Mergers and acquisitions market stays under 1 bn dollars in H1

In the first half of 2009, the total value of mergers and acquisitions market in Romania slumped 75%, corresponding to 18% drop in deal volume year-on-year, according to data provided by Raiffeisen Investment bank.
In first six months, the investment bank tracked 78 transactions, (of which only 43 have announced the value) which totaled below 1 billion euros.

The total size of reported M&A deals was 379 million euros. In a simple calculation of estimating the value of the acquisition of 25% equity by KazMunaiGaz, the deal size would be in the range of 400-500 million euros, while the remaining 34 deals with unannounced value could total another 100 million euros.

“A review of the first half of 2009 appears to be an accurate reflection of our economic situation. Given the very low values involved, we can say that the M&A activity is largely driven by deals concluded more as a matter of happenstance rather than the result of strategic planning”, Ioana Filipescu told Wall-Street.

The most recent transaction concluded in first half is the acquisition of Telemobil, operator of Zapp carrier, by the Greek-based telecommunication group, Cosmote.

Moribund M&A landscape

The ingredients of the deals were vendors under pressure of selling distressed companies – most of the times involving low-value non-core assets, in deals that didn’t require any financing from banks, said Ioana Filipescu.

In default of a megadeal, as well as of any other state intervention or privatizations, the deal size averaged a mere 9 mln euros, which is the lowest value in ten years. “In the context of a drop in the average deal size from over 38 million euros, we may say that the local M&A market is in a lockdown mode”, Ioana Filipescu continued.

The outlook is bleak, as the M&A consultant says: a third of the deals of average size of 5 million euros were carried by financial investors, generally representing small real estate projects, while strategic investors pursued deals whose average value is 5 to 15 million euros, given the presence or absence of the estimated value for KazMunaiGaz - Rompetrol deal.

The most active M&A sectors, both in size and volume were: real estate, financial services and industry.

Source: Raiffeisen Investment

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