A Western European private equity fund identifies a Romanian software company as an attractive bolt-on acquisition. The target looks clean: three years of audited accounts, a tidy corporate structure, and a motivated founder willing to sign. Six weeks into legal due diligence, the team discovers an undisclosed pledge over the main operating subsidiary. A lapsed licence that the business depends on. Additionally, employment contracts that do not comply with Romanian labour law. The deal still closes – but at a materially reduced price, with an extended escrow, and after two months of renegotiation.
M&A due diligence in Romania follows a structured multi-workstream process covering corporate, legal, regulatory, tax, and employment matters. Foreign acquirers must engage a lawyer in Romania with direct access to the Registrul Comerțului (Romanian Trade Register) and the Arhiva Electronică de Garanții Reale Mobiliare (Electronic Archive of Movable Security Interests) to verify title and encumbrances before signing. A standard legal due diligence exercise takes four to eight weeks and results in a report that forms the factual basis for the representations and warranties and closing conditions in the share purchase agreement.
This guide walks through the full process step by step: the regulatory setting, the documentary checklist, the workstream sequence, common errors by foreign clients. Cost expectations. Additionally, a decision framework for selecting the right due diligence scope for different transaction types.
The regulatory setting for M&A transactions in Romania
Romania operates a civil law system rooted in the Napoleonic tradition, heavily influenced by French and Italian codifications. Corporate transactions are governed primarily by Romanian corporate legislation, the civil code, and commercial legislation. Competition law aligns with EU merger control rules, meaning that transactions above certain turnover thresholds require notification to the Consiliul Concurenței (Romanian Competition Council) or, where EU thresholds are met, to the European Commission.
Foreign direct investment screening has become a significant factor since Romania transposed the EU Foreign Direct Investment Screening Regulation. Acquirers from outside the European Economic Area – and in some cases from within it – must assess whether the target operates in a sector designated as sensitive. These include energy, transport, digital infrastructure, defence supply chains, and media. A screening notification filed late, or omitted entirely, can result in the transaction being suspended or unwound.
The Oficiul Național al Registrului Comerțului (National Office of the Trade Register, ONRC) maintains the primary registry of corporate information. Romanian corporate legislation requires that constitutional documents, share transfers, pledges over shares, and changes to management be registered at ONRC. Registration has constitutive effect for share transfers in a societate cu răspundere limitată (private limited liability company, SRL) – meaning that title does not pass to the buyer until the transfer is recorded. This is a critical distinction for foreign acquirers accustomed to common law systems where contractual transfer of shares is effective on closing.
For transactions involving a societate pe acțiuni (joint stock company, SA), share transfers may be effected by endorsement of share certificates or through the Central Depository for listed companies. The due diligence approach differs accordingly. Understanding which vehicle the target uses is the first structural question the deal team must answer.
Romanian tax legislation adds further complexity. Value added tax status, corporate income tax rulings, transfer pricing documentation, and any outstanding tax inspections by the Agenția Națională de Administrare Fiscală (National Agency for Fiscal Administration, ANAF) all fall within scope. Tax due diligence in Romania is best run as a parallel workstream to legal review, not a sequential one.
Step-by-step process and documentary checklist
A well-organised due diligence process in Romania moves through five phases. Each phase produces deliverables that feed the next. Compressing phases or running them out of sequence is one of the most common sources of delay and cost overrun.
Phase 1 – Scoping and data room preparation (weeks 1–2). The acquirer's counsel agrees a request list with the target. The request list covers corporate, contractual, regulatory, employment, intellectual property, litigation, real estate, and environmental matters. For a Romanian target, the list should specifically request ONRC extracts and articles of association for all group entities, pledge register searches at ONRC and in the AEGRM archive. Land book extracts (extras de carte funciară) for all owned or leased real property. Additionally, ANAF certificates of fiscal compliance. A virtual data room is populated by the target over the first two weeks. In practice, Romanian sellers frequently provide incomplete initial uploads. Build two to three rounds of follow-up queries into the timeline.
Phase 2 – Corporate and title review (weeks 2–4). Local counsel searches ONRC for each group entity. The search confirms the corporate structure, registered share capital, identity of shareholders, management mandates, and any registered pledges over shares or assets. Share pledge agreements in Romanian law must be notarised and registered to be enforceable against third parties. An unregistered pledge discovered at this stage may indicate undisclosed financing. Management mandates are time-limited under Romanian corporate legislation. If a key executive's mandate has lapsed and has not been renewed, contracts signed after expiry may be challengeable.
Phase 3 – Contractual and regulatory review (weeks 3–5). Material contracts – customer agreements, supplier frameworks, licences, financing arrangements, and intragroup agreements – are reviewed for change-of-control provisions. Romanian commercial legislation does not imply a universal change-of-control right for counterparties, but many contracts contain bespoke clauses. Missing a termination right in a key customer contract has the potential to destroy a significant portion of deal value post-closing. Regulatory licences are checked for transferability and currency. Sector-specific licences in energy, pharmaceuticals, and financial services are issued to the legal entity and do not automatically follow a share transfer – but the licensing authority may require notification or fresh approval.
