1 Deal structure

1.1 How are private and public M&A transactions typically structured in your jurisdiction?

When it comes to private M&A, transactions are usually structured as share deals or asset deals (which in certain cases qualify as the transfer of a business as a going concern). In limited cases, mergers are used as a means of taking over companies. Often, transaction structuring involves attracting growth or venture capital along with the acquisition of a share package.

Public M&A deals are usually structured as public takeover bids (voluntary or mandatory – in the latter case, preceded by the acquisition of a 33% holding, which represents the threshold that triggers a mandatory takeover) or mergers.

1.2 What are the key differences and potential advantages and disadvantages of the various structures?

Share deals are typically more straightforward, while asset deals are usually more complex contractual arrangements. The key difference is that in share deals, the buyer acquires the target along with all of its assets and liabilities; while in asset deals, the buyer can cherry-pick specific assets and carve out liabilities.

However, in specific cases, liabilities cannot be excluded from the asset transfer. For instance, if an asset deal qualifies as a transfer of undertakings, the buyer will acquire all rights and obligations deriving from the individual and collective bargaining agreements; specific limitations on the transfer of the rights and obligations existing prior to the transfer date may be contractually agreed between the parties. The factual situation should be carefully analysed, since not all transfers of undertakings trigger the automatic transfer of employees according to the law.

Similarly, in certain circumstances, asset deals may trigger the transfer of environmental liability and/or other liabilities linked to specific assets.

Asset deals are more challenging transactions, as they often involve:

  • the transfer of intangible assets (eg, patents, trademarks and company expertise – generally defined as goodwill – which can make the tax valuation difficult);
  • formal requirements (for real estate assets); and/or
  • formal approval from contractual partners for the transfer of key agreements.

The two types of transactions are subject to different tax regimes.

1.3 What factors commonly influence the choice of sale process/transaction structure?

This is mainly a business decision, depending on the buyer's strategy, the industry and the features of the target, as identified during the due diligence project. These factors will dictate the ratio between opportunities and risks (eg, liabilities that would be transferred to the buyer as a result of a share deal; depreciation plans in place and resulting goodwill for which no depreciation plan is permitted; applicable tax regime).

2 Initial steps

2.1 What documents are typically entered into during the initial preparatory stage of an M&A transaction?

Non-disclosure/confidentiality agreements are usually concluded prior to exchanging any sensitive information, to ensure that confidential information exchanged between the parties is not disclosed to third parties or used for personal interests. Such agreements usually cover:

  • the deal negotiation and the structure of the contemplated transaction;
  • all data and information made available in the data room and during the management interviews;
  • teasers;
  • disclosure letters; and
  • memoranda containing non-public information.

The signing of a letter of intent/memorandum of understanding/heads of terms, setting out the main contractual terms of the intended transaction, is standard practice in M&A transactions in Romania. These documents can also include exclusivity and confidentiality terms, if not addressed separately. Except for specific provisions (eg, exclusivity, confidentiality, applicable law and resolution of disputes), they generally have a non-binding nature.

An exclusivity agreement allows the buyer to negotiate exclusively with the seller for a specific period (usually short) in relation to the transaction. In most cases, exclusivity provisions are included in the letter of intent/memorandum of understanding/heads of terms. A breach of exclusivity by the seller will entitle the buyer to obtain indemnification, with no further consequences for the transaction concluded as a result of such breach.

2.2 Are break fees permitted in your jurisdiction (by a buyer and/or the target)? If so, under what conditions will they generally be payable? What restrictions and other considerations should be addressed in formulating break fees?

Under the Civil Code, the parties must negotiate in good faith and with the intention to reach an agreement. Break fees (as well as reverse break fees, due by the buyer) are permitted, but are rarely used. Such fees cover the costs and expenses incurred in preparing for the transaction (including consultants' fees).

