Turning challenges faced by Romanian mid-sized companies into opportunities
Since 1999 our investment team has worked on over 150 mid-market M&A and corporate finance assignments in Romania and had exploratory discussions with hundreds of founders/MDs of Romanian SMEs. Here are some of the challenges and the lessons learned and how they can be turned into opportunities:
Common Challenges for Romanian Mid-sized Companies
Romanian SMEs are a highly illiquid asset class: Exiting Romanian mid-sized companies is very difficult in Romania/SEE region for various reasons:
- limited universe of PE funds
- most of existing funds look at companies with EUR 2.5mn+ EBITDA
- strategic buyers looking at cross-border deals have size limitations as well
- there is little M&A culture among local entrepreneurs
- low level of national consolidation activity through M&A except a few industry verticals (e.g. healthcare services sector, pharmacy chains, FMCG retail)
- companies are often unprepared for exit (owner is a “one-man show” without a proper management team, poor corporate governance, opaque reporting and operations, no business plan and financial projections etc.).
Investment Opportunity
Focus on industry verticals/market segments with scope for consolidation and work with entrepreneurs to build businesses, which could emerge as a top 3 player in their core markets, command a very compelling strategic position and allow multiple exit routes (secondary trades, trade sale to strategic buyers, IPO).
