Bbj 2423

SPECIAL REPORT:

rt 3Special Repo

BBJ

Deals of the Year 2016

State activity less visible

on Hungary’s M&A market

Having survived a few hazy years after the global financial crisis hit Hungary, the country’s M&A market is now showing a stable recovery pace.

But while investors previously favored IT and the banking sectors before, this year they focused more on the manufacturing sector.

The dominance of domestic transactions continued in 2016.

& McKenzie Capital Association, Baker and M27 Absolvo. on the market, Sellers will also be active is among and the fact that Hungary targets of the the top three investment local companies. region is good news for is that Hungary Also worth mentioning country in the is the most attractive to venture capital region when it comes VC investments investments: 30% of all Therefore were realized in Hungary.place in the take several exits will likely the supply and future, strengthening on a market thus generating competition enterprises now where several thousand face the problem of succession.

Most important transactions

of

the year Group retail senior vice president, 30 issue. stations. Lars Höglund, MOL MOL snaps up Agipʼs filling the move in an interview with the BBJ in our September startup IBM bites into Hungarian a large-scale explained the rational behind The year kicked off with In order Banks relieved international IT transaction: of venture capital to Simonyi, it is a significant to expand its cloud-based computing any significant number half of the year. According year banks IBM purchased investments in the second continue to achievement that during the real services portfolio, cleansed their commercial loan Ustream, a seller of video streaming Domestic transactions and this hasn’t have non-performing deal valued at USD 130 dominate the M&A market, Erste services, in a years, says Dezse; estate-backed

by Hungary’s Gyula by selling them to funds. changed for the past six the target and portfolios disposed of its non-performing million. Co-funded Francisco, has in 56% of the deals both Ustream is based in San entities. The most Bank is an important Fehér, ZSÓFIA CZIFRA employees in January. buyer were Hungarian mortgage portfolio, which be and had about 300 origin of inbound investments transaction. Should there the had got back to its frequent USA, Germany, Czech Republic landmark some of acquires Hungary’s M&A market viable demand for credit, South African company 2015 and is now at includes to lend more. easier it find feet again by the end of Italy. nutrition firm will and banks market saw a stable Simonyi thinks Hungarian VII) managed its pre-crisis level. The As for the whole year, private equity fund (PEF the estimated together the market is not A first six months this year, less visible that while the value of Polish Enterprise Investors,(including by 9% in terms of State dominance total, the number by market size increased likely to reach last year’s with its minority co-investorsInvestment half year of 2015 state’s activity decreased of deals might be higher in 2016. “State Alternative value versus the first Hungarian The Stanley year Morgan first in the second half in a less a 100% stake in and by 21% versus the the Hungarian M&A market previous dominance will continue, albeit Partners) agreed to sell to months in 2016, on he summarized. of the year, compared of 2015. In the first six Scitec Nutrition, to Ascendis while in the visible fashion,” and published in half on the market Hungary’s South African publicly listed It is worth noting that 64 deals were disclosed “The lively activity seen Health, a rather on the decrease compared years. company in May. year continued through Hungary, which is a 9% three years the state was as the in the first half of 2016, and for the health and care brands EUR 170 mln. first half year of last side, in this case it appeared with H1 2015. Since the the deal was the second half expect The value of were closed, this buyer’s days of this year, we 2011, when 69 deals active period, in seller. an important remaining deals to be has been the third most Swiss biotech firm “The state continues being market, but closures; there are several publicly disclosed seller and Richter buys company of the domestic M&A terms of the number of at PwC too, both on the Hungarian pharmaceutical company available M&A player years in mind, we closed Apáthy from the PwC Swiss biotech transactions, the latest even with the past few Dezse the buyer side,” of the Richter acquired 194 barometer by EY reveals. manufacturing wouldn’t call that role dominant,” certain told the BBJ. He added that some 2017. Finox Holding for CHF 190 mln (USD are in only be realized in Unlike in previous years, in Hungary, opined, adding that there expanding its presence activity is deals might Apáthy, foreign buyers are mln) in June, deal gives however, where state was the most active industry European markets. The According to technology sector sectors,outstanding. female of the current major Finox’s effect for “The rights ahead of the IT and back. the Richter global for many years. rather difficult to assess the role of coming in all markets upgrades, together with that has led the market It is infertility medicine Bemfola market, [credit rating] study, in the first judgment of Hungary, United States. With the state on the transactions According to the EY Big4 somewhat softening more apart from the occurred in this the will be Simonyi, director at anotherThere is significant. We expect an even half of the year, 11 deals the Hungarian drug maker biggest deals in the same Tamás on the market deal, told the BBJ. on its sector compared to eight sector company, KPMG, able to reduce its reliance in Ukraine, owned spectacular accelerationsaid. also where, while a privately period in 2015. The manufacturing next year,” Apáthy market, Russia, and deals in terms are deals the buyer, it is from economic crisis. was dominated by strategic and foreign company plays the role of which has been hit by an has very known that the company of volume of transactions up Germany and Italy, widelyrelations with the government, which Competition to pick investors, mainly from haulage company good a Hungarian is this transactions.