As it is rather difficult to prove the extent of the damages and the default of the party that withdraws from the negotiations, there should be clear wording (usually in the letter of intent/memorandum of understanding/heads of terms and/or in the exclusivity agreement) on the amount of the break fee (which it is recommended should be a fixed amount) and the triggering event/s.

2.3 What are the most commonly used methods of financing transactions in your jurisdiction (debt/equity)?

Most local transactions are equity financed (both venture and growth capital). In some cases (subject to deal size and particular transaction features), deals are financed by senior, mezzanine or institutional debt.

2.4 Which advisers and stakeholders should be involved in the initial preparatory stage of a transaction?

We recommend involving legal, tax and financial advisers, as well as technical and commercial consultants (subject to the specifics of each business sector) in the preparatory stages of the transaction. These professionals can:

  • advise on the potential advantages and disadvantages of the various M&A transaction structures under local law; and
  • identify potential hurdles and decide on the best strategy in negotiations.

As regards the stakeholders, it is advisable to have:

  • the C-suite executives involved in the preparatory stage, to better shape the transaction by ensuring a consistent approach and setting a vision for the post-transaction/integration phase;
  • business specialists to help identify potential red flags and opportunities at an early stage, to help structure the deal and validate it from a business perspective; and
  • a dedicated project team/transaction lead to organise and manage information streams and organise processes, timelines and task assignment.

2.5 Can the target in a private M&A transaction pay adviser costs or is this limited by rules against financial assistance or similar?

Under the Companies Law (31/1990), ‘financial assistance' is defined as "granting down payments, loans or creating guarantees" by a target joint stock company to facilitate the subscription or acquisition of its shares by a third party. Financial assistance rules are not applicable to limited liability companies or to other types of companies.

The rules on financial assistance are generally applied restrictively (ie, with the exclusion of other transaction-related costs, such as adviser costs). However, a specific assessment should be conducted on a case-by-case basis with respect to potential conflicts of interest of consultants where adviser costs are incurred by the target.

No rules on financial assistance apply with respect to asset deals.

3 Due diligence

3.1 Are there any jurisdiction-specific points relating to the following aspects of the target that a buyer should consider when conducting due diligence on the target? (a) Commercial/corporate, (b) Financial, (c) Litigation, (d) Tax, (e) Employment, (f) Intellectual property and IT, (g) Data protection, (h) Cybersecurity and (i) Real estate.

(a) Commercial/corporate

From a commercial perspective, specific investigations should be conducted with respect to:

  • change of control provisions in major contracts;
  • non-transferable contracts, rights and licences; and
  • any existing liabilities.

With respect to corporate matters, the following main aspects should be assessed:

  • the general status of the company, including decision-making mechanisms, powers of representation and a group chart;
  • specific shareholders' agreements and tag-along, drag-along, pre-emption and first refusal rights; and
  • share pledges.

(b) Financial

Specific attention should be paid to:

  • financing agreements (change of control, material adverse change, force majeure and hardship provisions);
  • loans/facilities granted intra-group/to affiliates;
  • cash pooling arrangements; and
  • business-related agreements and information on clients and suppliers.

The aim is to ensure that the target will benefit from a steady cash flow during the implementation of the transaction, as well as in the business integration stage.

(c) Litigation

Generally, basic information on past and ongoing litigation is available from public sources. However, to determine the target's exposure, the following main issues should be reviewed:

  • up-to-date information and relevant documents provided by the target regarding existing, pending or threatened litigation and/or arbitration; and
  • information on ongoing investigations conducted by public authorities.

(d) Tax

Tax due diligence should cover a period of at least five fiscal years (ie, the local statute of limitations for tax obligations).

(e) Employment

In both share and asset deals, specific investigations should be conducted with respect to employment-related matters, to:

  • determine the obligations and liabilities incumbent upon the target/transferring along with the assets in deals that qualify as a transfer of undertaking; and
  • identify key employees and potential financial exposure relating to non-compete, dismissal and other specific indemnifications.

