M&A market plunged 92% in Q1

The local mergers and acquisitions (M&A) market declined by as much as 92.6 percent in the first quarter of 2009 year-on-year in terms of value, due to the global financial and economic crisis, according to a study by Raiffeisen Investment Romania. As asset prices plunged, both owners and buyers were reluctant to sign M&A deals. The 33 deals (the value of only 16 of these was made public) concluded in Q1 2009 amounted to a total €100 million. While the amount makes up barely 10 percent compared to Q1 2008, the number of transactions dropped only 20 percent year-on-year. As no major deal was registered, and there was no government intervention or privatization, the average deal was worth €6 million, a record-low for the past 10 years. A quarter of the total mergers was made by financial investors and targeted mainly small real estate projects. The remaining deals were made by strategic investors. Retail and industry were the segments with the most transactions, as opposed to global trends (most M&A deals in Europe were made in the energy and utility fields), which proves that these acquisitions were made more as an opportunity than as a strategic move, with owners forced to sell companies in distress or non-core assets. Rumors in Q1 2009 of two mega-deals indicate that the Zapp telecom company and the digital Boom TV company were to be sold for a total €250 million, with these deals possibly finalized in the coming months. M&A will likewise be impacted by the financial and economic crisis in the coming months, due to difficult or impossible access to significant financing, and a lack of predictability regarding the economic and macroeconomic evolution, both locally and globally. Furthermore, there are no benchmarks for evaluation, as buyers are still hesitating, and seller price expectations are too high compared to the market.