The Mergers & Acquisitions Review: Romania

Overview of M&A activity

According to the World Bank's Doing Business Report 2020, Romania is ranked 55th worldwide on the aggregate ease of doing business index, three positions lower than the previous year. However, Romania ranks first in the European and Central Asia areas regarding the ease of doing business across borders and is well above the average rankings of the region in areas such as getting credit, paying taxes, enforcing contracts and resolving insolvency procedures.2

As an effect of the pandemic-induced crisis, Romania's GDP growth for 2020 was –3.9 per cent. This is set to recover modestly with GDP reaching its pre-crisis level in 2022. While Romania's per capita GDP is still low compared with more advanced European countries and in the lower range of its Central and Eastern Europe (CEE) peers, the growth in recent years has led to a convergence towards general European Union (EU) levels.3

Romania's mergers and acquisitions market recorded 54 transactions in the first half of 2021, compared to 42 for the same period in 2020. The total market value for both disclosed and undisclosed transactions was estimated at between €1.2 billion and €1.4 billion, while disclosed transactions' value amounted to €485 million. In comparison, total transaction market value in the first half of 2020 was approximately between €1 billion and €1.2 billion, out of which €572 million were disclosed transactions. Four transactions with a disclosed or estimated value of minimum €100 million were announced in the first half of 2021.4

Strategic investors continue to be the dominant players on the Romanian M&A market, accounting for 94 per cent of transactions. Although Romania remained an attractive investment destination for foreigners, with inbound deals (31) accounting for 45 per cent of all transactions, domestic deal-making (34 deals) increased by 31 per cent compared to the first half of 2020, and accounted for just under half of all transactions. The most active inbound investors were the United States (six deals), Germany (three deals), followed by Hungary, France, Italy and Ireland with two deals each.

The most active sectors by deal volume were technology (14 deals), followed by real estate (10), diversified industrial products (10), power and utilities (six) and healthcare (six). In terms of disclosed deal value, power and utilities attracted the largest share of investment, followed by real estate, banking and capital markets, diversified industrial products and technology.5

General introduction to the legal framework for M&A

The general framework for M&A activity in Romania is mainly governed by the Civil Code and Company Law, as republished and further amended and supplemented (the Company Law).6 The Civil Code provides the general legal framework governing legal entities as well as the general principles applicable to mergers and demergers. The Company Law provides the applicable rules for the sale and purchase of shareholdings in Romanian companies, as well as those applicable for share capital increases, mergers and spin-offs.

On a more practical note, registrations with the Trade Registry (which is the method for publicising operations of companies) follow the rules established by Trade Registry Law,7 as republished and further amended and supplemented, in addition to certain ancillary regulations.

In addition to the above, depending on the business activity of the target company, the below sector regulations may also be applicable. Investors doing business in Europe may find Romanian regulations somewhat familiar, as they are the product of the implementation of EU directives into Romanian law:

  1. for public companies, the Capital Markets Law8 and various secondary legislation (e.g., Regulation 5/2018 on Issuers of Financial Instruments and Securities Operations, as further amended and supplemented). Public companies come under the supervision of the Financial Supervisory Authority (FSA);
  2. for insurance companies, the general framework is set forth in Law No. 237/2015 on the authorisation and functioning of insurance and reinsurance activities, and the supervision of the FSA also applies; and
  3. for banks, the main legislative framework is set forth by Government Emergency Ordinance No. 99/2006 on credit institutions and Regulation No. 5/2013 of the National Bank of Romania (NBR), and the supervision of the NBR also applies.

Law No. 137/2002 is the main piece of legislation governing company privatisations, which continues to be of interest to many major companies that are still state-owned. However, in August 2020, Law No. 1739 came into force, restricting the transfer of shares owned by the Romanian government in state companies, banks and other companies for the next two years. However, as Law No. 173 also provides the possibility for the Romanian state to acquire shares in companies that carry out economic activities in key fields (e.g., industry, energy and postal services), any future legislative changes should be closely monitored, especially given that there are several ongoing M&A processes in the aforementioned key fields where the state might be interested in acquiring a shareholding.

