The market of home appliances boomed to $150 million last year and may soar to $1 billion in the medium term. So what may the companies operating in this sector need? First of all financing – an answer that has already been given by managers of several investment funds, foreign or already operating on the Romanian market.
After snubbing the home appliance retail chains for a long time, the funds are now fighting over a piece of the cake that may grow more than six times in the next four or five years.
According to market information, all three top companies in the quoted sector – Flanco, Altex and Domo have been “wooed” in the past months by large, regional investment funds, willing to invest between 5-10 million dollars in such businesses.
What do these funds want? To take over a stake in such a company, contribute with financial and managerial resources to its growth, then sell for a nice profit to strategic investors after several years.
According to market sources, Altex and Flanco are being eyed by a foreign investment fund, which is not doing business in Romania for the time being. The fund is planning to buy both companies in order to merge them and then create an entity with several hundred million dollars in sales.
But what do the targeted companies have to say?
“We have talked to the largest investment funds in Romania, but decided not to sell. I don’t believe that we should have investment funds as shareholders at this point. We are now growing and consolidating our operations. Access to credits is much easier now,” says Dan Ostahie, general manager of the Altex retail chain.
Lorand Szarvadi, general manager of Interexpo, the company that owns the Domo chain, says he gave a similar answer.
“We were in talks with several investment funds operating in Romania. There was even an offer for taking over half of the company’s stock, but none of these proposals actually materialised. We would have been more enthusiastic about a partnership with an investment fund several years ago, when we needed financing,” Szarvadi said.
But why this sudden interest of investment funds in home appliances retail trade? First of all because these companies have entered partnerships with several banks in the past few years, which allowed them to start selling goods in instalments. As a result, home appliances worth more than $150m will be sold this year through consumer financing.
“A retail company selling home appliances could become attractive for a strategic investor only when it reaches a minimum sales level of $150-200m. Due to the jump in consumer finance activities, there are several such companies on the Romanian market that could reach this minimum level with support from an investment fund, for instance,” says Ladislau Randjak, Global Finance director for Romania. Greek company Global Finance manages three regional investment funds in Romania, which have tens of millions of dollars available, waiting to be invested.
laurentiu.ispir@zf.ro ; ionut.bonoiu@zf.ro