Private equity funds have the cash and know how that Romanian companies need to overcome the financial crisis, but Romanian entrepreneurs do not readily accept partnerships with investors.
Private equity funds are among the few available financing alternatives left for Romanian entrepreneurs in the context of the current financial crisis, as a result of the tighter access to banking loans and capital market collapse. The reluctance and lack of training Romanian entrepreneurs show in accepting an investor in their own company are, though, the biggest hindrances in the way of partnerships with private equity funds.
According to a survey conducted by the South-Eastern Europe's Private Equity Association (SEEPEA), Romanian entrepreneurs' reluctance to accept an investor is the most important impediment in the way of a faster development of the private equity industry. "Most of the time, entrepreneurs do not trust investment funds and the relationship between the two is quite hostile," said Marian Tescaru, managing partner of Altria Capital investment banking firm.
"Romanian entrepreneurs are not reticent, but rather unprepared to accept an investor in their businesses (...)," said Radu Timis, chairman of Cristim charcuterie producer.
The fact that this is the first generation of Romanian entrepreneurs (the "youth") and their lack of business experience is apparent, believe private equity funds. However, the international crisis will make Romanian entrepreneurs mature and "open their eyes".
"Many Romanian firms have banked on strong growth in the coming years. Because they have seen growth in recent years, Romanian entrepreneurs are confident their businesses will continue to grow and thus see a very strong increase in the selling price, but the increase will no longer be registered because of the crisis," said Cristian Nacu, partner with Enterprise Investors.
The financial crisis will be a key test for Romanian entrepreneurs. The main risks are related to banks' reluctance to lend, to the rising costs of current loans and to the economic slowdown and rising inflation.
Private equity funds will also cope with a difficult environment. " (...) We'll see the private equity industry slow down and deals worth no more than a hundred million euros," said John Evangelou, a partner with Ernst & Young.
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