What’s still on the market in Moldova?

Financial crisis is at its early stages in Moldova, with investors reverting mode to stand-by. At Chisinau stock exchange, trades have become scarce, and things are not getting any brighter when you step out of the business arena. “We had many deals running in various industries in the second half of last year, but things started to turn sour as of September-October. The profile of a regular client of ours is a western company, usually a European company”, said Alexandru Turcan (photo), managing partner of Turcan&Turcan law firm, which provided legal advisory to clients such as Lehman Brothers and Morgan Stanley in their 100 million euros investment in Adama Holding last year, and assisted Societe Generale and Veneto Banca in the acquisitions of two Moldovan banks.

Investors are discouraged primarily by the instability of the political scene, after last month elections. It is still unknown whether there will be any anticipated elections or what will be the final component of the government. The possible “election dances” in the coming months would bring foreign investments to a halt, on an acquisition-oriented M&A market. “If we look at the M&A market in Moldova, is not too much of an ‘M’, but only ‘A’. Mergers are much too scarce”, said Turcan.

The market itself cannot be evaluated on the lack of transparency. The majority of private deals are conducted under confidentiality terms. Turcan&Turcan assisted a similar deal of 20 million euros in 2008. Last year, the target fields of M&A were banking, TV, real estate, and telecommunication.

The largest deals were in banking industry. The biggest deal of 2007 was the acquisition of local Mobiasbanca by Societe Generale for 18.4 million euros which involved 70.5% stake, one year after Gruppo Veneto Banca took over Eximbank.

But the biggest deal in M&A should have taken place in 2008. The government planned to privatize Savings Bank (Banca de Economii) the last state-owned bank in Moldova. The deal is estimated at tens, maybe 100 million euros. The Government wanted to complete privatization by the end of last year, under the terms imposed by the arrangement with International Monetary Fund: the sale to a strategic investor, a large bank capable to absorb and improve Savings Bank’s assets. “They have the widest retail network in the country. Their motto is to have one unit on every square foot. They are present in every village, just like the post offices. In fact it is a very interesting asset to buy”, said Turcan.

Turcan&Turcan is directly involved in the privatization of the bank as consultant, together with BNP Paribas. The privatization process is likely to be resumed in the second half of the year, and the potential bidders are banking groups from Western Europe or the Commonwealth of Independent States.