In a struggling crisis-hit economy, investors have shifted focus to small-scale deals. M&A specialists interviewed by Wall-Street explained the premises of this downscaling and prospects of an ever-changing market.
Stancescu, Riff Holding: There will be a “main street” of middle and small-scale deals.
If the giga-deals that involved economic mammoths took the spotlight in the past, the repositioning of investors and reorientation of interests have steered their attention to niche businesses, small and midsize deals with development potential.
According to Raiffeisen Investment, M&A market dropped to five-year low. Of the 61 deals announced this year, only 10 topped the 6-mln euro threshold, without any mega-deal in the pipeline (the largest one amounted to 44 million euros, between EBRD and Renault Tehnologie).
As Marius Stancescu (photo), chairman of Riff Holding International, commented, deals below 5 million euros are the ones to make the M&A market go ’round in Romania.
“This phenomenon will be roughly permanent, long after the crisis is over. In Romania, there will be no opportunities for the development of mega-deals”, Stancescu told Wall-Street.
Given the shaky economic ground, almost 90% of the companies will book annual profits below 1 million euros, which means that at an EBITDA multiplier of 4.5 up to 6, the market values will stand below 5 million lei.
As he noted, a new “main street” of deals below 1 million euros is underway. “This is unquestionably one of the most important signs of economic revival”.
Urzica, Consilium Advisors: This reorientation is normal
The total deal size suffered a 93% year-on-year drop in first five months, from 2.659 billion euros to 199 million euros, according to Ioana Filipescu, managing director of Raiffeisen Investment Romania, at M&A Outlook Conferences.
Marian Urzi
