Category: The Buzz

Radulescu & Musoi Partner Roxana Musoi reflects on a dynamic year for Romania’s M&A market, highlighting shifting entrepreneurial mindsets and opportunities driven by European funds.

“It’s been a strong year for M&A transactions in Romania, both in terms of volume and activity levels,” Musoi begins. “What stood out was the openness of sellers to engage with investment funds, which is a noticeable shift in mentality. Historically, many businesses were run more as private enterprises, but we’re now seeing a greater willingness among Romanian entrepreneurs to embrace transparency and adopt corporate governance structures.” According to her, this change is largely driven by the rising costs of bank loans, which has made accessing traditional financing more difficult. As a result, entrepreneurs are turning to private equity funds or preparing their companies to go on the capital market as a way to raise capital.

“Additionally, there’s been a wave of Romanian entrepreneurs exiting their businesses,” Musoi continues. “Interestingly, many of them are reinvesting their capital elsewhere to spread the financial risks in different sectors, which is slowly fostering the growth of a private equity ecosystem in Romania. Currently, there are about 10 funds actively seeking investment opportunities across various industries. We’re optimistic this trend will continue into 2025, though much will depend on political stability and maintaining investor confidence.”

As for the specific areas that have been most active, Musoi stresses that “the IT, healthcare, medical, retail, production, and oil and gas sectors have attracted significant attention this year. Real estate, however, has seen less activity compared to previous years.” One of the key drivers for this sectoral interest, according to her, has been the availability of European investment funds, which have created numerous opportunities in industries tied to public procurement. “As a result, we’ve seen a lot of work related to public sector bids and projects.” Furthermore, Musoi indicates that the war in Ukraine has had a dual impact on Romanian sectors. “On the downside, agriculture has been heavily affected, with Ukrainian produce flooding local markets and driving prices down. On the positive side, oil and gas have remained stable, and we hope to see continued investment in exploring energy sources, particularly in gas.”

Musoi also reports on several noteworthy updates, especially in the financial sector. “Romania has aligned itself with broader EU legislative trends, implementing overhauls like the Alternative Investment Funds Directive, the Crowdfunding Directive, and the Payment Services Directive,” she says. “These changes are creating a more structured and transparent financial environment, which is crucial for attracting and retaining investors.” And, another important regulatory development has been the FDI approval mechanism. “For all foreign investments exceeding EUR 2 million in most sectors and below EUR 2 million for investment in strategic sectors, prior approval is now required before closing. This has added a new layer of complexity to transactions, generating significant work for legal advisors and sometimes delays in closing, as most of the deals now require notification and compliance with these requirements.”

Finally, focusing on the legal market itself, Musoi reports that client work remains robust, but that it is becoming evident that larger law firms are better positioned to handle the demands of today’s market. “Their broader expertise allows them to provide faster and more precise advice, which is increasingly important given the complexity of modern transactions and regulatory requirements. As the market evolves, I expect the gap between larger and smaller firms to continue widening, with the former being better equipped to meet the challenges posed by both clients and regulatory frameworks,” she says. Still, she remains optimistic about the year ahead concluding by saying that “2025 could be another vibrant year for Romania.”

A significant number of landmark energy and infrastructure projects are currently materializing in North Macedonia, with foreign direct investment interest constantly growing as well, according to Veton Qoku, Partner and Attorney-at-Law in cooperation with Karanovic & Partners.

“With elections coming up next year, we have an interesting period ahead in North Macedonia,” Qoku begins. “The business sector, however, remains vibrant with numerous ongoing energy, infrastructure, and FDI projects.”

“Among those, the estimated EUR 1.3 billion highway project, carried out by a joint venture between US-based Bechtel and Turkish Enka, stands out,” Qoku says. “The project involves the construction of two motorways with a total length of 110 kilometers. The first, part of Corridor 8, is an east-west route connecting the Adriatic and Black Seas, between Albania and Bulgaria. The second one, known as Corridor 10d, is part of the EU’s Pan-European Transport Corridor 10, connecting Austria and Greece. These highways play a vital role in the country’s infrastructure development and are currently the primary focus of our efforts.”

“Ongoing energy projects are also gaining momentum,” Qoku adds. “Here, four major projects stand out, each focusing on a different aspect of the country’s energy sector: a 415-megawatt wind farm developed by Germany-based WPD AG; a 400-megawatt solar energy project spearheaded by French Akuo Energy SAS; a 150/105-megawatt combined heat and power generation plant under development by Greek Mytilineos; and last, but certainly not least, the competitive dialogue procedure for the development of a natural gas distribution network in North Macedonia through a PPP project. The first three projects have received special attention from the Government, granting them a strategic investment status.” According to Qoku, a substantial amount of behind-the-scenes work has been accomplished thus far, and most of these projects are nearing the finish line.

