The movement of capital in the M&A market is no longer a "one-way" road from West to East. More and more Czech companies and also companies from other countries of the former Eastern Bloc are considering these days acquiring competitors in the western part of Europe. “We have many very successful companies looking for opportunities to take over “Western” companies, says Antonin Piskáček, who also leads the team of acquisition advisors from the position of Corporate Finance Director at Česká Spořitelna.
How active are Czech companies in investing in foreign companies?
Czech companies have grown way more confident. We have a number of very successful companies here, I would say “regional tigers” who act as active consolidators and buy not only in Czechia but also abroad. This is a huge change compared to the 1990s, when I started in the industry and when a cross border transaction meant exclusively that a foreign company - typically a German company - bought a Czech company in order to obtain cheap production capacity or a market.
Are Czech acquirers in the West welcome or are they still viewed with prejudice or disrespect?
That depends. Somewhere they are open and do not wonder about the origin of the investor. But sometimes we still see a surprise when a company from the East wants to buy its competitor in the West. Somewhere they still have rigid ideas of this; they haven't got used to it being no longer a one-way street. Yet, with the way things look now, they’ll have to get used to it.
How confident are Czech companies in the M&A market compared to companies in the V4 countries?
Given the size of our country and what we have done, our companies are doing great. The acquisition activities of Czech companies are larger than those of Slovak and Hungarian companies. Although, Hungary made quite some effort to create a strong domestic capital layer in the privatization of their national assets; several very strong regional companies were established, and thanks to this we can still see support of Hungarian government in domestic capital matters. Poland is a specific market, partly because of the size of the country, which in itself predestines Polish companies as regional champions and consolidators. But it was also the policy of the past Polish government that supported the formation of domestic capital through the Warsaw Stock Exchange, supporting Polish private equity sector and more. This greatly helped Polish companies to maintain their independence.
What motivates Czech companies to expand abroad?
There are many reasons for buying companies abroad. For example, we see well-known examples of successful Czech energy consolidators who have taken advantage of the acquisition opportunities that arose as a result of solving ESG issues in many EU countries. However, apart from this specific area, one of the typical reasons will be the acquisition of a foreign competitor in order to acquire its market or product.
Are there any threats for Czech investors in foreign companies?
In addition to the economic cycle, trade wars, Brexit and the like, I see as a major risk the increasing degree of regulation of everything possible, which can generally undermine the competitiveness of our entire economy. Increasing tendencies towards protectionism also pose a threat. We need more market, more liberalism, more trade, and not more regulations. You can’t growth wealth with them being the base for it.
Although Czech companies are increasingly involved in international mergers and acquisitions, it seems that Czech companies mostly acquire other Czech companies. What the most common reasons for this?
Perhaps the most important reason for a sale of a company, we are currently observing, is a generational change. Sometimes it is also the owner's effort to focus on another domain. Another reason for such transactions can also be property restructuring initiated by foreign investors, as some investors leave Czechia or change their domain and thus sell part of their assets. In the case of company acquisitions, a major driver of transactions is the fact that, in the last 30 years, we have grown a number of very successful companies that are expanding their scope, buying their competitors, even abroad, or buying their suppliers, etc.
In particular, how can you be useful to the buyer / seller when buying or selling businesses?
Consulting sales of companies is our main activity. This is also down to the aforementioned generation change, when the first generation of founding fathers hands over the company to their successors within the family, and if there is no suitable heir, they may decide to sell the company. Our role is then to organize the entire sales process, from preparing the company that is to be sold and estimating its achievable market value, through identifying and addressing appropriate investors, negotiating the terms of the transaction, to its settlement. In the case when we work on the side of the buyer, the situation is actually mirrored - according to the specified criteria, we select a suitable company to buy, then address its owner, perform the valuation, organize in-depth inspection and try to negotiate the best conditions for our client.
What does an acquisition advisor do?
The role of the advisor is, besides organizational and personnel support of the whole process, which usually involves about 4-6 months of intensive work, is especially in using his / her experience and knowledge and not letting his / her client be fooled or committing any substantial mistakes. That's probably the main thing.
How do you define the price of a business that's for sale? What is the specific procedure?
The initial price estimate is made by market comparison - we just look at how much comparable companies in the industry are being sold. This is nice because it is very simple and intuitive, but it has a big catch: there are no two same companies. Therefore, in the course of a transaction, in particular a purchase transaction, it is also necessary to measure the company using the discounted cash flow method, whereby the future cash flow from the company to the holder is de facto estimated and converted to its present value. This method is able to take into account all the specifics of a particular company, but it is quite difficult to prepare. So much the theory. However, sometimes the reality is different and only one thing is decisive in the end: how much someone is willing to pay on the market. And this can differ significantly from these nice spreadsheet calculations. Thus, the actual market price of a company can ultimately be only ascertained through a well-organized and competitive sales process.
To what extent does the whole process facilitate the rapidly advancing digitization?
Of course, our industry cannot avoid the advent of new technologies, be it the higher level of computerization of the entire transaction process in the form of various repositories, transaction sharing platforms and the like, or the impact of regulatory measures and societal trends such as ESG. However, the basic principle of our work remains unchanged: making a good transaction for the client is half technology and mathematics, but half alchemy, psychology and common sense, and these are the things that artificial intelligence and various algorithms have not yet succeeded in. Companies are not cakes and they can’t be sliced and sold that way just yet and not for long still.
What services do you offer in addition to M&A advice?
We advise in all phases of a company's life. We are able to assist our clients in all sorts of situations that a company's life brings - from finding capital for further development, through buying or selling a company and its valuation, to listing a company stock or helping get a rating from Moody's or S&P. Our clients include small family businesses as well as large Czech and international companies. We also advise public entities, various state organizations or cities and municipalities in the implementation of their investment plans in the construction and operation of various social, cultural or sports facilities. The scope and focus of our consultancy is very broad. An interesting and promising activity is consulting in PPP projects, i.e. in public-private partnerships. At present, we work as an advisor to the Ministry of Transport in the preparation of the completion of the Strakonice highway D4 in the form of PPP. The highway will be built and financed by a private investor, the state will then repay it and the investor will eventually transfer it to the Ministry. We consider this project a pilot and its successful implementation will hopefully contribute to breaking the ice in this area in our country.
Ing. Antonín Piskáček (born in 1972 in Prague)
Graduated from the School of Industrial Engineering and subsequently from the School of International Relations of the University of Economics and the Institute of Property Valuation.
#After graduation, he joined Commerzbank's Prague office where he worked in the investment banking department, most recently as its director. In 2007, he moved to Česká Spořitelna, where he is responsible for M&A advisory and share issues on the capital markets.
He spends his free time with his family. His hobbies are hiking and literature, especially historical literature.