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November 30, 2022

Mazars Study: Most of the global investors continue to seek deals despite COVID-19, but 90% of them predict falling revenues

COVID-19 pandemic shifted the M&A landscape with some declining statistics and tensed transactions. There has been a slowdown in the activity of numerous industries, the hardest hit being taken by hospitality & leisure and transport & logistics. On the other hand, food & beverages and pharmaceuticals registered a significant increase in sales.

Mazars Global Financial Advisory Services team has recently surveyed leaders of Private Equity funds and investors from Europe, the Americas, and Asia to understand their challenges and concerns, gauge their level of optimism for the future and find out more about their crisis response strategy.

74% of the participants come from Leveraged Buyout funds (38%) and Growth Capital funds (36%). 68% of all respondents are coming mostly from funds of a size of €51M – €200M, and the second share from the ones with €201M – €500M.



The study COVID-19 and the world of private equity, reveals that the funds’ leaders expect a drop in revenues for their portfolio companies in the next 12 months, as an immediate impact of COVID-19.

50% of the respondents expect a drop of between 11% – 25% and this was consistent across all fund types, whilst nearly a quarter (22%) of the participants went for 26% – 50%.

When talking about the impact on funds’ exit strategy, 79% of the respondents said that the exit timing for their portfolio of companies will be delayed. This doesn’t come as a surprise at all, considering that ~90% of the funds expect a drop in revenues.

There was a broad split of opinion regarding the focus over the next 12 months as a result of COVID-19. 24% of the respondents noted that managing downside in the existing portfolio will be a priority, whilst another 24% stated there will be no change in their strategy.

45% of the participants stated that new platform opportunities and acquisitions, and “bolt-ons”  for their current portfolio will be their focus.

Clearly, Private Equity professionals are keen to continue to look for opportunities. While it appears that the exits will be delayed, the level of “dry powder” across existing funds means they are continuing to look for new platform deals and bolt-on to their existing portfolio.


Buy, Sell, Hold while anticipating business as usual


When asked: “When do you think everything will return to business as usual?” only 1 in 5 respondents (21%) said Q3 2020, while 14% predicted Q4 2020, and 61% came out more cautious, saying 2021. Just 4% said normal business conditions will return in Q2 2020. With the majority (82%) of the respondents believes that we will have a U-shaped recovery, and 10% went for the V-shaped, there is natural caution as to the overall optimism on the market.

When looking at new investments, only 6% of the respondents noted that they expect to cease to look for new investments for the foreseeable future. There is a strong consensus on what does “business as usual” mean for 74% of the participants saying that they will not only continue looking for opportunities, but they are very much open for business in the immediate term. The responses showed a general optimism regarding the appetite to invest and pursue new opportunities, but it’s hard to translate this into deal volume over the coming months.


Global transition economy, but investors are still open for business


88% of the investors and Private Equity firms surveyed say it is possible to complete deals in a “working from home” environment, but 74% of them admit it is more challenging to do so. There is little correlation between the fund type or size and the expected impact on the ability to complete deals from home, suggesting that funds across the market have adapted well to the new working environment.

“However, despite the potentially significant challenges, we sense a level of optimism and resilience from the Private Equity community. Our personal experience tells us that quality transactions will still be delivered, and this is confirmed in our survey results with 74% of the respondents telling us that they are open for business and looking at new opportunities in the immediate term, considering also the reduced deal flow and the confinement restrictions”, mentioned Răzvan Butucaru, Partner, Financial Services & Advisory Leader, Mazars Romania.


Rescue deals and new market development within CEE


The investment funds industry, at a global level, stands at the end of 2019 on a record level of liquidity, estimated by Bain & Co. consultants at ~$2,500B. This trend is confirmed by the regional Private Equity funds active in Romania, who have raised several fresh funds from investors in the last three years. Despite the pandemic and economic downturn, the same trend can be also observed on the strategic investors’ side. There are a lot of companies outside the CEE region that have enough liquidity to pump it in the development of their business abroad. Thus, their growth strategy could be focused on developing new markets by acquiring local existing businesses, and CEE has been and continue to be a “hot spot” for them, as a place where they could gain new clients and expand their activities.

When analyzing the local market, some Romanian industries have been more affected by quarantine and social isolation, while others have managed to get off the momentum during this period. The first category includes tourism, HORECA, manufacturing, while technology, pharma, and FMCG have been able to adapt more easily to new conditions.

“The current issues should be perceived as opportunities for all sides. Despite the actual limitations and conditions, the Romanian M&A market has the potential of being dynamic, with opportunities normally encountered in the recession periods – such as fast sales, carve-out, disposal of non-core or non-performing assets, and portfolio recalibration. The market will continue to expand as more companies see the value of having a strategic investor capable of providing fresh funding and know-how.”, mentioned Răzvan Butucaru, Partner, Financial Services & Advisory Leader, Mazars Romania.


Emerging Romania and its favorable geopolitical position


From 2000 to 2019, year by year, Romania registered an average economic growth of 4.1%, reaching the highest increase within the European Union. The favorable position within Central and Eastern Europe, low tax levels, low-interest rates, and competitive wages have prompted potential buyers and investors to consider Romania an attractive market.

According to the Inbound M&A Report 2019/2020 by Mazars and MergerMarket , the CEE region registered 726 M&A deals in 2019, the same number as in 2018, as the momentum continued despite global headwinds, and the total public deal value fell 12% to €42.3B.

The Romanian M&A landscape registered a peak in 2019, with 50 deals (61% more than the 31 deals in 2018) and a total value of €815M , 45% higher than in the previous year. Most of the transactions were registered in manufacturing, wholesale & retail, and real estate & construction.

At the end of 2019, the expectation was that the positive M&A market trend would continue in 2020. Three of the largest transactions signed in the first quarter of 2020 were:

  • The takeover by successive transactions (the largest worth of €280M) of a minority stake in Globalworth by the developer of the CPI Property Group SA;
  • The taking over of G4S’s cash operations by the Brink’s Company;
  • The transfer of OMV Petrom’s 40 onshore oil and gas Romanian deposits to Dacian Petroleum.

“After a relatively active start of the year, Romania was among the countries hit by the pandemic, and its economy is expected to fall by 4% this year, according to the latest EBRD forecasts. The global health crisis created uncertainty, supply chain disruption, and liquidity pressure. The short-term effect on the M&A market was to limit or delay the transactions’ signing, several publicized deals being put on hold until later in the year or even in 2021. In the long term, the impact remains uncertain”, mentioned Georgiana Ion (photo), Senior Manager, Deal Advisory, Mazars Romania.



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