Marian Tescaru, managing partner with Altria Capital investment banking firm, says the unfreezing of the M&A market will depend on the way investors will perceive Romania, as multiples will continue to shrink.
Tescaru was one of the few investment bankers who as early as the beginning of last year stated we would see fewer deals in 2008 and Romanian assets would suffer further declines. He late last year saw multiples drop by 50% in just a few months in tourism and the failure of a deal in the sector of construction materials in late 2007.
"As it's a buyers' market, they are moving the chess pieces as they please. Sellers will not withdraw, but go further until buyers say yes or no," Tescaru also said.
Under the circumstances, the periods in which deals are sealed changed significantly last year. Still, most buyers prefer to sit and wait. Part of them do this because they used to finance their deals with money borrowed from banks, while another part "are afraid to take money out of their pockets". Investment funds make up a specific category. "(...) Funds are somewhat passive. They prefer to manage their existent portfolios to keep up a balance and meanwhile, should an interesting deal come up, look at it," Tescaru believes.
As for domestic entrepreneurs' expectations, the consultant says they have started to adjust, but valuations continued to drop, and this is why a demand/supply match is impossible.
How can we escape this circle of expectations? "It all depends on investors' future perception about Romania. The first elements they will perceive will be the new Parliament and the new Government, as well as the policy referring to attracting new foreign investments. Once investors start gaining some confidence that from a political perspective things are going in the right direction, they will start looking at us," Tescaru also said. @N