11 experts expect a livening it hard to decide whether performed six out of the Simonyi As for the future, strengthening supply on head retires yet ended, and makes Europa Partners a market transaction, Although the year hasn’t Private equity firm Mid the competition and are at hand, state or year. Although there has acquired Waberer’s International Nyrt.

As an example, he mentioned therefore no exact figures many the market next of already published said.

György Wáberer media market where in the first three-quarters based on transactions from its founder, from market Hungarian outlets are now, as a result been a setback boom a Europa feedback expect to Mid and investors the deal, and according the media that the mergers of took place in 2016, experts period, as a great amount in June. With from 56.8% to 97.1% in players, EY forecasts several acquisitions that hands of in the coming is seeking its final target. increased its stake will see a weaker of announced one or two years, in the and acquisition market capital company. Wáberer also a strong first the past friendly terms of liquid stock exchange the second half year after closing and head companies said to be on Companies listed on the his retirement. partner equity firms have a pressure the current administration. half, Margaret Dezse, services at the with acquisitions or private a good amount of deals are sold of transaction advisory As strategically important MKB-Euroleasing Autópark100% of the Apáthy, to grow, so Budapest Business acquired already taken place, Ervin thinks expected in this area as well, as concluded Big4 company told the by the ALD Automotive her, this is mainly have of corporate finance at PwC conference organized Journal. According to Hungarian fleet management investment period director state and state-owned companies at a recent Private Equity and Venture shares of the due to the fact that the the Hungarian side. has closed, and that for the JEREMIE funds be less active on the buyer’s information about will that there is thus far no

DEALS OF THE YEAR

BUSINESS JOURNAL BUDAPEST

VOL. 24. NUMBER 23

DECEMBER 9, 2016 – JANUARY 12, 2017

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

HUF 1,250 | €5 | $6 | £3.5

Content still king

Happy Holidays!

The Budapest Business Journal would like to wish all our readers, advertisers and partners a Happy Christmas and a peaceful, prosperous New Year.

BUSINESS

Keeping it in the family The sixth generation of his family to to run the Unicum empire, Sándor Zwack discusses how you keep a 225-year-old product relevant, and the need to balance “Tradition and Innovation”. 10

NEWS

Better luck next year, analysits hope

Photo: Tímea Izsó - ITPhoto

Eight months after Radu Florescu, a pioneer of the Romanian advertising market, brought Centrade-Cheil to Hungary, he says he is looking to “shake things up”.12 SPECIAL REPORT

BBJ_2423_news.indd 1

NEWS

The latest GDP data was better than previously calculated, but this year’s growth will likely reach just 2%. Analysts expect the economy to speed up next year, but industry still lags behind. 3

SOCIALITE

State activity less visible on M&A market

The German take on the economy

Celebrating a Hungarian Christmas

Hungary’s M&A market is now showing a stable recovery pace. But while investors previously favored IT and the banking sectors, this year they focused more on the manufacturing sector. 20

German-Hungarian Chamber of Commerce and Industry official says closer cooperation and better communications are needed between Berlin and the Visegrad Four countries. 4

Our resident English writer abroad is about to celebrate his second Christmas in Hungary and finds himself charmed and looking forward to it in a way he hasn’t since he was a child in the U.K. 26

2016. 12. 07. 23:10

www.bbj.hu

Budapest Business Journal | December 9, 2016 – January 12, 2017

SPECIAL REPORT:

3Special Report

BBJ

Deals of the Year 2016

State activity less visible

on Hungary’s M&A market

Having survived a few hazy years after the global financial crisis hit Hungary, the country’s M&A market is now showing a stable recovery pace.

But while investors previously favored IT and the banking sectors before, this year they focused more on the manufacturing sector.

The dominance of domestic transactions continued in 2016.

& McKenzie Capital Association, Baker and M27 Absolvo. on the market, Sellers will also be active is among and the fact that Hungary targets of the the top three investment local companies. region is good news for is that Hungary Also worth mentioning country in the is the most attractive to venture capital region when it comes VC investments investments: 30% of all Therefore were realized in Hungary.place in the take several exits will likely the supply and future, strengthening on a market thus generating competition enterprises now where several thousand face the problem of succession.