Phase 4 – Employment and data protection review (weeks 4–6). Romanian employment legislation provides strong employee protections. Individual employment contracts must contain mandatory clauses required by labour law. Collective bargaining agreements, where applicable, bind the acquirer after closing. Undocumented or informal employment arrangements – sometimes encountered in family-owned Romanian businesses – create exposure under both employment legislation and tax legislation. Data protection compliance under the General Data Protection Regulation (GDPR) is reviewed concurrently, with particular attention to consent records, data processing agreements. Additionally. Any open proceedings before the Autoritatea Națională de Supraveghere a Prelucrării Datelor cu Caracter Personal (National Supervisory Authority for Personal Data Processing, ANSPDCP).
Phase 5 – Litigation and environmental review (weeks 5–7). Pending and threatened litigation is identified through the target's disclosure and through searches of the Portalul Instanțelor de Judecată (Courts Portal). This allows public searches of civil and commercial proceedings. Environmental liability, particularly for industrial targets, may require specialist input beyond the legal team. The output of all five phases is consolidated into a due diligence report, typically delivered at the end of week seven or eight.
For a detailed overview of the full M&A transaction lifecycle in Romania, including structuring considerations and post-closing obligations, see our M&A services page for Romania.
To receive an expert assessment of your due diligence scope for a Romanian target, contact us at info@ferrazwhitmore.com.
Common errors by foreign acquirers – and their consequences
The errors that cost foreign acquirers the most in Romanian transactions are rarely about missing documents. They arise from misreading local legal concepts or underestimating procedural requirements that have no obvious equivalent in common law systems.
Assuming online data is sufficient. The ONRC online portal provides useful initial information, but it does not reflect all registered encumbrances in real time. A formal certified extract requested directly from ONRC is required for reliance. Similarly, AEGRM searches for movable security interests must be conducted by an authorised agent. Acquirers who skip these formal searches and rely on seller representations alone take on undisclosed security risk that cannot be recovered through the SPA.
Overlooking the constitutive effect of registration for SRL transfers. As noted above, title to shares in an SRL passes only on ONRC registration, not on signing the share purchase agreement. This means the closing mechanics in the SPA must be structured to account for the registration step. The gap between signing and registration – which can take several days to a few weeks depending on ONRC workload – creates a period of residual risk. Practitioners in Romania typically address this through interim management arrangements and escrow mechanics.
Treating representations and warranties as a substitute for due diligence. Some foreign acquirers. Particularly those familiar with warranty and indemnity insurance markets in Western Europe, attempt to compress due diligence in reliance on seller representations and warranties. Romanian courts have not yet developed a consistent and predictable body of case law on SPA warranty claims. Enforcing a warranty claim through Romanian civil procedure is a multi-year undertaking. The practical consequence is that a gap in due diligence cannot be reliably remedied through post-closing litigation. Thorough pre-signing investigation remains the primary risk management tool.
Underestimating employment liability. Romanian labour law requires specific written documentation for every element of the employment relationship. Salary supplements, bonuses, and flexible working arrangements agreed verbally or by informal exchange have uncertain enforceability – but still create exposure if employees assert them against a new owner. Many foreign acquirers discover, after closing, that the target's actual wage bill significantly exceeds what is recorded in formal employment contracts.
Ignoring fiscal compliance certificates. ANAF issues fiscal compliance certificates showing whether the target has outstanding tax liabilities. These certificates are point-in-time snapshots. A certificate obtained at the start of due diligence may not reflect a tax inspection opened or concluded later. Closing conditions in the SPA should require a fresh ANAF certificate dated no more than a few days before closing.
Romanian corporate law practice also intersects with EU-level regulatory considerations. For acquirers structuring a Romanian deal alongside activity in other European markets, our corporate law services in Romania cover the full spectrum of entity management, governance, and compliance requirements.
Costs, timelines, and the decision framework for scope
The cost of legal due diligence in Romania depends on three variables: the size and complexity of the target, the number of jurisdictions involved (many Romanian groups have offshore holding structures in the Netherlands. Cyprus. Alternatively, Malta). Additionally, whether specialist workstreams. environmental, sector regulatory. Alternatively, data protection. are needed alongside the core legal review.
For smaller targets with simple structures, legal fees for a focused due diligence exercise start in the low thousands of euros. Mid-market transactions with multi-entity group structures, significant contract portfolios, and concurrent tax review typically involve fees in the tens of thousands of euros. These are orders of magnitude, not capped figures – scope creep driven by seller disclosure deficiencies is the most common source of fee overrun.
The timeline follows the phase structure described above. Four weeks is achievable only where the data room is substantially complete on day one and follow-up queries are answered promptly. Six to eight weeks is more realistic for most transactions. Where the target has pending litigation, open tax inspections, or environmental matters requiring specialist input, ten to twelve weeks should be budgeted.
