Business Forum • 13 May, 2024 at 11:48 AM
Active investment funds in Romania are more optimistic regarding the evolution of the local market in 2024 compared to the previous year, according to Roland Berger's "Private Equity Industry Outlook 2024" study. Over 70% of the study participants anticipate an increase in the number of completed transactions in Romania by investment funds, after 20 were completed in 2023 transactions, 13 acquisitions and 7 exits.
Approximately 2,200 representatives from this industry, at the European level, were invited to participate in order to carry out the study. In Romania, over 80% of funds active on the local market participated in this research, at the level of Europe Central and Eastern participation rate exceeding 50%.
Optimism in the East and caution in the West
Outlook on the macroeconomic climate in 2024 within the industry of private equity differs significantly by region. According to the study, 73% of participants from Romania anticipate an increase in the economy this year. In Europe Central and Eastern, 63% of respondents share similar expectations. In Europe of the West, as a whole, the level of uncertainty is quite high, only 33% of participants anticipating economic growth this year. Expectations are high optimistic in France, Great Britain and the Nordic countries, while experts in Germany, Portugal and Spain are the most reserved.
Optimism both in Romania and in the rest of Europe
Even in the context of increased macroeconomic uncertainty in some Western European countries, private equity professionals across Europe remain confident in the evolution of the market for the year 2024 and anticipate an increase in the number of transactions made by investment funds this year. This represents a significant change from 2023 sentiment, particularly in Western Europe and Central and Eastern Europe.
At that time the outlook for that year (2023) she was very reserved. In Romania, also, an impulse of optimism, the share of funds that anticipate an increase in the number of transactions for the current year increased from 50% in 2023 to 70% in 2024.
According to the study participants, in 2024, the number of transactions made by the funds of private equity in Romania will be primarily influenced by the availability of targets attractiveness and the potential purchase price. Macroeconomic context and confidence consumers will have the greatest impact in the dynamics of transactions on the market of private equity in Central and Eastern Europe, while the accessibility of financing through "availability of debt financing" will be more relevant in Western Europe.
"It is gratifying to see an increase in optimism in the private equity market from Romania. Two-thirds of professionals in this field anticipate that the targets available in 2024 will be more attractive than last year, implicitly the number of transactions made this year will be higher. This optimistic feeling is similar in Europe. The biggest increase in optimism is recorded in Western Europe, where the market for mergers and acquisitions, including those made by funds of the private equity type, was strongly affected last year," said Szabolcs Nemes, Managing Partner, Roland Berger Romania.
Slight change in industries of interest to private equity funds
Specialists in the field anticipate that the Consumer Goods and Retail sector will attracts the most private equity investments in Romania this year, followed by the Logistics and Services sector. The IT, software and digital solutions sectors as well as the of Medical Services are tied for 3rd place this year, having occupied the first two positions in last year's ranking.
"Investments planned for 2024 will focus on industries that already have a significant weight in the local portfolio of funds. At the end of 2023, the four main sectors accumulated 75% of the total turnover of the companies in the private equity portfolio in Romania," added Szabolcs Nemes.
Different priorities for funds active in Romania and for those in Europe
The private equity market in Romania is at a different stage compared to other countries from Europe. By default, the players' priorities for the current year are different, both in what regarding their focus, as well as the measures planned in the medium term for increasing the value of the portfolio.
"Investment fund portfolios are made up of 40% of companies which has been under their management for more than 5 years, and over 10% of companies that have been owned by these funds for more than a decade. Therefore, it is no surprise that almost half of the participants from Romania mentioned that they are interested in an exit this year. In Central Europe and East, over 70% of the funds that participated in the study anticipate an exit in This year. At the same time, we notice an increased interest in Romania regarding fundraising, both compared to the previous year and compared to the other countries from Europe. This is supported by the launch of the PNRR funding program as well as the appearance of new funds at the local level recently", added Nemes.
The development of portfolio companies is a priority for all funds of investments, regardless of their geographical location. Measures taken locally in this an are similar to those in the rest of Europe, with an emphasis on the consolidation of companies from the portfolio, cost reduction and digitization. In the medium term, although there is similar directions, such as increasing the importance of using artificial intelligence, there are also regional differences, such as an increased interest in ESG in Central and Eastern Europe and Western Europe.