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The Buzz in Romania: Interview with Alexandru Birsan of Filip & Company

The Buzz in Romania: Interview with Alexandru Birsan of Filip & Company

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The Romanian market has been a “very hot one,” in recent months, and the year in general, according to Filip & Company Partner Alexandru Birsan, with entrepreneurs benefiting from easy access to funds.

“We’ve been announcing a new transaction every few days for the past weeks, and there’s still a lot more happening as we speak,” Birsan notes. While the last few months have been particularly busy, the Filip & Company Partner says the whole year was intense: “I have a sense that, in 2021, everyone was trying to catch-up for last year, addressing all they wanted to have done this year, and scrambling a bit to cram in some of the things for the next year.” Perhaps counter-intuitively, Birsan says that “the pandemic helped,” noting that “a lot of people spent time reflecting on where they are and what they want to do and we see the fruits of that exercise now, with a lot of businesses keen to develop and take their next steps. This year felt like everyone was trying to board a rocket to Mars.”

According to Birsan, the tech sector has been a huge driving force. He points to UiPath, which recently became Romania’s first unicorn, and says that, while the company is by far not the only example, it certainly is one of the most positive ones out there. “Overall, the sector has reached a certain level of maturity which created a lot of buzz in the local tech entrepreneurial class.” Specifically, he points to a lot of activity on the venture capital front, while also noting that “today’s venture capital is tomorrow’s growth capital, so I am very optimistic about the pipeline of deals.”

And the stock market in Romania has reflected that aspiration to shoot for the stars as well, according to Birsan. “The AeRO market of the stock exchange had a few transactions per year in the past but saw dozens of IPOs this year – and overall with high valuations relative to the Romanian market.” The AeRO marketplace “that by now has grown into a place where you can easily get EUR 1 to 10 million – excellent for a mid-sized company looking to grow,” has been fueled by the same maturity: “The whole ecosystem is simply working better and better – if you have some money to invest in a company that is in its early stages, you now have a clearer exit path than you did in the past.”

On the flip side, “traditional PE has been slow this year,” Birsan notes. He explains it probably was because valuations have been 'aggressively' high lately: “I’ve seen valuations coming in that are quite ambitious, by traditional PE fund standards, to which the reaction on the sale side was a lackluster 'ok' – when a little while ago, they would have been excited about it.”

“Yes, inflation is rearing its head, and that will take a toll, but monetary conditions have been extremely loose for the past 18 months, which means there has been plenty of cheap money flying around,” Birsan says. This, in turn, “has created an environment where a lot of investments have been made, and they’ve been driving results for these companies.” As a result, “between the relatively easy access to funds and the companies' growth, it is only normal to have a seller’s market at the moment, with high valuations.” And this can only further fuel transactions in the market, with the Filip & Company Partner explaining that some transactions might occur where entrepreneurs might not have considered a sale, but the high sale value might make them pull that trigger.

Will it continue? Birsan says that "over the past six weeks, the public markets have not been burning rocket fuel anymore.” He concludes that, based on this, “valuations will probably slow down their growth, if not flatten. It’s unlikely that they will drop, though, as there is still a lot of appetite in the market.”