Furthermore, Qoku notes “there has been a notable surge in FDI in the country’s technological industrial development zones, with the largest investment coming from Taiwanese chip manufacturing company Yageo Group, which recently announced an investment of EUR 205 million, among the biggest greenfield investments since the independence of the country. The country’s business-friendly policies, regulations, favorable tax environment, and skilled workforce continue to attract FDIs and make North Macedonia a competitive destination for large foreign investments.”

Qoku further highlights notable legislative developments in North Macedonia: “There have been a few legislative changes in parliament over the past couple of weeks that will have an impact on projects of strategical importance,” he says. “These changes aim to fast-track certain procedures and provide more flexible regulation for such projects, which may result in an increase in similar initiatives in the future. Additionally, a new labor law draft is being prepared by the Ministry of Labor, to modernize the existing, rather outdated one.”

“On the political front, the parliament is trying to find a mutually satisfactory solution that will allow for a change of the country’s Constitution, to make it more inclusive towards certain minorities, in an effort for North Macedonia to ultimately join the EU, which is a crucial aspect of our commercial aspirations,” Qoku says.

Romania’s markets faced a bit of a slow start to the year but have since overcome it and are back on the right track, according to MPR Partners Partner Daniel Alexie.

“The start of the year was somewhat slower and less energetic when it comes to M&A work,” Alexie begins. “But I would not read much into it – the turn of the year is usually a slower period, with many investors taking a well-earned break and pausing some of their activities.” Indeed, he reports that transactional work has spiked recently, with “IT and tech leading the charge. I feel that the market will only get stronger as the year progresses, to be honest.”

In addition to M&A and transactional work, Alexie reports spikes in activities on account of migration. “Following the beginning of the war in Ukraine, we have seen high numbers of Ukrainian and Ukrainian-controlled businesses setting up shop in Romania,” he says. “We have witnessed movement in various areas, including IT, agriculture, and even the courier businesses. This relocation and, to a degree, expansion of businesses is logical, given the proximity of the two countries and the attractiveness of the business market in Romania,” he explains. “It is a good sign that our neighbors from Ukraine are finding the energy to move forward in these difficult times.”

Turning more to local legislative innovations, Alexie mentions a draft law specifically aimed at lawyers – which was shot down recently. “The draft law proposed setting up a central digital platform, created by the Romanian National Bar Union, which was supposed to be used by lawyers to interact with clients, courts, and other authorities,” he says. 

“If this had passed, lawyers that opted to use it would be expected to undertake all of their digital work through this platform. This created a lot of friction within the legal community, raising concerns about attorney-client privilege, the privacy of personal data, and confidentiality – leading to strong opposition to the proposal,” Alexie explains. Ultimately, the draft law was not to pass, and “one can only wonder if a similar project will appear in the future.”

Finally, from a more practical perspective, Alexie reports a market adjustment. “Following the updates to the trade registry procedures and regulations last November, the market is still adjusting to all of the amendments and innovations,” he says. With the changes to the framework leading to a full digitalization of procedures and processes, Alexie reports that “we still find ourselves in a bit of a transitional period. While there clearly are a lot of benefits – for example, it is much easier to obtain certain documents that are essential for due diligence procedures – there are still some hurdles, for instance when submitting documents in multiple languages.” However, even with the markets still getting used to these innovations, Alexie concludes that “they’re a step in the right direction.”

Despite the challenging global landscape, Romania’s banking sector continues to show resilience – with M&A activity in line with the second half of 2022 – according to Filip & Company Partner Alexandra Manciulea.

“In the banking and finance sector, the major talking points are the fall of Silicon Valley Bank and the takeover of Credit Suisse,” Manciulea begins. “These developments raised questions on their further impact on the European and the Romanian banking market. In addition to these global events, the Romanian market is also grappling with its own issues, such as the withdrawal – by the Romanian Financial Supervisory Authority – of the functioning license and the envisaged bankruptcy of Romania’s market leader in third-party liability car insurance – Euroins.”

Despite these challenges, Manciulea says the banking sector in Romania remains resilient. “In March, Romania experienced a 14.53% inflation rate, which is comparable to other CEE countries, and there are hopes for stabilization in the second half of the year, which, however, depend to a great extent on the evolution of the global economic context,” she notes. “Additionally, non-performing loans in the Romanian banking market are currently manageable, with a low rate of 2.65% recorded at the end of last year. This represents a 0.7% decrease compared to the end of the previous year,” she says.

“The era of cheap money has come to an end, as financing conditions have tightened and the banking sector is adopting a more prudent and risk-averse approach,” Manciulea continues. “However, there is a growing interest in green financing, with banks keen to finance environmentally sustainable projects. Some banks have recently also issued their own sustainable bonds in the market.” And, according to her, “in the realm of project finance, there is a notable interest in energy projects, particularly those involving solar and wind energy, indicating a positive outlook for renewable energy projects.”

