The world M&A sector continued a slightly downward trend in 2013. While the number of transactions stayed in the same level as 2012, the total deal volume decreased 3% according to Mergermarket’s annual report. The total volume was in 2013 2,215 B$. European M&A deals valued at 631B$ dropped 12% compared to 2012 (US$ 718bn) and showed a second annual decline.
The 2013 estimated transaction value in Romania rose to USD 1.1bn, up by 39% from the previous year. This growth can be mainly attributed to the UniCredit Tiriac Bank - RBS Bank transaction. For a list of M&A deals please see the CFIE page on deals in the Romanian market.
The Romanian transaction market was in 2013 dominated by domestic transactions with 56% of total number of deals, which represents 9% points increase compared to 2012, while inbound transactions decreased by 14% from last year and outbound transactions appeared a new, potentially signifying a new trend.
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. Further industries with M&A activity in the Romanian M&A market are the agriculture and TMT sectors.
The energy sector – with interest in both oil & gas and alternative energy sources – continued to generate a considerable amount of M&A activity in 2013, as in recent years. In June 2013, the Romanian government adopted an emergency ordinance which postponed the trading of a number of green certificates for renewables projects in Romania. There is still activity in the renewables area and continued interest in wind and photovoltaic projects in particular. Samsung acquired a 45MW photovoltaic project in Southern Romania.
Privatisation also happened in 2013 with privatisations of state-owned enterprises such as the sale of the national post operator Posta Romana, petrochemical plant Oltchim and a majority stake in the freight rail company CFR Marfa.
Deals closed by strategic investors represent 63% of total deals, which is lower compared to previous year. However, from the total transactions, 37% represent financial investors, which indicate a growing easiness for PEs to match their portfolio in Romania, in 2012 the percentage being of only 18%. PE investment was still relatively low due to the lack of debt financing.
In 2013, out of a total of 57 inbound transactions, the largest part of 7% came from Poland, while in 2012 the most active inbound investors came from USA (13%). The only inbound investors country present in Romania in the last 2 years is UK, that in 2012 represented 7% from the total inbound transactions and in 2013 represented 5%.
The transactions arena in 2013 has been marked by two major trends, which have shaped the M&A market and beyond. As the most important trend in the market, we have noted the consolidation of the financial sector, with major transactions in the banking field and insurance, but also covering other areas including leasing. Two transactions, RBS Romania - Unicredit Tiriac Bank and Citibank - Raiffeisen Bank, are the 2 largest transactions of the banking industry since the privatization of the BCR to Erste Bank, and have put pressure on other players. The second trend comes from the IPOs and SPOs, 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.
As the outlook for 2014, we see a continuance of transactions in the financial sector. In addition, we expect M&A from sectors including BPO, technology, telecom, FMCG or automotive. Agriculture is also an industry of interest. Projects are encouraged by both EU and Romanian government subsidies available to support investments in the sector.
Romania remains attractive to investors and has the potential to be extremely attractive in the coming years. Improvements to transport infrastructure in Romania in the coming years, alongside a continued commitment to the privatisation programme and more efficient absorption of EU funds, should encourage investment into Romania and move the market forward.
There is a growing interest from other markets, such as China and Korea. We have seen increased interest from Chinese companies in particular and this looks set to continue for the coming year(s). The fact that the Chinese government has opened a US $10 billion special credit line for joint investment projects in East European infrastructure and technology projects is further testament to China’s serious interest in promoting economic cooperation with the region. All in all we see potential for significant increased M&A growth in the years ahead.