Competition law is also relevant in the M&A field, as economic concentrations between companies must be reviewed and competition must always remain fair. The Competition Law,10 as republished and further amended and supplemented, implements EU competition law and contains provisions on notifications to the Competition Council and the European Commission, and the related requirements and thresholds. Considering that the screening of foreign direct investments has been a hot topic for some time now across Europe, the Romanian Competition Council has put forward new draft legislation aimed at tightening the existing foreign direct investment screening rules. This draft is subject to public debate and sets forth new filing requirements, a detailed procedure to be followed, standstill obligations to be observed and fines, thus broadening the scope of the current investment screening regime.

In addition to the above, other legal provisions applicable to the particularities of each transaction may become relevant (e.g., environmental law, employment law and insolvency law). Furthermore, the Romanian government, like other governments around the world, implemented a series of measures to support the economy; given the uncertainty surrounding these measures and their applicability in time, this chapter only briefly touches upon some of them. However, the aforementioned need to be considered when looking into a potential investment in Romania.

Developments in corporate and takeover law and their impact

i Banking and finance

NBR Regulation No. 11/2020, in force as of 28 December 2020, amending and supplementing NBR Regulation No. 5/2013 on prudential requirements for credit institutions, introduces new regulations on the management of credit institutions, assessment of adequacy of the members of the management body and persons having key positions, internal capital adequacy assessment process, internal liquidity adequacy assessment process, management of significant risks, crisis simulations.

Law No. 101/2021 approving Government Emergency Ordinance No. 111/2020 transposes into national legislation the European Directives 2015/849 and 2018/843 related to the regulation of cryptocurrency transactions.

ii Capital markets

Law No. 88/2021 on the Investor Compensation Fund entered into force on 20 June 2021 and establishes the investor compensation fund as a legal entity under public law. The organisation and operation of the fund will be established by its own statute approved by the FSA's Board. The fund will compensate, equally, non-discriminatory and, if certain conditions met, eligible investors up to a maximum ceiling representing the Romanian leu equivalent of €20,000.

The NBR and the FSA adopted secondary legislation on the protection of financial instruments and funds belonging to customers, product governance obligations and applicable rules, as well as updated secondary legislation on the provision of investment services and activities on behalf of financial investment service companies and credit institutions. Moreover, the Romanian Financial Supervisory Authority also provided secondary legislation in regard to the transparency of financing operations through financial instruments and the re-use transparency and on the application of the guide on outsourcing to cloud service providers.

iii Energy

On 1 September 2020, Romania enacted ANRE Order 61/2020 (Order 61) which approves three regulations on (1) scheduling dispatchable production units, dispatchable consumers and dispatchable storage facilities; (2) the operation and settlement of the balancing market; and (3) the calculation and settlement of imbalances of parties responsible for balancing. Order 61 sets forth technical price limits and implements a 15-minute settlement interval. From a practical point of view, the price on the balancing market is now freely determined by the supply-demand mechanism and can reach negative values.

The National Recovery and Resilience Plan, still in negotiations with the European Commission, proposed the following six reforms:

  1. Electricity market reform, replacing coal in the energy mix and supporting an incentive legislative and regulatory framework for private investment in renewable electricity production.
  2. Developing a favourable framework for future technologies, in particular hydrogen and storage solutions.
  3. Improving corporate governance of state-owned energy companies.
  4. Reducing the energy intensity of the economy by developing a sustainable mechanism to boost energy efficiency in the industry.
  5. Increasing competitiveness and decarbonisation of the heating–cooling sector.
  6. Decarbonisation of the transport sector through investments in electric transport infrastructure and creation of incentives for green transport.

iv Tax and tariffs

As also noted in Section VIII, there were numerous amendments to Romanian tax legislation. Government Emergency Ordinance No. 59/2021 transposes in the Romanian Fiscal Code the European VAT provisions in the field of e-commerce. Government Ordinance No. 8/2021 provides for tax exemptions in the field of withholding tax as well as other amendments in the field of corporate income tax, while Government Emergency Ordinance No. 11/2021 introduces the legislative framework for implementation of the Standard Audit File – Tax (SAF-T), as well as procedural regulations on payment rescheduling and fiscal amnesty.

