Late 2006 saw the first important takeover on the market of private clinics, a move that was set to pave the way for a M&A frenzy.
The sector boasts a 20% annual growth rate and includes businesses started from scratch by domestic entrepreneurs. Several of them have decided to attract a strategic or financial investor to ensure growth continues in their businesses.
In the health care industry, they say that 2007 is not only the year of M&A, but is also the year when the sector is expected to boast a record growth rate.
After the first six months this appears to be accurate, with several companies upwardly revising their forecasts for this year.
"We decided to invest in this sector in Romania as we predict a huge growth potential for clinics, specialised services and diagnosis equipment (...)," said Daniel Lynch, managing director with 3TS Capital Partners, which manages the funds held by the 3i giant in the region.
The fund entered the domestic market of private clinics at the start of this year, when it acquired 47% in Centrul Medical Unirea (CMU). According to CMU representatives, this is the biggest deal on the market.
Romar's shareholders also decided on a partial exit this year and agreed to sell 33% of the group to Reconstruction Capital 2 (RC2) for 3m euros.
For buyers, the return of investments in private clinics is certain, as the sector is expected to continue to register sustained growth, without any major European private clinics or hospitals present on the Romanian market. But what does an entrepreneur that gets an investment fund to buy into their company stand to gain?
"The financial investor ensures liquidity. This is the main advantage. Disadvantages are mainly linked to the need to register large profits on medium term and the pressure of selling in 3-5 years (...)," said Mihail Marcu, chairman of MedLife.
Last year, MedLife shareholders made the first partial exit on the market of private medical services and sold 20% to IFC, World Bank's investment arm, for 5m dollars (4m euros).
Another important deal involved Gemisa Investments, which acquired 45% in of Centrul Medical Diagnosis for 1.5m euros.
The private medical services market is estimated to be worth around 200m euros and its development is influenced by an increase in the population's average income.
The market is highly concentrated in Bucharest, with (on average) over 40% of turnover generated in the Capital.
Given that investment funds have already acquired major operators, what else is left to buy on the pharmaceuticals market?
The main targets would be medium and small players in Bucharest and the rest of Romania.
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