Merger and acquisition (M&A) deals concluded in the first half of 2021 amount to an estimated 1.8 billion euros for over 80 transactions announced, shows a survey by PwC Romania which confirmed the market's upward trend resumed since the second half of 2020.
"The rise in investor confidence, supported by encouraging macroeconomic data, excess liquidity in local and international financial markets and the upgrade of the Bucharest Stock Exchange to emerging market status have significantly boosted transactions in Romania this year," said Dinu Bumbacea, PwC Romania Country Managing Partner.
The buyer was a strategic investor in 59 of the 83 M&A transactions centralized by the PwC survey of Romania's relevant market in the first six months of the year. The interest of investment funds in the local market has also increased, with 16 of the announced transactions having venture capital funds as buyers.
"Beyond the rearrangement of the winners of the pandemic crisis against the market's competitive background, the consolidation and polarization of companies to increase their crisis resilience have also been an important catalyst for transactions between players from the same activity sector or from sectors that allow for vertical integration and the capitalization of synergies," explains George Ureche, leader of PwC Romania's M&A department.
The Bucharest Stock Exchange has also become a noteworthy platform for attracting capital. The eight listings (through initial public offering or private placement) initiated during this period as an alternative to a standard M&A process, and over-subscriptions in the sale processes are proof of the growing attractiveness of the local stock exchange. The two most important transactions were the IPOs of carrier TTS and of real estate developer One United Properties, respectively, in June this year, with a combined of over 100 million euros in attracted capital.
"Real estate transactions generated a quarter of the local M&A market in absolute value, respectively a fifth of the volume. Also, the IT sector preserves its podium position in the transaction market through a mix of listings, fundraising operations and mergers & acquisitions, amid the market's need for financing and consolidation," says Marina Pavel, PwC Romania M&A manager.
Thus, the acquisition of Hermes Business Campus by Adventum Investment Fund Management for over 120 million euros represents the largest transaction in the local real estate market. The transformation in the working manner of large corporation employees was one of the boosters for the number of transactions with office buildings that also saw the highest prices in the sector.
In IT, in addition to the 60 million dollar B-series funding attracted by FintechOS, the largest of the kind in Central and Eastern Europe since the beginning of the year, other IT players such as Gemini Solutions Inc or Metro Systems Romania SRL were the object of M&A transactions of over 20 million euros. The market's consolidation is visible through a series of other small transactions (mostly under 10 million euros), whereby entrepreneurial companies are acquired by large international technology conglomerates.
The financial and the private health services sectors remained a traditional presence among the top M&A deals, with the local operations of City Insurance and Alliance Healthcare Business topping the ranking of the respective sectors.
The transport, energy and consumer goods sectors were also upbeat, due to the desire of the big winners of the pandemic to consolidate their position in the market. M&A growth is further expected in the green energy and logistics sectors.
Global mergers and acquisitions continued to grow in April-June 2021, which was the fourth consecutive quarter to surpass $1 trillion, according to PwC's Global M&A Industry Trends report. This trend will continue in the second half of the year and in 2022, due to the increased demand in the area of technology and innovation and the very large amounts available to investment funds and special purpose procurement companies (SPACs).
"Interest in new technologies and innovations remains at the forefront of transactions; competition among investors is expected to heighten and assessments are seen increasing exponentially. Yet at the same time we could see an increase in restructuring operations and transactions among the companies still affected by the health crisis, such as airlines, cruise operators, aircraft manufacturers or cinemas, which could face new liquidity challenges as governments begin axing support programs," said Dinu Bumbacea.