Foreign involvement in M&A transactions

In the first half of 2021, the current account of the balance of payments registered a deficit of €9.057 billion, compared to €5.350 billion in the same period of 2020 and the total external debt increased by €6.058 billion.

Foreign direct investment in Romania amounted to €3.962 billion (compared to €1.222 billion in the first half of 2020), out of which the share capital contributions (including the estimated net reinvested profit) had a net value of €3.353 billion, and intragroup loans recorded a net value of €609 million.11

The measures intended to support the economy, along with the gradual relaxation of the restrictions, had as a first effect the improvement of the investors' and consumers' perception.12

Significant transactions, key trends and hot industries

The world faced major challenges in the first half of 2021 related to the covid-19 pandemic, and yet the disruption also created opportunities in the marketplace, evidenced by increased corporate and private equity appetite for M&A during that same period. Nowhere is this truer than in the technology sector, which has been by far and away the most active area for investment by corporates and private equity firms.

The rate of technology innovation and adoption since early 2020 has been nothing short of astonishing. Consumers are responding to pandemic changes by enthusiastically embracing technology in all forms. As a result, companies in the technology, media and telecoms (TMT) sector benefited and are propelling the M&A deal pipeline. There is clearly no going back – digital tools are meeting consumers' pandemic demands for convenience and safety, as well as increasing operational efficiency and resilience and improving decision-making for companies, enabling them to reach more customers with new products and services.13

Together with the TMT sector, real estate and construction and manufacturing were the sectors showing the highest number of deals in the past year.

The entertainment and media (E&M) industry in Romania is expected to achieve year-on-year growth of 8.09 per cent in 2021 to a total value of €2.62 billion, taking it above the pre-pandemic level (€2.53 billion in 2019). Estimates also show that the industry will continue to increase until 2025, with an annual average growth rate of 7.68 per cent.14

Non-traditional sources of value creation such as the impact of environmental, social and governance factors (ESG) are increasingly being considered by dealmakers and factored into strategic decision-making and due diligence, as they focus on protecting and maximising returns from high valuations and fierce demand.15 While it is still too early to know what impact they will ultimately have on corporate decision making, it is clear that ESG factors will represent important risk and value components in M&A transactions. As a result, companies should ensure that the existing ESG framework is well integrated into their M&A strategy and execution.16

i Telecoms and IT

Orange Romania acquired a 54 per cent controlling stake in fixed operator Telekom Romania Communications. Telekom Romania Communications is one of the leading fixed telecom operators owned 46 per cent by the Romanian state. The transaction included the 54 per cent stake owned by OTE and its fixed-mobile convergent subscribers. The total enterprise value was €497 million, corresponding to a total purchase price of €268 million.

ii Finance and insurance

Innova Capital acquired market leading consumer payments operator PayPoint from the British group PayPoint. The €51 million agreement was signed in October 2020 and was completed on 8 April 2021. Through its over 19,000 terminals countrywide and its partnerships with over 170 major suppliers of telecom, utilities, transportation, security and financial services, PayPoint collects over 100 million bill payments for 85 per cent of the Romanian utility and telecom providers.

Portuguese payment services group SIBS acquired Bucharest-based Wirecard Romania, Romcard and Supercard Solutions & Services for an amount exceeding €50 million. Wirecard Romania serves major banks and retailers with operations in Romania, as well as in other markets, such as Moldova, Serbia, Hungary, Kosovo, Montenegro, Macedonia and Lithuania. It provides digital and e-commerce tools to merchants as well as loyalty programmes and card personalisation services.

iii Real estate and construction

Property investment and development group NEPI Rockcastle completed the sale of its Romanian office portfolio to AFI for €307 million. The disposal was successfully concluded on 27 August 2020 in accordance with the terms of the agreement. The transaction comprised the purchase of four Class A office projects in Romania, with a total gross leasable area of 118,500 square metres.

