Czech Republic: a dynamic industrial and technology investment destination

Foreward by Andrew Chilvers

During the past two decades the key nations of Central and Eastern European (CEE) have grown significantly following moves to liberalise their economies. On average Poland, the Czech Republic, Hungary, Bulgaria and Romania, to name a few, increased their per capita GDP by 115% between 2004-2020. Employment was at its lowest ever at a mere 4.6% and productivity levels were catching up with the developed states of the EU.

In CEE countries growth has been the result of several factors such as the prosperity of the traditional industries, competitive exports and foreign investment, as well as the significant inflow of various funds from the EU and others.

However, this growth ground to an abrupt halt last year with the onset of the Covid-19 pandemic. As elsewhere, the pandemic hit the CEE region on several fronts, with disruptions to the regional services sector and global supply chains – this was particularly damaging to those countries with large vehicle manufacturing sectors. Nevertheless, the CEE economies are known for their economic resilience and many believe they are better positioned to cope with the aftermath of the Covid-19 crisis than their West European counterparts.

Indeed, many analysts predict that the next year or so will be only a temporary setback as CEE economies quickly find their feet again. With this gradual re-opening, the economies in the region are forecast to grow by a healthy 4.1% in 2021 from what was a severe 5.1% contraction last year, according to Moody’s Investors Services.

Overall, economic growth is expected to be more robust in the region compared with countries to the West due to the regional economies’ reliance on traditional manufacturing and heavy industry, with less exposure to hospitality and tourism. The collapse of the latter sectors has had devastating effects on countries such as Croatia and Greece but has spared the majority of CEE countries.

Czech Republic: a dynamic industrial and technology investment destination

The growing economic and strategic importance of the CEE region

The world is going through a huge transformation and many of these economic, political, social, cultural and environmental changes indicate considerable global progress. One of the major aspects of this transformation – apart from the Covid-19 pandemic – is the changing balance of political power in the world. Similarly, there’s a growing economic power and strategic importance of emerging markets and developing regions including the CEE region.

Given this worldwide macro-economic situation it is essential for any entrepreneur or investor to choose a suitable local advisor to help orient themselves to local market conditions. This does not refer only to legal and tax issues, but also the local cultural, societal conditions.

The “post-Covid” economic forecasts in the Czech Republic indicate numerous insolvencies/financial shortcomings of well-established mid-sized and larger (industrial) businesses. This naturally creates unique opportunities for (especially foreign) investors to enter the local market.

The legal framework of the Czech Republic is modern and allows easy online access to public registers such as Commercial Register, Land Register and various judicial and non-judicial procedures. Indeed, the Czech judiciary and business databases have been digitalised significantly during the past decade. The same applies to any applications and motions filed with the authorities, enabling 24/7 access.

At Schaffer & Partner we always think outside the box to try to find not only top professional but also business solutions for our clients. Based on the request of our clients we are ready to monitor all available online registers (insolvency register, register of enforcement proceedings, register of auctions etc.) and target suitable investment opportunities such as companies or real estate for sale.

Thanks to our long experience and expertise in the insolvency, M&A and real estate markets of the Czech Republic, we have established close relationships with major insolvency trustees, key local M&A players and real estate developers and entrepreneurs. This strategic position helps us to gain access not only to public offers for solid and profitable investment targets through various databases and registers but also to be able to identify and determine interesting off-market investment opportunities for our clients. Effectively, time is always of the essence when identifying the target and seizing the opportunity.

When considering a cross-border transaction, whether it is an M&A or real estate or any other type of international deals, it is essential to establish close and effective cooperation between domestic professional advisors of the client and local advisors with necessary professional know-how and knowledge of the specifics of the selected local market. Such local advisors include experts and professionals outside Schaffer & Partner team with whom we successfully cooperate regularly.

The Schaffer & Partner team of international lawyers, tax advisors, auditors and accountants have been involved in many important and successful transactions during the past decade. We often serve as an “international advisory hub”, connecting with domestic advisors of the client in one operational team, with one contact person for the clients who manages and oversees multidisciplinary tasks (legal, tax, accounting issues) in all jurisdictions involved. Based on a particular financial model of collaboration agreed with our clients, they always have absolute transparency about the fees/costs and the transaction fee distributed between all advisors as (i) master fee and (ii) individual handling fees charged for necessary professional support from our colleagues in other jurisdictions.

In a typical project, our international clients intend to acquire assets in the Czech Republic. We help them to become oriented on the local market and explain the most effective way of how to achieve their goals. As international investors, they have the same legal assistance in the Czech Republic as domestic investors, so they are allowed to acquire investment targets without any legal restrictions or special requirements.

Once we identify the investment target for our client, we monitor all available resources including non-public ones and discuss with owners of assets or their representatives (insolvency trustees etc.) all necessary financial, legal, administrative and other conditions for the prospective acquisition. If possible, we try to get access to alternative investment opportunities on the market, so our client can choose the best available option. During the transaction we usually manage a multidisciplinary transaction advisory body and “speak the same language” with our clients.

At Schaffer & Partner we are ready to become your proud local advisor and win great deals with you.

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