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| FT REPORT - SLOVAKIA: Local specialists with a dream to become famous |
| Bratislava - London, 20.02.2007 |
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| By Robert Anderson, Financial Times
Published: Feb 20, 2007
Few of Slovakia's old heavy industries remain in local hands and the top exporters today are foreign automotive companies, but two domestic financial groups continue to make waves both at home and, increasingly, abroad. Penta Investments, with €300m in equity, and J&T, which has overtaken it with €430m, dominate the Slovak business scene to an extraordinary and controversial extent. "The concentration of economic power in their hands is too much," says Martin Barto, vice-governor of the central bank.
The two groups are seen as essential partners for foreign bidders in big privatisations and are strong competitors to international private equity groups in both the Czech Republic and Slovakia. Their horizons now spread to the whole of eastern Europe and beyond. "The dream for us is to buy an international business that is famous in global terms, to take over something that is visible to show that we are not just local players," says Patrik Tkac, the "T" in J&T.
Both have their roots in the messy transformation from communism in the early 1990s when shares in state assets were placed in the hands of newly-founded investment funds. Penta and J&T started out as brokers but - helped by good contacts at state banks - soon seized control of investment funds that they asset stripped. "We grew up on Gordon Gekko [from the film Wall Street]," says Mr Tkac.
They grew to dominate the tiny and opaque Slovak market, which foreign investors were then shunning because of former prime minister Vladimir Meciar's authoritarian abuses. After acquiring shares or debt and threatening legal action, they bullied many majority owners into selling out or buying them out at a profit. Even in battles with the state or with foreign investors such as Mol of Hungary or US Steel, they typically came out winners.
They bid aggressively in tenders, discounting risk because of their knowledge of the local environment, and reacting swiftly and flexibly because of their informal management models. Their success inevitably created resentment and rumours. One of then prime minister Mikulas Dzurinda's former coalition partners even accused Penta of being, in effect, the fifth member of his government. When Robert Fico became prime minister, he immediately cancelled privatisations the groups had won, while alleging that one of them had tried to bribe him to step down.
"They are very powerful in Slovakia," says Mr Fico. "If you allow these groups to enter politics, policing and the judicial system where they have no business being, it is very dangerous.
Penta and J&T dismiss such accusations. Marek Dospiva of Penta, the group seen as the most likely target of Mr Fico's attack, says: "If Mr Fico has any evidence, we think he should go to the police."
Penta and J&T are so big now that they can shrug off such irritants. Their extraordinary growth and the maturing of the local market - particularly the increase in transparency and the growing interest from private equity groups - has pushed them to look beyond Slovakia. "We will ensure our position by going to other countries," says Mr Tkac, who plans to soon spend half his time in Moscow.
Both have long been active in the neighbouring Czech market, which was part of the same country until 1993 and therefore shares a similar environment and language. Penta and J&T inherited Czech shares through their investment funds and include Czech partners, so they like to call themselves Czech-Slovak groups. Both say 60 per cent of their assets are in the Czech Republic. Initially the Czech government resisted the Slovak invasion but Penta last year won the privatisation tender for Aero Vodochody, the struggling aerospace company.
Both groups are now looking further afield, to the former communist countries of eastern Europe, though so far their investments are few. J&T, the most active, plans to buy a Russian bank and invest in hotels and property there. In these countries the Slovak financiers can often speak without interpreters, quickly understand the environment, and exploit old communist-era Slavic ties.
Growth has also forced the groups to change the kind of deals they seek. Both now pursue bigger deals, even if they come with smaller margins. Penta in particular is focusing on longer-term restructuring projects, such as ZSNP, the aluminium group, the rump of the old VSZ steel group, and Aero Vodochody. This is helping them shed their reputation as financial sharks and win respect as aggressive cost-cutters.
Both, particularly J&T, are also starting to specialise in certain sectors. "We need to specialise to improve our competitiveness," says Jaroslav Hascak, one of Penta's partners.Penta is focusing on healthcare, betting, utilities and engineering; J&T has chosen property, hotels, energy, and banking.
Their growth is also pushing both Penta and J&T to rethink their management models, though this is still work in progress. J&T's nine partners, who started out as friends, often make investment decisions on the basis of intuition. By contrast, Penta's five partners, most of whom trained as communist diplomats, have always prided themselves on their financial modelling.
Both are becoming more professional but are still reluctant to give up the flexibility of the partnership structure. However, this structure has made it difficult to recruit senior managers or to manage what are now large, diversified groups. "We know it's a completely different story now," says Mr Tkac. "We need to apply standard management practices."
odkaz na stránku
By Robert Anderson, Financial Times
Published: Feb 20, 2007
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Address : Euro-Brew Ltd., Hlboká 22, 917 01 Trnava, Slovakia
Tel. : +421 33 53 418 53, Fax : +421 33 53 418 52, E-mail : info@eurobrew.sk |
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