Deal makers see a bull market coming

By Timothy Sifert

Poland's investment bankers are supporting a boost in corporate deal making among the country's publicly and privately-owned companies, a clear signal that - at least behind the scenes - executives and politicians are making their future plans in terms of raising capital and even long-awaited privatizations.

"There is more of a feeling of optimism in the market," said Piotr Chudzik, Vice President at Deutsche Bank Global Corporate Finance.

Many Warsaw-based investment bankers were resigned to revising the weak economy of the last two years, making fewer deals with less staff, based on glum economic forecasts and results. But the newfound optimism is a direct result of better-than-expected growth figures for the first half of the year, and the promise of a better business environment as an EU member.

Bankers' confident perceptions - in many ways, an indicator for the direction of the economy - could also spark firms to increase their investment banking staffs as more deals come through the pipeline, according to Warsaw-based bankers.

"I think there will be an increase, maybe not this year, but next year," said one locally-based banker at an international firm. "This is related to some more positive perceptions among business, especially for 2004." He declined to be named for fear that the bank would be flooded with resumes.

Throughout Europe as well, and after a string of painful cutbacks at top investment banks, there is at least some expectation of an improving economy - even if it's just in terms of banking fees.

Last week, for instance, the Bank of America announced it would add about 140 bankers to its London offices to target European deals. The bank's officials, expectant of a future bull market on the flipside of positive economic signs out of the US, are betting that by being one of the first banks to expand in Europe, they will have an advantage over competitors.

Banking pros in Poland might not be as aggressive, but they are confident.

"There's an increase in interest among international investors in Poland," Chudzik explained.

However, bankers see investment banking proposals well before any transaction is finalized, so most were hard-pressed to find any specific business they were able to reveal today.

In terms of sizable deals and international interest, bankers pointed to Deutsche Telekom's (as well as other investors') almost persistent interest in acquiring the country's largest mobile operator, PTC, as an example of an economic upturn.

Chudzik explained that most future deals won't be as large as the DT-PTC transaction which was over E1.1 billion. "A lot of things have been coming through, but are not completed," he said. "There are deals in the pipeline."

Krzysztof Rozen, head of KPMG Corporate Finance for Central and Eastern Europe, is positive about the future prospects in M&A in particular: "We have been very bullish in Poland and in Central and Eastern Europe," he said. "We think that the market is recovering well. There are two trends which are fueling the action - and both are related to the EU."

He said that local players realize that they will have to compete with European companies and, as such, must combine forces. Also, he pointed out that mid-size European companies are beginning to enter the market, whereas the big players are already in the country.

There's a key change among the mid-size companies: "Now they have a different perception of risk." He measured middle market companies as those that work at as much as $100 million.