To this end, the following should be reviewed:

  • all employee individual and collective agreements;
  • personnel files;
  • management agreements;
  • benefits;
  • policies (eg, internal regulations);
  • dismissals;
  • disciplinary reports; and
  • litigation.

Moreover, in case of asset deals, an assessment should be made in order to establish whether there is a transfer of undertakings. According to Court of Justice of the European Union case law, this is a matter for the national courts, in view of the specific interpretation factors involved (which cannot be considered in isolation) – that is:

  • the type of undertaking or business;
  • whether tangible assets such as buildings and moveable property are being transferred;
  • the value of intangible assets at the time of transfer;
  • whether a majority of employees will be transferred to the new employer;
  • whether the customers will be transferred;
  • the degree of similarity between the activities carried on before and after the transfer; and
  • the period, if any, for which those activities were suspended.

The above assessment is not necessary in the case of a share deal, as the employer remains the same.

(f) IP and IT

Often, IP and IT rights are overlooked in transactions outside the technology, media and telecommunications industry and are dealt with as boilerplate provisions in common law structured agreements, which creates further liability and increases the buyer's exposure. There are various national specifics and technicalities when it comes to IP rights, and the following main aspects should be reviewed in the context of the legal due diligence:

  • patents;
  • copyright;
  • trademarks;
  • domain names;
  • licensing/sub-licensing agreements; and
  • IP litigation and claims.

(g) Data protection

As data protection issues have become increasingly important from a purchaser's perspective, the due diligence should encompass all aspects in this regard, including:

  • the existence and accuracy of a data processing register;
  • the existence and form of privacy agreements signed with providers/clients;
  • technical and organisational measures implemented in order to ensure personal data security;
  • privacy information notices; and
  • proof of compliance with the data processing principles imposed by the General Data Protection Regulation (eg, data processing impact assessments and/or legitimate interest assessments performed by the target).

(H) Cybersecurity

Cybersecurity has become paramount as the threats in this area become increasingly severe, such as incapacitating ransomware attacks. The due diligence should thus encompass issues such as:

  • verification of the information system security measures taken by the target;
  • penetration tests; and
  • reports, including security certifications.

(i) Real estate

Typically, the due diligence should address:

  • ownership title;
  • restitution claims;
  • zoning requirements;
  • potential overlapping; and
  • environmental-related issues.

Lease contract reviews should highlight:

  • termination clauses;
  • service charges;
  • rent indexation or similar;
  • force majeure;
  • hardship; and
  • the existence of flexible mechanisms and tools that allow for risk sharing renegotiations.

Considering the consequences of the COVID-19 crisis on the real estate market, another matter to be considered during the lease review is business interruption insurance/insurance for loss of rent.

3.2 What public searches are commonly conducted as part of due diligence in your jurisdiction?

The following sources of public information are used on a regular basis:

  • the public data base of the Trade Registry (for basic information on the target and its current status, and copies of the corporate documents of the target submitted with the Trade Registry from incorporation to date in the context of mandatory filings);
  • the public database of the Ministry of Finance (for basic financial and corporate information on the target);
  • the Official Gazette (for copies of shareholders' resolutions, articles of association and other documents which are subject to mandatory publication obligations);
  • the Insolvency Bulletin (for information on bankruptcy and insolvency proceedings with respect to the target);
  • reports published by the stock exchange and the Financial Supervisory Authority (submitted by entities that are subject to disclosure obligations under the relevant legislation);
  • the Land Book Register (for information on ownership, zoning, use category and encumbrances over real estate);
  • the Electronic Archive for Moveable Securities (for information on mortgages, pledges and other liens); and
  • the public database of the Ministry of Justice (for basic information on litigation).

3.3 Is pre-sale vendor legal due diligence common in your jurisdiction? If so, do the relevant forms typically give reliance and with what liability cap?

