WSG goes hunting for buyer

By Timothy Sifert

Warsaw Software Group (WSG), which provides geographic information systems (GIS), computer aided design (CAD) software and data management systems, is looking to be acquired by a large local systems integrator - probably Prokom or ComputerLand.

"We want to be very close to IT integration companies, such as ComputerLand and Prokom," said Paweł Starzyński, WSG president. "Our software is dedicated to large-scale projects."

Therefore close ties with larger companies are necessary, he added. At present WSG operates as a sub-contractor for large projects - often government related - for which it provides civil engineering software as well as GIS for mapping and planning.

But Starzyński said that the company, which counts roughly 150 customers, has met difficulty in growing its business to better serve large projects through traditional routes such as venture capital financing. He said WSG is in talks with both Prokom and ComputerLand.

"We are like young couples before the wedding," he explained.

However, Starzyński said WSG does not know which company would make the best match. It would depend on which company pursues a business strategy best suited for its GIS and CAD software focus. "We are closely watching the companies," he said, adding that an acquisition would take place by the end of the year.

Michał Michalski, spokesman for ComputerLand, declined to comment specifically on Starzyński's plans.

"ComputerLand is one of the biggest sources of consolidation in the country," Michalski said. "But I couldn't say if we are interested in Warsaw Software Group or any other company."

He pointed out that in the last six years ComputerLand has acquired 20 companies.

Prokom declined to comment on acquisitions.

WSG's Starzyński said the company had pursued other strategies to grow its business.

"Another way is to expand with venture capital: we tried it, it didn't work," he explained.

WSG had received roughly $1.5 million in venture capital financing from Enron's financing arm, which had been a very active investor in the now-bankrupt firm's heyday.

"This was just about three months before there were negative signals coming from Enron," Starzyński said of the day when WSG sealed the deal with the energy company.

Enron's financial disaster has discouraged the company from dipping its oar back in the venture capital market. "I cannot say that it was a financial disaster," he said, but he noted that following the Enron investment he came to an important realization: "We realized that money was not the most important factor."

What's more important, especially for small companies, is technological resources, the kind that WSG could get from larger local players, Starzyński explained.

He said WSG would also not seek more venture capital because, since the tech investment bubble burst, VCs are not so keen on fronting new capital. Instead the investors are focusing on improving the companies in which they already have committed capital, he added.

Until the acquisition prosects become clearer, Starzyński said the company would continue their business strategy, which includes working with customers KGHM and PKN Orlen.