Romania – Distressed M&A 2022

Although the M&A market suffered in the first half of 2020, mainly due to the imposed covid-19 lockdown and the uncertainty that followed such an unprecedented situation, the Romanian M&A market quickly picked up in the second half of the year and continued to focus on deals for businesses that had and have an exceptional track record.

Continuing the trend, in 2021, we have witnessed fairly dynamic M&A activity in Romania, which included some sizeable deals for our jurisdiction. Despite covid-19, distressed M&A transactions in Romania still seem sporadic, with only a handful of active buyers, typically opportunistic or coming from the non-performing loans sector.

The past three years have set positive records for regular M&A deals in Romania. Distressed M&A has not, however, been a primary focus of investors, except maybe in some opportunistic situations or as regards certain non-performing loans portfolios. Notably, there was a failed acquisition of City Insurance SA, one of the biggest insurance companies in Romania, having assets worth €700 million and written gross premiums of €500 million and boasting a portfolio of four million clients, representing half of Romania’s mandatory car insurance policies, as reported. In the City Insurance case, although a transaction was signed with a prospective buyer the Romanian insurance regulator placed the company in special supervision, replaced the management with the Insurers Guarantee Fund and ultimately withdrew the licence of the insurance company and opened the bankruptcy proceedings.

Considering that the pandemic has threatened and is still considerably threatening the good standing of some Romanian companies, the general expectation, although not desirable, is for the M&A market to slowly shift to distressed companies. We note that such a trend has not been visible until now, presumably given that distressed businesses were rather sold as individual assets and not via M&A deals.

Originally published in Distressed M&A – Work areas – Getting The Deal Through – Lexology