Knowing the Czech market

COMPETITION on the Czech investment advisory market is harsher than in Slovakia. A detailed knowledge of the local market is therefore a must if you want to gain an advantage.
The Slovak Spectator talked to Martin Kvietik, the chairman of the board of directors of Slavia Capital Prague, about his experience of the Czech market.

CULTURAL familiarity is evident, says Kvietik.
photo: Courtesy of Slavia Capital

COMPETITION on the Czech investment advisory market is harsher than in Slovakia. A detailed knowledge of the local market is therefore a must if you want to gain an advantage.

The Slovak Spectator talked to Martin Kvietik, the chairman of the board of directors of Slavia Capital Prague, about his experience of the Czech market.

The Slovak Spectator (TSS): Since when have you been operating in the Czech Republic? What's been the focus of your activities there?

Martin Kvietik (MK): The Slavia Capital group has been operating in the Czech market since 1995. In 2002 it established its daughter company - Slavia Capital Prague as a joint stock company. Currently its share capital represents Sk2 million (€50,000).

Last year, Slavia Capital Prague achieved profits of Čk1.86 million (€60,000). Investment advisory, private equity, corporate finance and real estate are its core activities.

TSS: Which of the projects in the Czech Republic do you consider the most important?

MK: From 1997 to 2003, the Slavia Capital group was an advisor in 20 mergers and acquisitions in Slovakia and the Czech Republic. The volume of these transactions exceeded $1.6 billion (€1.47 billion).

On the Czech market we were advisors, for example, in the sale of a strategic 98.96 percent share of Vítkovice Steel, as well as a 48.4 percent share of Škoda Holding. Advisory in the sale of shares of Unipetrol was also an interesting project last year. We were successful as advisors in deals for debts where we cooperated with renowned foreign financial groups.

TSS: The main privatisation projects in the Czech Republic and Slovakia where your company has been involved have already been completed. What activities are you currently focused on and what do you plan to do in the future?

MK: It is true that we participated as consultants in the privatisation of several Slovak and Czech companies previously fully or partially owned by the state. One of the biggest deals was the sale of Slovenské telekomunikácie [today Slovak Telecom]. This year we were an advisor to Czech power producer ČEZ that was interested in purchasing power producer Slovenské elektrárne.

Apart from privatisation advisory, we are focused on investments in the share capital of firms, asset management, and real estate, and we help companies with the financing of their activities. On the Czech market we would like to develop the field of private equity, mainly.

TSS: What is characteristic of your market segment in the Czech Republic compared to Slovakia, would you say? Is there greater competition, more requirements?

MK: We have wholly corporate clients in the Czech market. We cooperate there with partner financial institutions like JP Morgan. Apart from that, Česká konsolidačná agentúra bailout company was also our client.

The competition in advisory and investments is generally very high in Prague. Our big advantage is a thorough knowledge of local market, legislation regulations and tax system.

TSS: What is your opinion about the quality of the business environment in the Czech Republic compared to Slovakia? What advantages are there in the Czech market and what in Slovakia?

MK: Every market has its specific qualities. The Czech market can be praised for its greater absorbing ability and more sophisticated company culture. On the other hand, Slovakia has a better tax system and there have been some improvements in labour law.

TSS: Investors are attracted to Slovakia thanks mainly to lower costs and cheaper labour. Although wages in the Czech Republic are higher, it is still interesting for investors. What is attractive in the Czech Republic for investors? What is your forecast for the future?

MK: Historically, investors know the Czech Republic more. It is fixed in the minds of foreign entrepreneurs. The country offers stability and it is geographically closer to western Europe. Government agency Czech Invest is making a great effort to provide potential investors with complex services of a high quality.

The advantages of Slovakia stem from its attractive and transparent tax system, flexible labour law as well as strategic location in the region. Provided the current trend remains the same, we suppose that the volume of investment will grow in favour of Slovakia.

TSS: Does the fact that the Czech Republic and Slovakia were once one country help you in your operation in the Czech Republic?

MK: Yes, it does. Apart from language similarity, it is mainly working and personal contacts. Cultural and psychological familiarity is evident.

TSS: What about the expansion of Slavia Capital to other countries of central and eastern Europe? What activities do you want to focus on in these countries?

MK:This year we announced our accession to the Hungarian and Polish markets as well. We want to become a leader in mergers and acquisitions and develop our business in private equity, real estate, and be helpful to companies in financing their activities. We see large potential in energy, food, chemical, agricultural, machine industry, and in the environment.

TSS: Which market do you currently consider to be the biggest challenge?

MK: The new members of the EU are the big challenge for investors from the EU15. That is why we actively operate in these markets too. We consider the Balkan countries to have good prospects, given positive political developments. From the point of view of asset management, American stock exchanges are still interesting for us.

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