Vendor due diligence is common in competitive procedures where there are several interested buyers/bidders, as well as in cases where the target is ‘groomed' for sale and the seller is trying to gain as much leverage as possible in transaction structuring and negotiations.

Usually, the vendor due diligence is made available along with the information memorandum and the reliance letter. Vendors tend to treat vendor due diligence as disclosed information, thus limiting their liability (which in practice is also limited by caps).

In some cases, reliance letters are issued by the vendor's consultants (typically prior to or upon the execution of transaction documents). Such reliance letters are subject to various assumptions and liability limitations, with liability caps negotiated on a deal-by-deal basis for events that fall outside the scope of the vendor's own liability.

4 Regulatory framework

4.1 What kinds of (sector-specific and non-sector specific) regulatory approvals must be obtained before a transaction can close in your jurisdiction?

Competition clearance: A transaction is subject to clearance by the Competition Council, in addition to competition clearance under EU law, if the following thresholds are met:

  • The aggregate turnover of the undertakings involved in the transaction in the previous year exceeded €10 million; and
  • At least two of the undertakings concerned achieved in the year preceding the transaction a turnover of at least €4 million in Romania.

Clearance from the Competition Council is usually a condition precedent to closing, as it should be obtained prior to implementation of the transaction.

Sector-specific clearance:

  • The Supreme Council of National Defence issues clearances in relation to transactions involving companies or assets that likely to affect national safety in fields such as critical infrastructure, energy and transportation security;
  • The Financial Supervisory Authority issues prior approvals for deals exceeding specific thresholds when the target is an insurance or investment advisory/brokerage company; and
  • The National Bank of Romania issues prior approvals for transactions involving financial institutions.

4.2 Which bodies are responsible for supervising M&A activity in your jurisdiction? What powers do they have?

The Competition Council is an autonomous administrative body in charge of protecting and stimulating competition on the Romanian market. Among other things, it grants competition clearance for M&A transactions.

In specific industries, the following authorities also have regulatory and supervisory competences (eg, issuing prior approvals/clearances for M&A transactions):

  • the Supreme Council of National Defence, for transactions in specific critical industries which are likely to affect national safety;
  • the Financial Supervisory Authority, for transactions in the insurance, investment advisory and private pensions sectors, as well as for takeovers of public companies;
  • the National Bank of Romania, for transactions involving banks and financial institutions; and
  • the National Agency for Mineral Resources, for transactions in the mining sector.

4.3 What transfer taxes apply and who typically bears them?

Transfer tax is subject to various factors, such as:

  • the deal structure;
  • the fiscal residence of the parties; and
  • any applicable double tax treaties.

Share deals: No stamp duty or other transfer tax is payable on share transfers.

For resident legal entities, capital gains are subject to a 16% tax and are included in their ordinary profits. For non-resident legal entities, capital gains are also taxable in Romania, with the applicable tax being specified in the relevant double tax treaty.

Capital gains earned by Romanian individuals from the transfer of shares are subject to a 10% tax.

Asset deals: The gains from asset transfers are also included in the ordinary profits of the entity. The standard 19% value added tax is also applicable, unless the asset transfer qualifies as the transfer of a going concern.

The taxes are incumbent upon the seller and are typically borne by the latter.

5 Treatment of seller liability

5.1 What are customary representations and warranties? What are the consequences of breaching them?

Typically, representations and warranties refer to:

  • the seller's ownership title over the shares,
  • the lack of encumbrances and liens over the shares;
  • the legal existence and status of the target;
  • the target's tax, accounting and financial situation;
  • proper keeping of the target's registers as required by law (eg, shareholder register, statutory books and financial books);
  • the target's assets and their status (including real estate);
  • employee issues (eg, trade unions, employees' representatives, individual and collective bargaining agreements, employees' rights and liabilities);
  • licensing and regulatory issues;
  • material contracts;
  • IP rights;
  • liabilities (eg, environmental risks); and
  • disputes and/or litigation, existing or threatened.

