Opinion: Michael Harvey

If private equity activity in the M&A sector is a harbinger of a recovery in confidence, then the 'green shoots' are appearing in the Polish markets, as regional and international private equity funds get out the cheque-book and step gingerly off the fence.

After over a year of inactivity, private equity funds appear to have become tired of waiting for prices to fall, and become more comfortable about economic outlook, as Poland looks increasingly like the only EU country to report positive GDP growth for 2009.

Foreign owned private equity funds have launched two public tenders for strong niche opportunities on the Warsaw Stock Exchange over the past couple of months. London based Advent International launched an opportunistic bid for WSIP, a stalwart in the Polish educational book publishing business, which offers stable sector and strong cash flows on the one hand, and substantial scope for restructuring and growth via multimedia on the other.

Swedish heavyweight, EQT, meanwhile strengthened its portfolio in the medical sector, by launching what was effectively an agreed bid for a true Polish success story, HTL-Strefa, which has built from scratch its position as a world leader in medical lancets.

The developments come after a long period of inactivity, driven by the inability of all concerned to square the circle. A combination of selectivity, concern about valuations, earnings outlook, and non-availability of bank financing meant PE funds were unwilling to close deals that have been 'imminent' for longer than all concerned can remember. On the sell side, owners of better companies dug-in to ride out the hard times and refused to cut a deal at bargain basement prices, while forced sellers of troubled companies found the PE funds unwilling to take the risk.

With the Warsaw Stock Exchange having now bounced strongly off its lows and looking for direction, the re-emergence of the funds comes at a good time, even if the cash being deployed, at c.EUR100-200mn per deal, remains relatively small.

MICHAEL HARVEY IS A DIRECTOR AT IPOPEMA, THE POLISH MEMBER OF CATALYST'S INTERNATIONAL PARTNERSHIP MERGERS ALLIANCE. HE CAN BE CONTACTED EITHER DIRECTLY AT IPOPEMA ON THE NUMBER ABOVE OR VIA THE BUSINESS MANAGER OF MERGERS ALLIANCE, STAS MICHAEL ON +44 207 881 2990.