As for M&A in the first quarter of 2023, Manciulea points to “the takeover of ENEL group operations in Romania by the Public Power Corporation – the main electric power company from Greece – announced in March and amounting to over EUR 1 billion.” She says the first quarter of 2023 is comparable to the third and fourth quarters of the previous year: “Romania’s market has been busy with interesting deals, including overseas investments on which our team has advised, such as the acquisition by Banca Comerciala VictoriaBank in Moldova of BCR Chisinau and an investment agreement between DIGI Spain and a fund managed by Abrdn for the development of a fiber optic communications network in Southern Spain.”

“Deals of such magnitude contribute to a solid year in terms of market activity,” Manciulea says. “Despite concerns about market conditions, there is still liquidity in the market and an intention to continue with transactions. However, since money is more expensive, it is important to note that transaction values may be under pressure, particularly for those with a leverage component.”

In terms of general trends in banking, Manciulea says that fintech and digital finance have become a significant focus for law firms: “there has been a lot of regulatory activity in this space, with both fintech and banks developing digital solutions,” she notes. “Moreover, consumers are increasingly seeking easy one-click access to financial services, solutions, and products. To that end, we expect the collaboration between banks and fintech players will continue.”

“The political situation in Austria is as stable as it ever was,” says Eisenberger & Herzog Partner Marco Steiner. “Everybody’s eyes are pointed towards the government’s handling of the crisis, especially given that we are right now in a third lockdown. However, the government will need to get right on with its reform agenda as soon as the crisis begins to die down.”

In addition, Steiner reports, the country’s insolvency framework has been targeted for an overhaul. “Companies have been given a reprieve in the fact that the moratorium on insolvency proceedings for cases of over-indebtedness has been extended until the end of March,” he says. Companies that are over-indebted aren’t out of the woods yet, however. “In the first half of 2021 we expect insolvency proceedings and the distressed situation to increase substantially. For this reason, I believe, we can expect to see new legislation that will help companies in trouble by allowing for them to enter a reorganization process before filing for insolvency.”

In addition, Steiner says, “a new FDI screening framework has been put into place in an effort to screen non-EU investors that seek to invest in critical sectors such as infrastructure, energy, and defense.” Under that mechanism, he explains, “non-EU investors must now ask for prior clearance before engaging in these sectors.”

Ultimately, Steiner believes that the Austrian economy is on track for a bounce-back this year. “M&A transactions will be back to a normal pace – not booming as they were before the crisis, but decent enough – and the real estate and infrastructure sectors have been going strong recently as well.” Thus, he says, “I trust that all of these will remain active together with an increase in distressed/insolvency-driven transactions as the year progresses.”

“We are in the middle of dark hours of Belarusian history,” says Ann Laevskaya, Senior Associate at Sorainen in Minsk. “No one remembers COVID-19 crisis and its aftermath anymore. The nation, excited and shocked at the same time, is focused on what is happening now.”

“On August 9 we had presidential elections,” she reports. “Several popular candidates were not allowed to run. Still, some alternative candidates were registered. The campaign teams of those not allowed to run united to support the candidate who claimed to hold fair elections and eventually gained staggering support. In the evening of the election day people across dozens of cities took to the polling stations and central squares to learn the preliminary election results. At the same time, people all over the country started facing severe disruption of internet that continued until Wednesday morning. When we went online again, we saw hundreds of videos evidencing brutal suppression of peaceful protests in Belarus. It was shocking and many people took to the streets to say ‘stop’ to that violence.”

Laevskaya expresses her concern about the reports that are leaking out about the treatment of those who have been arrested and detained. “As some start being released, we hear from them and their doctors terrifying stories of torture and see mounting evidence of this torture in photos and videos,” she says, the alarm clear in her voice. “People are furious about revelations of brutality against peaceful protesters and unarmed detainees and demand legitimate election process. They started joining solidarity chains in mass and workers from many factories across the country went on strikes. I very much hope that we find a way to the rule of law, peace, and civil consent.”

“Slovakia’s new Government took office in March this year, exactly at the time COVID-19 hit,” says Peter Vrabel of the Legate law firm in Bratislava. “The Government consists of four parties – three of which are in the Parliament for the first time. Of course, the situation found them unprepared, so some mistakes naturally happened as a result of that. Overall, however, the response they had [to the Covid-19 outbreak] was quick and successful.”

Vrabel says that the ultimate question, going forward, is the effect the crisis will have on the country’s economy. According to him, the anticipated outcome is “a drop of ten percent in GDP and an increase of unemployment up to 6.5 percent.” To some extent, he notes, this was unavoidable, but he credits the Government with doing what it could to limit the damage. “Of course,” he says, “the restrictions that were applied caused limitations to the economy – but the Government has introduced several packages aimed at helping it recover. Some tend to help the employees, while others focus on businesses, giving them the ability to pay their office rent for an additional year.”