Breach of warranties entitles the buyer to seek indemnification from the seller and/or to terminate the agreement (subject to the nature and timing of the breach). In practice, termination for breach of warranties after closing is generally excluded, being allowed only for material adverse changes/failure to fulfil conditions precedent to closing.

5.2 Limitations to liabilities under transaction documents (including for representations, warranties and specific indemnities) which typically apply to M&A transactions in your jurisdiction?

Typical limitations on warranties refer to:

  • a cap on damages/indemnification to be paid (sometimes determined by reference to the transaction value);
  • the minimum/deductible value of claims below which the seller has no liability;
  • time limits on warranties; and
  • qualifying warranties to the seller's best knowledge.

5.3 What are the trends observed in respect of buyers seeking to obtain warranty and indemnity insurance in your jurisdiction?

Warranty and indemnity insurance is not common in Romania (especially due to the relatively high costs of such products).

5.4 What is the usual approach taken in your jurisdiction to ensure that a seller has sufficient substance to meet any claims by a buyer?

Bank performance letters and retention of a portion of the purchase price in escrow while the warranties remain valid are widely used mechanisms.

5.5 Do sellers in your jurisdiction often give restrictive covenants in sale and purchase agreements? What timeframes are generally thought to be enforceable?

Non-solicitation and non-compete covenants are included in the transaction documents, depending on the actual features of the deal. Non-compete undertakings are acceptable if necessary in the context of deal implementation and provided that they are compatible with competition-related legislation. Although the timeframe varies depending on the industry and the specifics of the deal, a two or three-year timeframe is deemed acceptable.

5.6 Where there is a gap between signing and closing, is it common to have conditions to closing, such as no material adverse change (MAC) and bring-down of warranties?

Having no MAC and bring-down warranties as conditions to closing is common practice on the local market, as the local laws cannot ensure a reasonable level of protection in such transactions.

6 Deal process in a public M&A transaction

6.1 What is the typical timetable for an offer? What are the key milestones in this timetable?

The milestones and mandatory timeline for implementation are as follows:

  • A preliminary announcement is sent for approval to the Financial Supervisory Authority (FSA) where the bidder is willing to purchase a stake exceeding 33%.
  • After its approval by the FSA, the preliminary announcement is sent to the target and to the regulated market on which the target's shares are traded, and is published in newspapers. The target's board of directors must inform the FSA, the bidder and the regulated market on which its shares are traded of its opinion on the takeover within five days.
  • Within 30 business days of publication of the preliminary announcement, the bidder submits to the FSA an application for approval of the offer. Within 10 business days, the FSA issues its decision regarding the offer.
  • Once the FSA has approved the offer, an offer announcement can then be published by the bidder:
    • in one or more daily national newspapers;
    • on the FSA's website;
    • on the bidder's/intermediary's website; and
    • on the market operator's website.

The announcement is also made available freely in hard copy at the target's headquarters to any potential investor, along with the offer itself.

  • The offer period can range from 15 to 50 business days and begins at the earliest three business days after publication of the offer announcement.
  • Within five business days of the closing date, the bidder notifies the FSA and the market operator of the results of the takeover, for publication on the market operator's website.

Mandatory takeovers should be initiated within two months of exceeding the 33% shareholding threshold.

6.2 Can a buyer build up a stake in the target before and/or during the transaction process? What disclosure obligations apply in this regard?

Stake building is permitted under Romanian law with the observance of:

  • disclosure obligations – a shareholder should report to the FSA and the target whenever its stake exceeds or falls below the following thresholds: 5%, 10%, 15%, 20%, 25%, 33%, 50%, or 75% of the total voting rights in the target;
  • the obligation to launch a mandatory takeover (for a price that cannot be lower than the highest price paid by the bidder during the last 12 months); and
  • insider trading and market abuse regulations.