Most important transactions

of

the year Group retail senior vice president, 30 issue. stations. Lars Höglund, MOL MOL snaps up Agipʼs filling the move in an interview with the BBJ in our September startup IBM bites into Hungarian a large-scale explained the rational behind The year kicked off with In order Banks relieved international IT transaction: of venture capital to Simonyi, it is a significant to expand its cloud-based computing any significant number half of the year. According year banks IBM purchased investments in the second continue to achievement that during the real services portfolio, Domestic transactions cleansed their commercial loan Ustream, a seller of video streaming and this hasn’t have non-performing deal valued at USD 130 dominate the M&A market, Erste services, in a years, says Dezse; estate-backed

by Hungary’s Gyula by selling them to funds. changed for the past six the target and portfolios disposed of its non-performing million. Co-funded Francisco, has in 56% of the deals both Ustream is based in San entities. The most Bank is an important Fehér, ZSÓFIA CZIFRA employees in January. buyer were Hungarian mortgage portfolio, which be and had about 300 origin of inbound investments transaction. Should there the had got back to its frequent USA, Germany, Czech Republic landmark some of acquires Hungary’s M&A market viable demand for credit, South African company 2015 and is now at includes to lend more. feet again by the end of Italy. nutrition firm banks will find it easier market saw a stable and Simonyi thinks Hungarian VII) managed its pre-crisis level. The As for the whole year, private equity fund (PEF the estimated together the market is not A first six months this year, less visible that while the value of

by Polish Enterprise Investors, by 9% in terms of State dominance last year’s total, the number with its minority co-investors (including market size increased decreased likely to reach “State half year of 2015 value versus the first Hungarian state’s activity in the first of deals might be higher in 2016. less Morgan Stanley Alternative Investment second half year The in a a 100% stake in and by 21% versus the the Hungarian M&A market previous dominance will continue, albeit Partners) agreed to sell to months in 2016, on he summarized. of the year, compared of 2015. In the first six Scitec Nutrition, to Ascendis while in the visible fashion,” and published in half on the market Hungary’s South African publicly listed It is worth noting that 64 deals were disclosed “The lively activity seen Health, a rather on the decrease compared years. company in May. year continued through Hungary, which is a 9% three years the state was as the in the first half of 2016, and for the health and care brands EUR 170 mln. first half year of last side, in this case it appeared with H1 2015. Since the the deal was the second half expect The value of were closed, this buyer’s days of this year, we 2011, when 69 deals active period, in seller. an important remaining deals to be has been the third most Swiss biotech firm “The state continues being market, but closures; there are several publicly disclosed seller and Richter buys company of the domestic M&A terms of the number of at PwC too, both on the Hungarian pharmaceutical company available M&A player years in mind, we closed biotech Apáthy from the PwC transactions, the latest even with the past few Dezse the buyer side,” added that some of the Richter acquired Swiss190 mln (USD 194 call that role dominant,” for CHF barometer by EY reveals.

BBJ. He 2017. Finox Holding manufacturing wouldn’t are certain told the in only be realized in Unlike in previous years, in Hungary, opined, adding that there expanding its presence activity is deals might Apáthy, foreign buyers are mln) in June, however, where state markets. The deal gives was the most active industry According to current major European technology sector sectors,outstanding. for Finox’s female ahead of the IT and back. “The effect of the the Richter global rights for many years. rather difficult to assess the role of coming in all markets upgrades, together with that has led the market It is infertility medicine Bemfola market, [credit rating] study, in the first judgment of Hungary, United States. With the state on the transactions According to the EY Big4 somewhat softening more apart from the occurred in this the will be Simonyi, director at anotherThere is significant. We expect an even half of the year, 11 deals the Hungarian drug maker biggest deals in the same Tamás on the market deal, told the BBJ. on its sector compared to eight sector company, KPMG, able to reduce its reliance in Ukraine, owned spectacular accelerationsaid. also where, while a privately period in 2015. The manufacturing next year,” Apáthy market, Russia, and deals in terms are deals the buyer, it is from economic crisis. was dominated by strategic and foreign company plays the role of which has been hit by an has very known that the company of volume of transactions up Germany and Italy, widelyrelations with the government, which Competition to pick investors, mainly from good Hungarian haulage company this is a 11 transactions. experts expect a livening it hard to decide whether performed six out of the Simonyi As for the future, strengthening supply on head retires yet ended, and makes Europa Partners a market transaction, Although the year hasn’t Private equity firm Mid the competition and are at hand, state or year. Although there has acquired Waberer’s International Nyrt.

As an example, he mentioned therefore no exact figures many the market next of already published said.

