Polish firms look beyond domestic market

Despite its strong economic growth, many middle-sized Polish companies appear to be hitting the limits of the domestic market and looking outside their country.
Polish firms look beyond domestic market

(Maria Bninska, Public domain)

Direct investment abroad more than doubled between 2014 and 2016 to EUR5.4bn, according to the United Nations trade agency UNCTAD. While Western companies have been investing heavily in Poland since 1989, recently the FDI in Poland dropped from EUR12.3bn in 2014 to EUR9.5bn in 2016.

Bank Pekao mulls UK expansion

One of the most visible examples of a larger firm looking abroad is Polish Bank Pekao, considering expansion into the UK. The Financial Times reported that the idea is part of a broader plan by the new management of Pekao — which was bought from Italy’s UniCredit by a Polish consortium in 2016 — to internationalize the second-biggest bank in Poland.

The Polish group has hired several bankers with international experience and is considering opening a rep office in London to serve the bank’s corporate and private clients in the UK, the FT reported.

A lot of Poles in the UK transfer money to Poland, so opening an office could make this easier and more efficient for them by bringing the transaction inside one bank

Other examples

Last September, Reserved, a brand owned by LPP, the Polish fashion group, opened a store on Oxford Street, after taking over the building previously occupied by retailer BHS.

Trans Polonia Group (TPG), whose trucks supply a quarter of the fuel delivered by road to filling stations across Poland has decided that to keep expanding it must go West. That means not simply serving foreign clients from a Polish base, but buying a presence abroad. Based near the Baltic port of Gdansk, the group is considering potential targets in Germany, Belgium and the Netherlands with annual turnovers of over EUR50m.

TPG already bought Poland’s biggest fuel trucking company three years ago. Now it wants to expand beyond its domestic business into a more international industry: intermodal transportation of liquid chemicals, which uses tanks that can be loaded between ships, trains and trucks with container cranes.

Another example is household appliance maker Amica, which agreed to buy British kitchen appliance company CDA Group in 2015 for EUR26.5m. “Polish entrepreneurs who have found success in the domestic market have reached certain barriers to further development in Poland and need to think about foreign expansion,” Amica’s deputy CEO Piotr Skubel told Reuters.

Some are moving beyond Europe. Drug maker Adamed Group took a controlling stake in Vietnamese pharmaceutical company Dat Vi Phu last year in one of the biggest investments by a Polish company in southeast Asia. Before that Adamed Group bought four companies in the Czech Republic and Slovakia.

Langendorf, a German truck trailer maker, which Polish rival Wielton bought last year, says its experience has been positive. For many of Polish companies Germany is the ideal destination due to a shared border and the size of the country’s market.

A temptation is to try to move some operations from a German acquisition back to Poland, where average wages were 44 per cent lower in 2016, according to OECD data.

Greenfield over acquisitions

Among the companies listed on the Warsaw Stock Exchange that invest abroad, the most popular entry strategy was through greenfield investments, a Polish central bank, NBP study revealed. This was selected by 83 per cent of the surveyed companies. The acquisition of foreign entities was less popular, but was still used by over 50 per cnet of the surveyed entities. Every third examined company carried out both greenfield investments and acquisitions.

During the last decade, Polish companies have taken over several hundred foreign firms. Many of these transactions were spectacular, as in the case of the acquisitions conducted by Asseco, Maspex, KGHM or Orlen. On the other hand, greenfield investments were implemented by, among others, LPP, Projprzem or Aplisens. These included both investments in a foreign distribution and sales network, as well as investments in manufacturing facilities.

(Maria Bninska, Public domain)

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