PMR Corporate

Ciech S.A is one of

Central Europe’s largest chemicals company, and with revenues expected at over $1.4bn in 2007, it is a major player in some markets.  Major products include soda ash, vacuum salt, fertiliser, sodium silicate, ethyl benzenes, dyes, chrome and phosphorus compounds.  Recent acquisitions include Zachem, Sarzyna and Govora.  With revenues per head in excess of $400K yearly and earnings per share rising fast, it is doing well, at least while the chemicals market is so strong.  Ciech is HQ-ed in Poland, and has interests in Hungary, Romania, Bulgaria Slovakia and

Czech Republic and many other countries. Worth notingEven a dominant regional player like Ciech is not at all large by international standards. Braschem is 50^th on a list of world rankings published this month has revenues of nearly $6 bn.  Central Europe’s largest players are still quite small. When PMR has been doing acquisitions studies for clients we have often found that the largest company in

Central Europe is “too small” to meet the global buyer requirements.  Note how much bigger some better known companies are than Ciech: Sabic of Saudi Arabia is 13 times bigger, Reliance of India has seven times the revenue, and China’s Petrochem’s 2006 revenue is at almost $28bn, though much of their revenue is not from chemicals.

Regional cross border acquisitions complicate the picture for the larger players. Ciech has acquired US Govora of Romania for around 60 mln Euros, and given itself a commanding position in Soda Ash as a result. The worrying conclusion for those international companies that are waiting until target companies get bigger is that it may be too late.  Herbert Stepic, Head of Raifeissen  International, told the Financial Times last week that they looking at acquisitions in

Central Europe. In some countries, there is almost nothing left to buy.

The answer to the “So What?” question,  that should be asked to anyone providing advice and information (like PMR) is as follows. If developing country acquisitions are a priority for your company, you need to relax your “critical mass” assumptions. Find the market leaders and plan how to deal with the consequences if they are “too small”. If you wait until they grow, someone else may get there first.