Deciding on scope: a decision framework. Not every transaction requires full-scope due diligence across all workstreams. The appropriate scope depends on the transaction structure, the sector, and the acquirer's risk appetite.
Full-scope due diligence – covering corporate, contractual, regulatory, employment, tax, IP, real estate, litigation. Additionally. Environmental – is appropriate where the acquirer is taking 100% of the share capital of an operating company in a regulated sector. Alternatively. There, the deal value is material relative to the acquirer's balance sheet. The representations and warranties in the SPA, and any warranty and indemnity insurance policy, will be conditioned on the scope of the due diligence conducted.
Focused due diligence – limited to corporate title, key contracts. Additionally, regulatory licences – may be appropriate for minority stake acquisitions. There. The seller is a well-known institutional counterparty. Alternatively. There, the acquirer has prior operational knowledge of the target. The closing conditions and representations and warranties in such cases should be correspondingly narrower, reflecting the reduced investigation.
Red-flag due diligence – a rapid high-level scan across all workstreams – is used in competitive auction processes where full access is not available before signing. The output identifies material risks only, without exhaustive analysis. It is not a substitute for full due diligence; it is a tool for deciding whether to proceed to exclusivity and a full process. The SPA in such cases typically includes a longer post-signing due diligence period as a closing condition.
The choice of scope has a direct effect on the allocation of risk in the SPA. Broader due diligence supports narrower representations and warranties, because the acquirer has verified more facts independently. Narrower due diligence shifts more risk to the seller through broader warranties and a longer limitation period. Romanian civil procedure treats limitation periods differently from common law systems – the parties cannot always extend statutory limitation periods by contract without limit. This is a point that benefits from specific local legal input when drafting the SPA.
For acquirers who have completed due diligence in other civil law jurisdictions – notably Portugal – many of the structural concepts are transferable, though local procedural differences are material. A comparison of approach and typical issues across both markets is available in our guide to M&A due diligence in Portugal.
For a tailored strategy on scoping and executing due diligence for your Romanian acquisition, reach out to info@ferrazwhitmore.com.
Self-assessment checklist before initiating due diligence
This checklist applies where a foreign acquirer is preparing to conduct legal due diligence on a Romanian target. Before the data room opens, verify the following:
- Confirmed the target entity type (SRL or SA) and understood the transfer mechanics and registration requirements that apply.
- Identified all group entities to be included in scope, including any offshore holding structures.
- Assessed whether the transaction falls within FDI screening obligations under Romanian or EU rules and confirmed the notification timeline.
- Assessed whether Romanian or EU merger control thresholds are met and confirmed the filing obligation and suspensory effect.
- Agreed a due diligence request list covering all workstreams relevant to the target's sector and structure.
This due diligence process is applicable if the following conditions are met: the acquirer is taking a controlling or full-ownership stake. the target is a Romanian-registered entity with active operations. and the transaction is structured as a share deal rather than an asset deal. Asset deals involve a different set of documentary requirements, including title searches for each transferred asset and analysis of the tax treatment of the asset transfer under Romanian tax legislation.
Frequently asked questions
Q: How long does M&A due diligence take in Romania?
A: For a mid-market transaction, a full legal due diligence process in Romania typically takes four to eight weeks from the moment the virtual data room is made available. Scope, target complexity, and document quality all affect timing. Engaging a lawyer in Romania with local registry access can compress the timeline considerably.
Q: Is it a misconception that Romanian company records are fully public and accessible online?
A: Partly. The Romanian Trade Register publishes basic corporate information, but full constitutional documents, detailed shareholding histories, and pledge registers often require in-person or formal written requests. Relying solely on online extracts is a common error that leaves gaps in a foreign acquirer's due diligence report.
Q: What are typical legal costs for due diligence on a Romanian target?
A: Legal fees for due diligence in Romania vary with deal size and complexity. For smaller targets, costs generally start in the low thousands of euros. Mid-market transactions with multi-workstream reviews can reach fees in the tens of thousands of euros. A scoping call with a law firm in Romania at the outset helps calibrate budget expectations before a data room opens.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our M&A practice covers transaction structuring, due diligence management, SPA negotiation, and post-closing integration across European and emerging markets, including Romania. We combine Portuguese civil law expertise with English common law tradition – an approach that is particularly effective in advising common law-based acquirers on civil law targets. Our attorneys have advised on share purchase agreements, closing conditions negotiations, and representations and warranties disputes in both civil law and common law systems. The firm is a member of leading international legal associations and participates in cross-border practice groups focused on M&A and corporate transactions. We work with international entrepreneurs, institutional investors, and in-house legal teams who need results-oriented counsel across multiple legal systems. As an international law firm operating across Romania and other European markets, Ferraz & Whitmore brings directly applicable local knowledge to every stage of the acquisition process. To discuss your due diligence requirements for a Romanian target, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.