A joint venture between the Fosun Group, a major Chinese conglomerate and investment company, and Zeus Capital Management, a leading international real estate investment and asset management firm, acquired Floreasca Park, one of the leading office complexes in Bucharest in early August 2020. The seller was German real estate fund manager GLL Real Estate Partners and the transaction entailed the sale of an office project of over 40,000 square metres.

S Immo acquired Campus 6.2 and 6.3 office buildings from Skanska Romania, for an estimated €97 million. The two buildings have a leasable area of almost 38,000 square metres and 463 parking spaces. The transaction was signed at the beginning of December 2020.

Hungarian private equity fund Adventum bought Hermes Business Campus from Atenor, a deal estimated at €150 million.17 The office project with a leasable area of 75,000 square metres is fully occupied by multinational companies. At present, the company is developing two office projects and its first residential complex in the Romanian capital. The sale of Hermes Business Campus has been the largest property deal closed in Romania in the year to date.

iv Betting and gaming

London-based Novalpina Capital acquired MaxBet Romania for an estimated value of €250 million.18 Following the transaction, MaxBet Romania will benefit from the expertise and experience of Novalpina Capital, which has a strong presence in multiple fields of activity, such as healthcare, B2B, software and gambling, it said in a press release.

Romanian company Superbet, one of the biggest players in online gambling in Central and Eastern Europe, acquired Napoleon Games Group, a leading Belgian operator active in the online, retail arcade and sports betting business, from Waterland.

v Pharmaceuticals

Prague-based Zentiva Group owned by Advent International completed the acquisition of US-based drug maker Alvogen's CEE business in Romania, Bulgaria, Croatia and several other countries. Alvogen develops generic, brand, over-the-counter (OTC) medicines and biosimilars and operates manufacturing and development facilities in the US, South Korea, Romania and Taiwan. The company's CEE business involves more than 200 generic and OTC medicines in various therapeutic areas, selling products across 14 CEE markets. In Romania, the acquisition concerned local pharmaceutical producer Labormed and included a manufacturing facility in Bucharest. In 2019, Zentiva also bought Romanian food supplement and OTC maker Solacium.

vi Energy and gas

Hidroelectrica acquired Crucea Wind Farm and Steag Energie for €130 million (disclosed value).19 Hidroelectrica focuses on diversifying production by adding high-quality renewable capacity to its portfolio as part of the company's recently approved development strategy. The company reaffirms its goal of remaining 100 per cent green throughout the process of portfolio diversification. Developed by STEAG and commissioned in 2014, Crucea Wind Park is one of the most modern and best maintained land wind farms in Romania, with an installed capacity of 108MW.

ČEZ Group reached an agreement to sell its Romanian assets to funds managed by Macquarie Infrastructure and Real Assets. The assets comprise seven companies, including electricity distribution networks, energy supply and the Fantanele Cogealac wind park, among others.

Financing of M&A: main sources and developments

Buffeted by persistent low interest rates and pressure from regulators on one side and disruption from platforms, fintechs, and continued digitalisation on the other, the sector needs to evolve to meet these challenges. A key facet of M&A activity is likely to be the continued formation of strategic partnerships as well as an ongoing consolidation. Moreover, we continue to expect distressed M&A in the coming months as covid-19 related aid programmes end and the implications become clearer for bank loan books and closed blocks from insurance companies.

In contrast to previous economic crises, a strong buy-side is being led both by a growing number of private equity (PE) investors and further motivated market players, including FS corporates, seeking to invest in the recovery through M&A activities. This is creating a deal-making landscape with many opportunities for mergers, acquisitions and divestitures, both domestically and cross-border.

As the end of the year approaches and government support measures run out, distressed M&A activity may accelerate as customers/investments in the real economy face liquidity challenges. In banking, we anticipate M&A opportunities related to asset quality and non-performing loan portfolios (NPLs), as they begin to emerge in certain sub-sectors; in insurance, deals are expected to be linked to the potential for more closed blocks and life-run-off businesses.