In addition, he says, “a so-called temporary protection shield for business states that no one can initiate enforcement proceedings or bankruptcy against you and that a company can’t initiate bankruptcy even with a negative ballot. This last measure provides a financing line to all business entities in case they decide to go for a new facility loan, in which case the state guarantees 90 percent of the principal loan amount.”

On balance, Vrabel says, this is all to the good. “Even though these measures don’t cover all of the costs, they are still important and helpful, and they helped stabilize businesses that otherwise wouldn’t have survived.”

Slovakia is proud of its automotive industry, Vrabel notes, and it continues to operate smoothly. “Volkswagen has announced that it will be producing three new models in Slovakia in the near future, which, of course, is a very large investment,” he says. Other sectors, unfortunately, are not doing as well. “With regards to M&A, a lot of the investors postponed their investments, and they are waiting to see how the situation develops. We are generally suffering in almost all fields mostly because of Slovakia’s open economy – meaning that we are almost entirely based on import and export. The fact that the supply chain was disrupted due to the pandemic means we are facing huge problems.”

Vrabel notes that, as Slovakia is particularly dependent on Germany, Germany’s dramatic economic decline is affecting Slovakia’s economy as well. “Still,” he says, “some sectors, like agriculture, have managed to work well even during the crisis. That is logical, though, because it’s not dependent on export, but mostly works locally, so it isn’t affected by the supply chain.”

Vrabel concludes that “the fact that people are not spending as much as they used to may lead to depression in all sectors.” He is particularly worried about a potential second wave of the pandemic, as he expresses doubt about “the country’s capabilities in terms of infrastructure, available devices, and medical teams to fight it.”

“The Corona Bubble is taking up most of our life in Romania these days,“ begins Sebastian Gutiu, Managing Partner of Schoenherr’s Bucharest office. “Everything is more or less related to it.“

Romania has been in a state of emergency since March 16, and, though it was initially announced for 30 days, the state of emergency has since been extended until mid-May. Gutiu reports that strict social distancing measures have been taken, including “lockdowns and movement restrictions, except for professional reasons and specific personal reasons.“ He states that “mostly everything is happening remotely these days in Romania: working from home, liaising with authorities, signing transactions, and making payments.” 

In an effort to combat the crisis, Gutiu reports, the Romanian parliament and government have been very busy. “Since the state of emergency started, the number of normative acts published in the Official Gazette has been one third higher than in the same period of 2019,” he says, noting that “the government was fairly good in terms of its reaction time and in taking preventive measures to limit the impact of the outbreak.”

Gutiu believes that the time is right to start evaluating the economic impact of the crisis. “I am sure we cannot be too early in taking balancing measures to this end, otherwise it’s likely that we’re going to be hit very hard.” According to him, Romania, as an emerging economy, does not have the strength and the critical mass of some western EU countries to cope with the crisis as well, and needs to prepare its strategy carefully.

In the meantime, Romania has taken many measures to do what it can to support the business community. Gutiu says that companies can now apply for a “so-called ‘state of emergency certificate’ if they see a drop in their revenues or need to shut down their business.” He reports that a draft law regarding rent payment exemptions is currently being processed by the parliament, and he says that a “EUR 3.3 billion state aid scheme for SMEs was recently approved by the European Commission, consisting mostly of direct grants and state guarantees for investment and working capital loans,” which should help Romania too.

Nonetheless, of course, Romanian’s workforce has been hard hit. Gutiu says that “nearly one million people are facing a temporary lay-off,” and that the number of employment agreements terminated since the beginning of this crisis is “estimated at over 200,000.” He reports that “various measures have been taken to protect employers and employees, including temporary lay-off compensations paid from the state budget, or paid days off for parents that need to take care of their children during the temporary shut-down of education units.”

“Court hearings and procedural law deadlines have been suspended during the state of emergency, as has the statute of limitation,” Gutiu says. “These measures apply to both civil and administrative courts, as well as insolvency proceedings, and even criminal trials, with only urgent cases being continued.” Similarly, most authorities have “postponed hearings and controls until the end of the state of emergency.” 

In the banking sector, Gutiu says, “a moratorium of up to nine months is available to borrowers, both companies and individuals, that have been directly or indirectly impacted by the pandemic.” However, he reports that “some uncertainties exist as the moratorium was already approved by a Government emergency ordinance, while the Parliament passed a separate law on it.” That law is facing a challenge in the country’s Constitutional Court. 

Finally, Gutiu says that “law firms are more flexible these days; they are much more capable of adapting now.” He states that the legal sector has had the opportunity to see other countries’ examples in dealing with the pandemic and its fallout, “so we were able to adjust.” He says that this crisis will most certainly change the “structure of the demand for legal advice” and that it can be used as an “opportunity to evolve.”