A share purchase followed by the launch of a mandatory takeover is a common approach. After submission of the preliminary announcement to the FSA and until initiation of the offer, the bidder cannot perform any operations with respect to the shares that are subject to the offer. After initiation of the offer, the bidder can acquire shares outside the offer under specific conditions.

In specific regulated fields (eg, insurance and banking), additional regulatory requirements will apply.

6.3 Are there provisions for the squeeze-out of any remaining minority shareholders (and the ability for minority shareholders to ‘sell out')? What kind of minority shareholders rights are typical in your jurisdiction?

After a takeover has been carried out, the bidder can require the remaining shareholders to sell their shares at a fair price, within three months of the takeover closing, if:

  • the bidder holds more than 95% of the share capital of the target and at least 95% of the voting rights that can be effectively exercised; or
  • the bidder has purchased more than 90% of the target's shares during the takeover procedure.

Minority shareholders have the right to sell out in the context of a takeover on conditions equivalent to those provided above for squeeze-out.

The rights of minority shareholders are generally as follows:

  • the right to receive various information;
  • the right to request that the general meeting of shareholders be convened and propose decisions on its agenda (to exercise this right, the shareholding should exceed 5%); and
  • the right to ask the court to appoint an expert to review management activity (to exercise this right, the shareholding should exceed 10%).

6.4 How does a bidder demonstrate that it has committed financing for the transaction?

During the takeover approval process, the bidder must submit to the FSA:

  • documents attesting to the payment of at least 30% of the overall value of the offer in the intermediary's bank account (which will be blocked during the entire offering period); and
  • a bank guarantee letter issued to the benefit of the intermediary for the entire value of the offer, valid until the transaction settlement.

6.5 What threshold/level of acceptances is required to delist a company?

The de-listing of a company as a result of a decision of the extraordinary general meeting of the shareholders is conditional upon the fulfilment of the following conditions:

  • In the last 12 months prior to the convening of the extraordinary general meeting of shareholders:
    • a maximum of 50 share transactions were registered; and
    • the number of shares traded represented a maximum 1% of the target's total shares; and
  • The shareholders that disagree with the de-listing decision have the right to withdraw from the shareholding and to obtain the value of their shares.

6.6 Is ‘bumpitrage' a common feature in public takeovers in your jurisdiction?

Although bumpitrage is not widely used as a form of shareholder activism in Romania, and shareholder activism is not yet common in the country, the legal framework allows any person to issue a counter-offer for the same securities under specific conditions, as follows:

  • to have as its object at least the same number of securities or to aim to achieve at least the same participation in the share capital; and
  • to offer a price at least 5% higher than that in the initial offer.

The counter-offer should be submitted to the FSA within 10 business days of publication of the initial offer. All competing tenders should be closed within 60 business days of commencement of the initial offer.

6.7 Is there any minimum level of consideration that a buyer must pay on a takeover bid (eg, by reference to shares acquired in the market or to a volume-weighted average over a period of time)?

Mandatory takeover: The price offered must be at least equal to the highest price paid by the bidder, or by persons with whom it is acting in concert, in the 12 months prior to the offer. If no such share purchase took place, the price must be determined in accordance with FSA regulations, taking into account at least the following criteria:

  • the average transaction price of the shares on the stock market over the previous 12 months;
  • the value of the company's net assets according to the latest audited financial statements; and
  • the value of the shares, as determined by an expert appraisal made in accordance with assessment standards.

Voluntary takeover: The price offered must be at least equal to the highest of the following:

  • the highest price paid for the shares by the bidder, or by persons with whom the bidder is acting in concert, in the 12 months prior to submission of the offer, determined in consideration of public offers, purchases made on the stock market, share capital increases and any similar transaction;
  • the average transaction price of the shares on the stock market in the 12 months before submission of the offer; and
  • the price reached by dividing the target's net asset value by the number of company shares, according to the company's latest financial statement.

6.8 In public takeovers, to what extent are bidders permitted to invoke MAC conditions (whether target or market-related)?