However, flush with capital, dealmakers in certain areas of financial services are picking up the pace. And while activity is still largely defined by the consolidation of a highly fragmented industry, new business models are emerging in sub-sectors, especially among fintechs, insurtechs and regtechs. These are becoming highly attractive opportunities for investors, who will need to adopt a value-creation mindset to ensure successful deals.20

Private equity investments showed a consistent growth during the last few years, reaching around 30 per cent of the M&A market and remained at a robust level during the first half of 2020. In this respect, equity investments accounted for €779 million (net amounts), and intragroup loans recorded a net value of €547 million, pursuant to NBR data.

Employment law

From an M&A perspective, the rules governing the transfer of employees in an asset deal, set out by the Law on Safeguarding Employees' Rights in the Event of Transfers of Undertakings, Businesses or Parts of Undertakings or Businesses (TUPE Law),21 which transposes EU Directive 2001/23/EC, should be considered.

Under the TUPE Law, in order to protect employees, every time a transfer of an undertaking (or a part thereof) occurs, all of the target undertaking's employees are transferred automatically by operation of law (no consent is required from the transferor, the transferee or the employees), and no cherry-picking is allowed. The purchaser must observe all rights and obligations resulting from existing employment contracts at the time of the transfer and has the obligation to honour all rights until the relevant contracts expire or are terminated. However, the purchaser can renegotiate the collective agreement with the employees' representatives one year after the transfer date.

In general, share deals do not impact employment relations at the target level (or at the subsidiary level), as the identity of the employer remains the same. Romanian legislation does, however, set out general employee-related information and consultation requirements in the context of M&A transactions, but they only apply if a proposed share deal significantly impacts working conditions. Even if the law provides that a consultation should be carried out regarding decisions that could significantly affect employees, there is no express obligation to accept employees' proposals or to sign any related agreements. However, failure to comply with the information and consultation requirements may be sanctioned with fines.

In addition, in the case of a voluntary takeover of a public company, the target's board must inform its employees of the terms of the takeover and the board's position on the attempted takeover. The target's employees may issue a written opinion on the matter to be provided to the bidder, the shareholders and the market.

In response to the covid-19 pandemic, the government has taken measures to support the affected companies and their employees including by compensating an unemployment indemnity of 75 per cent of the employees' base salary corresponding to their position (but no more than 75 per cent of the average gross salary) if the employers' activity was interrupted or reduced during the state of emergency or alert. This facility has been successively extended since the beginning of the pandemic and until 30 June 2021. Given the increase in the number of covid-19 cases and the imposition of new restrictions on the Romanian territory that will affect certain areas of activity, the government enacted the Government Emergency Ordinance No. 111/2021, which entered into force on 4 October 2021, by which it reinstates, until 31 December 2021, the settlement of unemployment indemnity from the state budget. Even though these measures are temporary, if an acquisition in Romania is considered, these measures would need to be considered and compliance with the temporary legislation checked.

Tax law

Part of the recent amendments to the Romanian tax law were enacted to clarify or supplement the 2020 measures introduced for supporting businesses affected by the covid-19 pandemic. However, there are several new provisions, part of which implement EU rules as detailed below.

Romania implemented the European VAT e-commerce package and thus, the extended One Stop Shop (OSS) system becoming operational. The European VAT provisions on e-commerce were transposed into Romanian legislation through Government Emergency Ordinance No. 59/2021, which amends the Fiscal Code. The purpose of these new provisions is the reduction of the administrative burden at the level of companies by simplifying VAT declaration and payment procedures, similar to the e-commerce carried out on the EU territory. The application of the new VAT regimes is optional.

On 31 August 2021, Government Ordinance No. 8/2021 was published in the Official Gazette, introducing several amendments to the Fiscal Code. Among the measures, there are new rules for taxpayers receiving bonifications for improving their equity position in respect of the payment and declaration of corporate income tax. Also, this Government Ordinance introduces tax exemptions for withholding tax on the dividends paid by Romanian residents to legal entities resident in a Member State of the European Economic Area (i.e., Iceland, the Principality of Liechtenstein, the Kingdom of Norway (under certain circumstances)) and transposes into Romanian law the provisions of Council Directive (EU) 2021/1159 of 13 July 2021, by introducing VAT exemptions for the imports and supplies of goods performed in relation with the European Commission, EU bodies and other agencies established under EU law.

