In the absence of bank credits, transactions worth hundreds ofmillions of euros have become history for consultants in mergersand acquisitions, whilst private equity funds need to work more anddig deeper into their pockets in order to finance theirinvestments.
"It is difficult to have activity on the M&A market in theabsence of economic growth patterns and in the absence of access tofunding. Since leverage (boosting investment profitability by usingborrowed money) is out of the picture, investors will have to workharder and contribute more of their own capital to financing thetransactions," says Ioana Filipescu, managing director ofRaiffeisen Investment Romania.
The mergers and acquisitions market amounted to 1.1 billioneuros in the first eight months of this year, 75% less than in thesimilar period of last year. After a 16% decline to 5.5 billioneuros, the market will deepen its fall this year to 2 billioneuros, an over 60% decline.
The high demands of local entrepreneurs have most often beencited as hindrances to sealing transactions. "Entrepreneurs'expectations are where they should be. Private equity funds need tolearn that one has to work for their money. On the consultants'side, the decline of the mergers and acquisitions market shouldbring about more involvement in transactions," added Filipescu.
On the other hand, the fall in the value of transactionsconcluded this year will halve consulting firms' revenues.According to ZF estimates, if one considers a success fee of 1 to5% of the value of the transaction, it results that consultingfirms collected revenues ranging between 55 and 275 million euroslast year. This year, overall revenues will decline to 20-100million euros. There are over 200 professionals providingconsultancy on the mergers and acquisitions market. Only 12% of the100 transactions sealed this year have been concluded by privateequity funds, with the market dominated by strategic investors.
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