Independent advisers fill void
In June, they set up Hexagon Capital, an independent Warsaw-based investment house, one of several that have emerged over the past two years as large investment brokers have pulled out of Poland.
The pair, who earned their reputations with top financial institutions, such as Price Waterhouse, West Merchant Bank, McKinsey & Co. and Andersen Consulting, wanted to fill the void left by these large investment banks, which exited after the Polish market had become too small. They were also hoping to bring their expertise and knowledge of the local terrain to domestic companies looking for capital with financial institutions.
"As the infrastructure for such services is still poorly developed here, we can provide a blend of investment, corporate finance and strategic advice," Nowakowski said. Firms like Hexagon Capital will have a key role in helping the growing number of venture capital funds find the right partners as the funds themselves lack the time to prepare the conceptual side of the deals, he said.
Made in Poland
Global investment banks maintained a presence in Poland as long as they could secure at least one major deal a year. In 2001, investment houses Schroders, CA IB, Credit Suisse First Boston (CSFB) and ABN Amro won most of the zł. 350 million ($83.3 million) that the state treasury spent on various privatization transactions. But the boom for huge privatizations is over.
"Poland no longer offers transactions over $100 million," Nowakowski said.
This gap opened a niche for small independent experienced investment advisors, such as Przemysław Szmyt and his partners, Leszek Maciusowicz, Andrzej Sykulski and Wojciech Pątkiewicz, who established Trigon Asset Management, an investment advisory firm, last year.
"We were a group of colleagues who used to work for major Western corporations and decided it was time to do something together," Szmyt said. From the start, Trigon scored a brilliant success by selling the publisher of Twój Styl, a top women's magazine, to Germany's Bauer publishing house.
Marcin Duszyński, an independent investment adviser and a former managing director at Advent International, is currently working with Gdynia-based Telewizja Kablowa Vectra (TKV), a leading cable TV network. TKV wants to buy Warsaw's Aster City cable TV company.
"Today, I have no brand I can hide behind," Duszyński said. "If a client loses, he will know exactly who is to blame. While I work on smaller transactions, I probably make more than a director of a large financial institution."
Human factor
Some market analysts, however, are skeptical of this new breed of independent advisers.
"Many had no choice, but to start a boutique operation as the only way to stay alive until a new job comes along," said one analyst who did not want to be identified. Janusz Heath, the director of Dresdner Kleinwort Capital's Central and Eastern European private equity unit, described such emerging investment boutiques as a normal market trend in an economic downturn. "Anything that helps improve advice available to small- and medium-sized companies is good as long as professional standards are maintained," he said.
So far, independent investment advisers seem to have had no problems in finding clients thanks to their individual approaches, flexibility and prices.
"If a company chooses a large investment bank, major costs are involved," Szmyt said. "At the first meeting you meet a senior partner, but then you are quickly passed onto a new graduate, (although) the cost will still be the same. Apart from selling your shares on international markets, the price-to-quality ratio is better with a small firm. Sometimes our knowledge of the national market and contacts are much better than those of any major investment bank."
Likewise, Hexagon Capital is more expensive than other local players.
"But we are cheaper than London-based investment banks," Nowakowski said. "In return, we offer more services and propose strategic and financial concepts that may lead to shareholder value enhancement."
Hexagon Capital deals with fundraising transactions of $5 million-$25 million and from $20 million-$50 million when mergers and acquisitions are involved.
"These are usually too small for large investment banks and too large for independent advisers, so we have a perfect niche," Nowakowski said.
