20 biggest corporate deals in first nine-months

Value of mergers and acquisitions in Romania closed in first nine months of this year amounted to 1.246 billion US dollars, after 126 million euros in third quarter, lower than Q3 in 2007, according to Wall-Street calculations.

If in first half 2008, 24 corporate deals were closed that amounted 1.3 billion euros, the past three months have geared only 126 million euros in 7 large transactions, in the context of international crisis.

Biggest transactions announced for July – September 2008 were the Piraeus Bank’s take over of 51% stake in Capital Partners, for 32 million euros, the 53 million euros – transaction between Macon Deva, held by Polish-based investment fund Enterprise Investors, and Simcor Oradea, headed by Stache Lutz and Mihai Voiculescu, and 20 million euros deal in which Russian Luxoft acquired local ITC Networks.

In August, low-sized deals were carried out: Unirea Medical Center bought 50% of AvaMedica for 700,000 euros, RTC Holding headed by businessman Octavian Radu sold the downstream division of IT&C ProCa to RHS holding headed by Dragos Popescu, for 3-5 million euros, and Marius Ghenea’s deal of selling metallic tiles producer VikingProfil to Polish group Pruszynski for approximately 3 million euros.

The transactions’ number and size dropped in the last quarter compared to similar interval of last year, and less than previous quarters this year. Investment bankers surveyed by Wall-Street say the financial crisis spawned on the M&A market in Romania as well.

“Everything spins around the global financial markets’ status – all players are on hold waiting for the next move. In times of uncertainty, as we live today, few players are actually pursuing strategic moves, like an M&A deal. The waiting is readying a wave of transactions after the turmoil tempers down,” Doru Lionachescu partner at one of the biggest M&A advisor on the domestic market, Capital Partners stated for Wall-Street.

Doru Lionachescu sees how M&A market is now feeling financial market’s woes. According to him, it is possible to continue a long period of unlimited tapping, both from vendors, and from buyers. “On the other hand, the theory says in times like these, premises of sparkling acquisition opportunities may emerge; we will see how and when this will be materialized in Romania,” Lionachescu added.

Matei Paun, owner of investment bank BAC Investment, says if we take into consideration the financial segment and the real estate segment, the financial crunch had no negative impact on the local merger and acquisition market. “On the contrary, foreign companies will urge in tapping player-free sectors that have growth potential or provide lower costs on workforce,” said Matei Paun, adding thatnumber of purchase and sale mandates of BAC Investments have soared compared to 2007.

In case in Capital Partners, ratio between purchase and sale mandates have predictably, sharply reversed: there are much more clients urging in exploring possibility of a sale, in the context of low appetite of foreigners in acquisitions in Romania. “We have generally remained committed to represent local vendors who we would like to assist in more difficult periods, like now. The difference is that as compared to last year, we started to accept purchase mandates, but only if we are convinced the client follows strategic, fair deals for vendors as well,” Lionachescu explained.

Even if private equity funds halted investment projects in Romania, investment bankers say this trend is not felt on the market. “I believe the investment funds are at least as keen as before in closing deals. Their issue consists in the failure of seeing local deal market high and attractive enough,” Matei Paun concluded.

“There are no signals showing investments funds are more reticent, on the contrary. Furthermore, a favorable juncture for private equity investors is emerging in Romania – accessible prices, enforcement pressures, higher growth projections,” Doru Lionachescu opined.

On the local market, companies’ ratings are reeling from international financial context. “For most of the fields, almost no player can actually hope in being rated at same quotas as they were 9-12 month before. The fastest indicator is the stock market, which provides a real-time first outlook on investors’ approach,” Lionachescu added.

Matei Paun says there is a slight correction of Romanian companies in ratings, excepting real estate market and financial segment, but in line with the rest of CEE countries. “I forecast a major correction in companies’ ratings, especially in case of large transactions,” BAC Investment owner added.

Local entrepreneurs, turned into millionaires in financial crisis juncture

More than 30 local entrepreneurs enhanced their wealth, due to first nine-months’ exists.

If in first half 2008, Bere Mures’s former stockholders who received 150 million euros for the their stakes were the leaders, while in last quarter, the wealthies businessman was Doru Mardare , founder and owner of ITC Networks , who sold 95% of the company for nearly 15 million euros. This is the biggest deal closed this year in IT&C sector. ITC Networks, founded in 2000 with initial investment of 200,000 US dollars is specialized in outsourcing for telecommunication industry.

“I would definitely not encourage potential local vendors to progress talks unless there are transactions whose strategic component is at least partially cushioning them from international crisis. The delicate issue is how many all-time attractive companies are on the market today,” said Doru Lionachescu.

If in 2008, Asiban’ takeover by Groupama for 350 million euros remains the biggest transaction even after nine months, last year, the sale of 75% stake of Rompetrol by Dinu Patriciu was the most important deal both as size and impact on Romanian market. After the deal, Dinu Patriciu, chairman of The Rompetrol Group cashed in 2.17 billion US dollars from state-owned oil company KazMunayGaz from Kazakhstan.

The sale of 75% stake is the second biggest deal in terms of value after the privatization of Banca Comerciala Romana, ranked Patriciu first as the wealthiest Romanian, outcompeting Ion Tiriac.

Translated and adapted by Camelia Oancea.