013. This was followed by Manufacturing and IT. In terms of value, the largest transactions occurred in the Telecom & Media, Banking & Financial services and Energy & Mining sectors.
HIGHLIGHTS CSE 2013
? Top 3 countries by number of transactions: Turkey, Bulgaria, Poland
? Number of closed transactions: 1,467
? Estimated market size: USD 39.4bn
? Top three most active industries in CSE (by volume):
1. Services (176 deals)
2. Manufacturing (175 deals)
3. IT (167 deals)
? Top three most active industries in CSE (by average deal value):
1. Telecom & Media (USD 245mn)
2. Banking & Financial services (USD 196mn)
3. Energy & Mining (USD 163mn)
? Average deal size of deals over USD 100mn: USD 439.6mn
? Average deal size of deals below USD 100mn: USD 14.0mn
? Number of deals over USD 100mn as % of total deal volume: 3.3%
? Disclosure rate of transaction value or deal size: 32.5%*