Government Ordinance No. 11/2021 was published in the Official Gazette on 31 August 2021 and brought amendments to the Fiscal Procedure Code by providing the legislative framework for the implementation of the Standard Audit File for Tax (SAF-T). Also, new rules, in the sense of extending the application, regarding the fiscal amnesty on accessory tax liabilities are provided, following those introduced last year.

Competition law

There was limited development of competition legislation in Romania during the past year. In this respect, as the screening of foreign direct investments (FDIs) has been a hot topic for some time now, several jurisdictions adopted stricter measures of scrutiny allowing for the vetting of transactions potentially posing security risks. In line with this trend, the Romanian Competition Council has put forward new draft legislation aimed at tightening the existing FDI screening rules (which is now up for public debate and has not yet been enacted). Under the current rules, foreign investments in sensitive sectors would fall under the scrutiny of a state defence authority, directly subordinated to the President of Romania, and the new FDI regime will broaden the scope of the investment screening in line with applicable EU legislation.


Achieving scale and a fear of being left behind in terms of new technological innovations will drive M&A over the coming year, even as regulatory scrutiny tightens. The pandemic clearly led to a significant acceleration in the trend toward digitalisation and this is driving record-breaking tech M&A activity. As companies build on their new-found capabilities, further innovation – and by extension more tech M&A – will surely follow.

Even as pandemic-related restrictions are lifted and face-to-face functions resume, the efficiency of running hybrid processes in which site and office visits are combined with video calling and, in some cases, drone or camera information-gathering, has become clear over the last few months. The new way of doing deals is likely to involve face-to-face initial relationship-building meetings, site visits and key parts of the negotiations combined with some remote due diligence and discussions.22

The Romanian M&A market is expected to remain active for the remainder of 2021 given opportunities to further accelerate growth, including those arising from the economic volatility caused by the pandemic that has left some businesses financially distressed. M&A will also be driven by the need to adapt business models, particularly in e-commerce and direct to consumer, but also to address the digitalisation, green economy and ESG agendas. Liquidity of capital and favourable financing costs will support and accelerate these trends. The M&A winners have and will be those that have demonstrated resilience and innovation during the pandemic. Despite this overall positive sentiment, the unknown factor remains how the pandemic will evolve in the latter part of the year.23

Regarding the Romanian market, an increase in the number of transactions (whether we are talking about mergers or acquisitions or purchases of distressed assets or corporate restructuring) is expected in the energy sector (especially renewable energy), financial services, information technology and communications, and medical services. Strategic investors will seek to acquire companies to increase their market share and will invest in new technologies through the acquisition of companies in this field, whereas the financial investors – having significant liquidity – will look for targets in the 'winner' sectors as a result of the pandemic, as well as new opportunities offered by the current context. Furthermore, given that, as of September 2020, Romania has been reclassified from frontier to secondary emerging market status (by FTSE Russel), it is expected that there will be a significant increase in stock market capitalisation. Thus, Romania is expected to develop into an increasingly dynamic and competitive market, becoming an important player on the financial markets in the region, which should also increase the confidence of foreign investors.


1 Horea Popescu is a managing partner and Claudia Nagy is a counsel at CMS Romania.

6 Company Law No. 31/1990.

7 Trade Registry Law No. 26/1990.

8 Law No. 297/2004 on capital markets.

9 Law No. 173/2020 on certain measures to protect national interests in economic activities.

10 Competition Law No. 21/1996.

14 PwC Report: Romanian entertainment and media industry expected to increase by 8 per cent in 2021 and exceed the 2019 level.

18 ibid.

19 ibid.

21 Law No. 67/2006 on Safeguarding Employees' Rights in the Event of Transfers of Undertakings, Businesses or Parts of Undertakings or Businesses.

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