Conditional takeovers are not expressly regulated in Romania. MAC conditions can be invoked in the context of a public takeover if approved by the FSA and included in the offer documentation. Such MAC conditions should observe the equal treatment principle and be granted to all shareholders/bidders.

6.9 Are shareholder irrevocable undertakings (to accept the takeover offer) customary in your jurisdiction?

Irrevocable undertakings to accept a takeover offer are very rare in Romania and are not expressly regulated.

7 Hostile bids

7.1 Are hostile bids permitted in your jurisdiction in public M&A transactions? If so, how are they typically implemented?

Under the relevant legislation, there is no difference between hostile bids/takeovers and voluntary takeovers. In fact, hostile takeovers are not regulated per se, but are voluntary takeovers in which the target's opinion on the takeover, as communicated to the Financial Services Authority, is a negative one. Hostile takeovers are not common in Romania.

7.2 Must hostile bids be publicised?

Hostile takeovers/bids should observe the general timeline and milestones indicated in question 6.1.

7.3 What defences are available to a target board against a hostile bid?

As pre-emptive measures:

  • high decision-making thresholds should be included in the articles of association;
  • significant compensation should be granted to the management in case of dismissal as a result of a hostile takeover; and/or
  • employee stock option plans should be established.

Once the takeover has been initiated, a competing offer can be launched by another investor and/or the authorised capital can be used for a capital increase or share buyback, provided that such actions can be qualified as being in the best interests of the company (ie, they are not mere actions to discourage the hostile takeover).

8 Trends and predictions

8.1 How would you describe the current M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

Although 2020 was a year full of uncertainty, given the extended effects of the COVID-19 pandemic, the Romanian M&A market recorded 91 transactions, as compared to 110 in 2019; and in the first quarter of 2021, the Romanian M&A market was slightly higher in terms of value, although it contracted by 26% in year-on-year terms. The key word to describe the current status of the M&A market is ‘resilient'.

Most transactions involve strategic investors, but local private equity funds are also becoming very active.

The most active sectors are real estate (including construction), energy and utilities, technology and healthcare. Notable M&A transactions in the last 12 months included:

  • the acquisition of CEZ's assets in Romania by Macquarie Infrastructure and Real Assets;
  • the acquisition of Floreasca Business Park by Fosun International Ltd;
  • the acquisition of the NEPI Rockastle portfolio by AFI Group;
  • the acquisition of a majority stake in Telekom Romania Communications by Orange Romania (€268 million); and
  • UiPath's new financing round ($225 million).

8.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms? In particular, are you anticipating greater levels of foreign direct investment scrutiny?

Interest in Romania remains robust and we expect to see increased activity of investment funds to capitalise on new economic developments. We estimate that the information technology and communications, energy, real estate and health and pharmaceutical sectors will remain high on the agendas of investors.

Romania is an ideal destination for investors looking to consolidate their market position or enter a new market, with interesting opportunities for players with long-term vision and the ability to adapt to post-pandemic uncertainty.

Additionally, the appetite for alternative deal models (divestments, reinvestments, joint ventures and alliances) seems to be increasing, as players seek to take advantage of the anticipated recovery.

9 Tips and traps

9.1 What are your top tips for smooth closing of M&A transactions and what potential sticking points would you highlight?

As a degree of uncertainty continues to affect most operations and most transactions take place in a virtual environment, parties should bear the following in mind:

  • Engage the most appropriate team of professional advisers in the early stages of preparing and negotiating a transaction.
  • Avoid striking an agreement on the purchase price and focus on risk allocation, which may prove just as important.
  • Legal advisers should structure and fuel the negotiation process, as there are particular features of local law that cannot be covered under standard contractual templates used by international investors.
  • Assess potential areas of business likely to be affected by pandemics and/or economic events and incorporate appropriate protection mechanisms into transaction documents (MAC provisions included).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.