The beginning of 2016 revealed some relatively unexpected and encouraging movements on the Romanian M&A market. A lot of new transactions have been either already signed (if not even closed) or are in the pipeline, in the most diverse industries.
Talking just about our experiences at Noerr, we have assisted clients in transactions that were signed during the first four months of this year in the manufacturing industry (such as the contemplated acquisition of Ana Imep and Ana Mep by Nidec Corporation), in agriculture business (the pending BayWa – Cargill transaction) and in IT&C. In addition, we are currently working on other transactions in IT&C (one involving software and the other involving hardware players), retail, oil and gas and real estate.
The signals received from the market are also very positive, all market peers talking about increased investment interest, more deal opportunities, excellent perspectives.
The reasons behind the facts
The Romanian M&A market is to a certain extent mirroring our economy and one has to look at the broader picture for identifying the reasons for the current promising situation.
In my opinion, three were the main factors that made Romania have one of the lowest FDIs in Central Eastern Europe for years and years after the fall of the iron curtain:
• The almost complete lack of consistency of the various governments that governed our country since 1989 from the perspective of the economic and political measures meant to attract investments, which led to discouraging macroeconomic parameters, poor infrastructure, low state budget incomes
• The mentality of the Romanian entrepreneurs that were rather reluctant in assuming the risks (such as listing their company on the stock exchange market, entering into joint ventures/ merging the businesses with competitors, selling part of their shares to a financial investor) required to bring their businesses at a level sufficient to make them attractive for foreign investors, combined with the well-known barriers that were historically facilitating the access of a certain category of entrepreneurs only to important state driven projects
• The strong competition in the region, that made Romania look as (one of) the black sheep of CEE, strongly linked with our failure to create at least a correct image of our country outside our borders, which made almost any foreigner coming to Romania and seeing the reality with his own eyes be positively impressed but, on the other hand, determined a lot of others to simply not come.
The last years have shown significant improvements from the perspective of the first two factors mentioned above.
Although there is still a tremendous lack of trust in the government, several measures that were applied and (perhaps for the first time since 1989) pursued by the last governments start to show very good results and Romania has currently perhaps the best macroeconomic situation after the communist period.
On one hand, the Romanian entrepreneurs are more mature and understand better what is required to have not only a stable business, but to grow it further and, on the other hand, a new generation of entrepreneurs, well anchored at the Western realities, starts to appear and to have a strong impact. Furthermore, the fight against corruption started to make our business environment healthier.
Finally, although I do not see a real progress from the perspective of improving our image abroad by own means, the problems existing all around us, starting with the Russian-Ukrainian issues and continuing with the populist measures implemented by the government of Hungary and (more recently) of Poland, have their own contribution to bringing Romania on the radar of more and more investors.
Will our M&A market really be booming?
Our country was for many years in a row considered as one of the most promising country in the region. The economy was down, the country had significant resources, the population was big and well prepared, everybody expected it to undergo significant growth and to really flourish sooner or later. Still, we have only had a few relatively good years before the crisis, not enough to eliminate the gap between Romania and most of the other European Union member states within the Central Eastern Europe.
Nevertheless, the current situation is encouraging and we should simply not allow ourselves to lose the momentum (for example, by implementing here also the populist measures seen at our neighbors – unfortunately there are already several signs).
I have met in the last years a lot of potential investors and attended all kind of European or regional M&A events and this year it happened for the first time that I was happy to not only hear the name of our country (if) as one of the other potential location for deals/investments in CEE, but as being referred to as the new pearl of the region.
We should understand that Romania is currently better positioned in the eyes of the investors than it has perhaps ever been and we should all work on capitalizing this – the answer to the question above is really in our hands.