Seweryn Dąbrowski, Szymon Komorowski Deloitte Poland 21 October 2008

Transcription

1 Attractiveness of Poland for PE and VC investors industries and tax planning opportunities. An overview of growth indicators as well as availability of targets and competition for deals. Seweryn Dąbrowski, Szymon Komorowski Deloitte Poland 21 October 2008 Selected optimization structures for foreign investors Financing of share acquisition debt push-down Share acquisition by Polish entity SPV Merger under the Company Law Code Price Loan Interest Seller Operating income Merger under the Company Law Code -2 -

2 Selected optimisation structures for foreign investors Debt push-down plus step-up Acquisition of shares by SPV, high hidden reserves in the Target Liquidation of Target and simultaneous step-up at Price Loan A Liquidation -3 - Selected optimisation structures for foreign investors Step up (and optional sale) of assets with high hidden reserves Contribution in kind to a transparent Partnership - tax neutral (except from stamp duty and input VAT) Partnership is allowed to increase of initial value of assets to market value If no sale then higher depreciable amount Sale from Partnership is tax neutral After sale - merger of and Partnership or liquidation of Partnership -4 -

3 Economic and Industry Outlook -5- Condition of Polish Consumers In spite of the economic slowdown, the condition of Polish consumers is still based on good fundamentals, and their exposure to credit supply is far smaller than in the EU x monthly income Disposable income as % of GDP [2008, %] 66,0% 62,9% 63,4% 63,9% 64,7% 57,7% 47,0% PL CZ HU UK DE FR ESP Household debt as % of Disposable income [2008, %] 5,6 6,9 6,5 21,8 13,8 10,1 15,8 181,3% 131,7% 114,8% 84,3% 46,7% 57,2% 54,0% Polish consumers have relatively high level of disposable income versus overall GDP, which shows a relatively strong purchasing power Consumer behaviour are therefore an important factor in the economy their attitude to consumption have been driving the growth so far and is expected to soften the cooling Polish consumer is much less exposed to cost of credit than its Western counterparts (both in terms of consumption credits as well as mortgage) An average Polish household could cover its debt with a 6 month income, while a UK one would need almost 2 years. 0 PL CZ Sources: EIU, Deloitte HU UK DE FR ESP -6-

4 Food & Beverage Industry Relatively high level of food expenditure (as % of overall consumption) has been very stable for over 5 years. Market growth was driven by real wages growth, and in spite of slowdown is expected to continue growing, allowing good deals to get attractive IRR. % of overall consumption Food expenditure per capita in Poland [USD] 28% 28% 28% 28% 27% 27% Food expenditure per capita - benchmarks, 2008 [USD] 22% 26% 17% 14% 14% 16% CZ HU EPS DE UK FR Over recent 5 years, the share of food expenditures in overall consumption has been stable on the level of 27-28% Increasing income was in line with food expenditure growth as a joint result of inflation and emergence and expansion of new categories Over the next few years we expect that Polish food expenditures will continue to move towards EU-15 levels while the growth rates would naturally phase out, leading to a gradual decrease in importance of food in the consumption basket Source: EIU, Deloitte -7- Industry Private healthcare has seen some large transactions across recent year. The private market is expected to continue its expansion to new lines of service. CEE in 2007 [USD bn] EU in 2007 [USD bn] % % % % GDP expenditures Private Services* Convergence potential GDP expenditures Private Services* CEE theoretical mid-term potential in 2013 [USD bn] % 200 6% Growth 9x * Defined as health insurance and subscription based private healthcares Source: OECD, EIU, Deloitte GDP expenditures 12.2 Private Services* -8-

5 Construction Industry (1/2) The real estate market is obviously cooling down, but the fundamentals still show space for new development. Good deals on this market will pay off. Residential estate market potential CEE vs. EU-15, 2006 CEE EU-15 +9% +9% +48% +426% Dwellings per 1000 inhabitants Persons per household Avg. living space per person [sqm] Residential debt to GDP [%] Note: Data shown are averages for CEE and EU-15 capitals. Source: UBS Prices and earnings. Commercial estate - office property market potential High growth potential - The office take-up growth rate in CEE is twice as high as in EU % 20.5% 17.8% 8.4% 8.2% 7.2% Source: King Sturge European Office Property Markets CEE 7.6% 6.8% Office take-up growth [%] Avg. vacancy rate [%] EU-15 Lower vacancy rates indicate a shortage of supply and pressure for price increase in CEE. Construction Industry (2/2) Each player in the value chain has a different risk/reward profile, but there are interesting targets in all categories. Watch out for Euro2012 hype, but observe the KSF. Real Estate Developers Construction Companies Building materials producers Key success factors: Real estate and land portfolio Project fit to clients needs Sales channels Key risks: High administrative barriers Rising costs of services and materials High level of land prices Acess to financing Key success factors: Project management, budgeting, and forecasting materials needs Economies of scale and available resources Reliability of subcontractors Key risks: Underbids Possible cash flow instability Costs of building materials and labour Key success factors: Quality of products Energy efficiency and good deal on energy overall Access to raw materials Key risks: Environmental pollution risk Adjusting capacity to meet the demand takes time, making it difficult to decide on CAPEX levels especially for materials that are expensive to transport

6 If you consider making a move Consulting headcount in CEE Szymon Komorowski Manager Strategy & Operations Oliver Murphy Partner Financial Advisory Sławek Krempa Director Tax Advisory Baltic countries 12 people Commercial Due Diligence skomorowski@deloittece.com Financial Due Diligence omurpny@deloittece.com Tax Due Diligence skrempa@deloittece.com Warsaw 314 people Prague 166 people Bratislava 25 people Budapest 11 people Bucharest 25 people Balkans 43 people Sofia 23 people Strategy Consulting Asset Screening Initial Review Early stage commercial work Market analysis (multi-country) Assessment of target s positioning on the market Preliminary CDD (i.e. based on IM or VDD analysis) Due Diligence Modelling and valuation Negotiation and completion Regular CDD: Commercial work pre-completion: CDD in Input to commercial assumptions cooperation with for P&L modelling FDD and TDD Inputs to SPA and earn-out Commercial part structuring (i.e. KPIs) of VDD (when Quantification of upsides and on sell-side) preliminary business plan -11- Contacts Seweryn Dąbrowski Deloitte Poland, Tax, Senior Manager sdabrowski@deloittece.com, +48 (61) Szymon Komorowski Deloitte Poland, Consulting, Manager skomorowski@deloittece.com, +48 (22) Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its Member Firms Deloitte Polska. All rights reserved