Five answers to five questions with Cornel Marian, Investment Manager, Oresa Ventures
April 08, 2014
"The very best companies and entrepreneurs can have access to VC/PE funding to build extraordinary growth and ambitious projects. The other companies need to adapt their strategy and growth ambitions to their capability to fund the investment and working capital needs"
Q: How are the banking and non-banking segments of Romanian's developing financial markets coping with the aftermath of the global financial crisis?
A: Banks are still focused on internal problems related to non-performing loans rather looking to understand the needs of the companies in the current economic conditions and coming with products and solutions. The non-banking segment is also not very active – there are a few private equity funds that started to make new investments but the number of transactions is still small.
Q: In your view, which could be the supporting viable alternative solutions for the real economy funding in the current economic context in Romania?
A: There is very limited funding outside the banks. Companies’ needs varies greatly and there is a need for different funding solutions. Businesses with good track record, good growth prospects and solid management or entrepreneurs can attract capital for growth or buy out from the private equity funds. The Bucharest stock exchange has not yet evolved as a viable source of funding.
Q: One generation of private equity funds have come to maturity. Do you see a new wave coming in? Which sectors will they be looking at mostly?
A: We see some new comers in Romania, 2-3 regional funds based Poland expanding south, but I expect that the ones that have investment management teams with a long experience in Romania are still best positioned to understand and select the good opportunities, and more important to provide the entrepreneurs and the management teams with capital and support based on a good understanding of the local specifics and challenges. Also for the entrepreneurs it is easier to get know and appreciate if a certain investment manager or team is suitable for a long term partnership, able to resist through good and tough times if they team up with funds operating here for almost two decades. We see this in Oresa, a Swedish PE investment company active in Romania for over 17 years that is quite easy to explain to the potential partners how we worked through boom periods and also through two recessions, and they can see how we supported our companies and partners with a very business, commercial and a very long term commitment. They see that such long term commitment and effort is reflected in the position of the companies. E.g. we have now 4 companies in the portfolio that are on the first position in their respective markets. Entrepreneurs also see the transformation that our companies went through and this makes our lives easier when we discuss potential new investments.
Q: What are the main challenges in the negotiation and acquisition of privately-held businesses in Romania? How easy is it going to overcome them?
A: Valuation is perhaps one challenge but we notice that the business owners have more realistic expectations adapted to the growth potential of the business in the new economic reality. Also sharing control with us in their business it is an important issue for the entrepreneur, something that Oresa have managed over the past 17 years for the benefit of our partners.
Q: In the context of a heavily banking dependent funding of Romania’s economic sectors, with a view to the growing side effects of global and regional deleveraging, Romanian entrepreneurs and SMEs are living dangerously on a day-to-day basis. What can be done to encourage their innovative spirit?
A: The very best companies and entrepreneurs can have access to VC/PE funding to build extraordinary growth and ambitious projects. The other companies need to adapt their strategy and growth ambitions to their capability to fund the investment and working capital needs from internal cash flow, leasing and banks.