Romania had only 1 company classified as a zombie in 2023, representing 1.4% at global level

In 2023 alone, Kearney identified 827 new zombie companies, a significant rise compared to the 534 companies that were “resurrected” by improved financial situations and the 127 that were delisted. This year-on-year increase underscores the severe impact of challenging financing and trading companies on these businesses, which now make up 5.8% of publicly traded companies globally. Globally, the sectors with most zombie companies were real-estate and travel & tourism (around 10% each), and telecommunications & media (7%); sectors with less zombies include financial services (2%), automotive, machinery, materials, and energy & utilities (3 to 4%).

To determine these figures, Kearney analyzed 75,000 globally listed enterprises across 154 industries and 152 countries. The data set includes more than 5.5 million individual data points and covers information from 2000 to the present day.

In Romania, 78 active listed companies were analyzed for 2023, and only 1 zombie company was identified, or 1.4% of total companies. This is less than the global average of 5.8%, and less than some of CEE peer countries - Poland has 26 zombies at 4% of analyzed companies. CEE overall stands better than global average.

As a result of higher borrowing costs, many companies are finding it difficult to stay afloat, and the report confirms that this trend is showing no sign of slowing down.

Kearney conducted two stress tests that indicate a continued increase in zombie companies, especially if businesses are forced to refinance their existing debt at today's elevated interest rates. For example, a company with $1 million in annual interest payments would see this amount increase to $1.5 million with a 1.5-times interest rate hike. Assuming no other changes in company performance, this scenario would turn 6.6% of companies into zombies, and a two-fold increase could push this figure even higher to 7.7%. For Romania, the results of stress tests do not show any increase in number of zombie companies so far.

Looking at the size of zombie companies more closely, the report found that smaller companies continue to be more “infested” than any other group. In 2023, the share of zombies among companies with an annual revenue of $500 million or less grew by nearly 9%, raising their share within this group from 6.2% in 2022 to 6.7% in 2023. Limited access to attractive refinancing options, coupled with weaker processes and governance compared to larger companies, could leave this cohort vulnerable to external shocks and may have had an effect here.

Florian Teleabă, Principal and Head of Bucharest office at Kearney, comments: “After the pandemic, many companies restarted investing for growth, including with debt; but increasing and still high interest rates pose another problem now for some. Zombie companies lack deep cash reserves, interest paid on loans taken for investing or supporting growth is variable, making higher rates all the more painful today. In Romania, companies so far seem to do better on average than globally - by share of zombie companies - yet there is still pressure, and likely it will increase in near future (slow down or evolution below expectations of the economy). The revenue growth is slowing down more quickly than the ability to control rising costs through standard business operations. It's not enough for these companies to wait for the markets to change. To avoid bankruptcy or closing their doors permanently, zombie firms or others at risk can give themselves a second chance with the right strategy, either restructuring or converting some of their debt to equity – and we expect more and more companies in Romania to look at such measures in near future.”