• Private equity (PE) fund investments in Central and Eastern Europe (CEE) reached a total volume of EUR 1.71 billion in 2023, while Romania ranked 4th at the CEE level.

• In 2023, the total investments made by PE funds in the construction sector in the CEE reached a total of EUR 55 million, representing 3.2% of the total PE investments in the region.

• The investments of these funds in the agricultural sector decreased by 26%, from EUR 7.7 million in 2022 to EUR 5.7 million, remaining at 0.3% of the total investments in the region.

Private equity investment funds reaffirm their role in supporting and developing strategic sectors, especially in periods of economic uncertainty. In 2023, although private equity (PE) investments in Central and Eastern Europe (CEE) had a downward trend, reaching a total volume of EUR 1.71 billion, from EUR 2.1 billion in 2022, Romania registered a significant increase, placing us in 4th place at CEE level, with a total of EUR 130 million in 2023, compared to EUR 80 million in the previous year. Also, according to the types of investments made at the CEE level, Romania is in a leading position in the Buyout segment, occupying the 3rd place, with EUR 76 million, after the Czech Republic and Poland.

The 2023 PE investment landscape reflected global and regional economic trends, as well as the need to support innovation and sustainable development. According to the Invest Europe* study, out of the total investments of EUR 1.71 billion, the sectors that attracted the highest amounts of PE investments were business products and services (29%), IT&C (25.3%), biotechnology and health (14.5%) and consumer goods and services (13.5%). Thus, these four sectors collectively represented 82% of the total value of PE investments in CEE, while key sectors such as agriculture or construction materials did not represent a major interest for private equity investors. The last two sectors are essential for Romania's economic development and, at the same time, represent priority areas for ROCA Investments' investments.

With six years of activity in the local PE area, ROCA Investments has a deep understanding of the market dynamics and the specific needs of the key agricultural and industrial sectors, through the two strategic pillars through which the company invests in the Romanian economy: ROCA Industry and ROCA Agri RDF.

"We invest in strategic sectors by taking over and transforming entrepreneurial companies, with the aim of offering them growth prospects at European level in the sectors in which they operate, applying our PE know-how, through the two specialized holding companies. ROCA Investments being an evergreen fund, of the buy & build type, with a specific majority shareholder, with already visible results especially in the construction materials industry, we want to consolidate and own companies in the long term, to transform them into market leaders," said Rudi Vizental, CEO of ROCA Investments, the most dynamic private equity company in Romania.

Evolution and prospects of the construction sector

In 2023, the investments of PE funds in the construction sector increased significantly in the CEE region, reaching EUR 55 million, representing 3.2% of the total PE investments, compared to EUR 38 million in 2022. This represents a 45% increase in the amount invested of PE investments, reflecting investors' confidence in the growth and development potential of this sector.

The construction sector contributed 8.2% to Romania's GDP in 2023, highlighting the sector's significant impact on the economy.

However, it should be borne in mind that, according to a Neomar study**, the total value of the construction market in Romania registered a decrease in 2023 (-3.5%), following the negative trend of recent years, 2022 (-1.2% ) and 2021 (-1.4%). This fluctuation reflects the sector's adaptation to changing economic conditions, inflation, the labor crisis, tight financing conditions and rising costs throughout the production chain. However, recoveries are forecast in the following years: 5.2% in 2024, 5.9% in 2025 and 4.8% in 2026.

Challenges of the agri-business sector

Investments of CEE PE funds in the agricultural sector decreased by 26% in 2023, from EUR 7.7 million in 2022 to EUR 5.7 million, remaining at 0.3% of total investments. This significant decrease leads to the conclusion of the need for a strategic intervention for the revitalization of this sector at the European level. Agriculture's contribution to Romania's GDP was 4.1% in 2023, also underlining its economic importance.

Despite the strategic role, investments in this sector decreased by 26%, being influenced by several factors. The increase in chemical fertilizer prices caused by sanctions against Russia had a significant impact. Falling grain prices have caused production costs to outstrip incomes, and drought-stricken crops and insufficient government support have compounded the situation. Fiscal uncertainty created by the new measures announced in autumn 2023, together with indirect costs related to interest and depreciation, have affected the profitability of farmers.

In this context, Rudi Vizental, CEO of ROCA Investments, emphasizes the need for investments in key sectors to stimulate economic growth: "Romanian companies need investments regardless of the field of activity to continue their development plans. This support can come by increasing private equity investments as a share of GDP, as is the case in the CEE area where, in 2023, the average reached 0.072% vs. Romania 0.041%. The capital that ROCA Investments invests in local businesses on the one hand covers part of the needs of these two key sectors, and on the other hand generates performance for investors, with an annualized portfolio return of 29.11% since launch," he said.

For 2023, the company announced a current valuation before the distribution of dividends of EUR 81.64 million. The market value of ROCA Investments' equity increased 3.7 times from inception to the end of 2023. The cumulative turnover of the portfolio companies reached EUR 345 million in 2023, generating an operating profit of EUR 12 million and providing more than 2,000 jobs nationwide. During its six years of activity, ROCA Investments completed 25 transactions and made two significant exits.

ROCA Investments, the most dynamic private equity company in Romania, owns, as the majority shareholder, two holding companies specialized in strategic industries (construction materials and agriculture) and a portfolio of minority stakes in five Romanian companies.

Note. The data in this press release was based on the following studies:

*Study by Invest Europe, Central & Eastern Europe PRIVATE EQUITY STATISTICS, Statistics on Fundraising, Investments, & Divestments, 2023

**Study carried out by Neomar, Analysis and forecast of the construction sector in Romania - 2023-2026, May 2024

* This is partner content.