György Wáberer media market where in the first three-quarters based on transactions from market Hungarian as a result been a setbackand investors expect a boom from its founder, deal, Mid Europa the and according to feedback the mergers of the media outlets are now, that took place in 2016, experts period, as a great amount in June. With from 56.8% to 97.1% in players, EY forecasts several acquisitions that hands of in the coming is seeking its final target. increased its stake will see a weaker of announced one or two years, in the and acquisition market capital company. Wáberer also a strong first the past friendly terms of liquid stock exchange the second half year after closing and head companies said to be on Companies listed on the his retirement. partner equity firms have a pressure the current administration. half, Margaret Dezse, services at the with acquisitions or private a good amount of deals are sold of transaction advisory As strategically important MKB-Euroleasing Autópark100% of the Apáthy, to grow, so Budapest Business acquired already taken place, Ervin thinks expected in this area as well, as concluded Big4 company told the by the ALD Automotive her, this is mainly have of corporate finance at PwC conference organized Journal. According to Hungarian fleet management investment period director state and state-owned companies at a recent Private Equity and Venture shares of the due to the fact that the the Hungarian side. has closed, and that for the JEREMIE funds be less active on the buyer’s information about will that there is thus far no

DEALS OF THE YEAR

BUSINESS JOURNAL BUDAPEST

VOL. 24. NUMBER 23

DECEMBER 9, 2016 – JANUARY 12, 2016

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

HUF 1,250 | €5 | $6 | £3.5

Content still king

Happy Holidays!

The Budapest Business Journal would like to wish all our readers, advertisers and partners a Happy Christmas and a peaceful, prosperous New Year.

SUBSCRIPTIONS

Call +36 1 398-0344, or email circulation@bbj.hu Budapest Business Journal 1 year HUF 27,500+VAT 6 months HUF 13,750+VAT 3 months HUF 6,875+VAT

BUSINESS

Keeping it in the family The sixth generation of his family to to run the Unicum empire, Sándor Zwack discusses how you keep a 225-year-old product relevant, and the need to balance “Tradition and Innovation”. 10

NEWS

Better luck next year, analysits hope

Photo: Tímea Izsó - ITPhoto

Eight months after Radu Florescu, a pioneer of the Romanian advertising market, brought Centrade-Cheil to Hungary, he says he is looking to “shake things up”.12 SPECIAL REPORT

NEWS

The latest GDP data was better than previously calculated, but this year’s growth will likely reach just 2%. Analysts expect the economy to speed up next year, but industry still lags behind. 3

SOCIALITE

State activity less visible on M&A market

The German take on the economy

Celebrating a Hungarian Christmas

Hungary’s M&A market is now showing a stable recovery pace. But while investors previously favored IT and the banking sectors, this year they focused more on the manufacturing sector. 20

German-Hungarian Chamber of Commerce and Industry official says closer cooperation and better communications are needed between Berlin and the Visegrad Four countries. 4

Our resident English writer abroad is about to celebrate his second Christmas in Hungary and finds himself charmed and looking forward to it in a way he hasn’t since he was a child in the U.K. 26

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ACTING EDITOR-IN-CHIEF: Robin Marshall NEWS EDITOR: Christian Keszthelyi EDITORIAL STAFF:

Zsófia Czifra, David Holzer, Levente Hörömpöli-Tóth, Gary J. Morrell, Claudia Patricolo, Mátyás Pödőr, Rob Smyth, Ágnes Vinkovits LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

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THE PUBLISHER SAYS

The message and the medium “So this is Christmas,” to quote that great poet John Lennon, “and what have you done?”

OK, so technically we are only half way through Advent, but you get the point. Another year has flown by. A new one is just around the corner. Those companies whose fiscal year matches the calendar year will already have all but have finished their business plans by now, but even those who follow the tax year often use this period to reassess targets and priorities.

Part of that process, naturally enough, involves how a business reaches out to its customers, which media it will use, and this issue includes something of a common theme on that front. In two major interviews, conducted entirely independently of each other, Radu Florescu, a pioneer of the Romanian ad agency scene who has brought his company, Centrade-Cheil, to Hungary, and Sándor Zwack, the chairman of Zwack Unicum Nyrt., discuss a fundamental change in the way people consume their information.

Specifically, they talk about how the 18-20 somethings can’t be reached through television anymore because they no longer watch it. For them YouTube and Snapchat and Facebook are king, and that is where the advertisers need to be. But not just there. Zwack says TV is still the most cost-effective way of reaching the greatest mass of people. Florescu agrees with that, but says you can’t really tell how effective it is. And in any case, that key younger demographic will still be missed.

There is nothing particularly new in any of this.

Conversations with local agency heads over the past several years have indicated they are spending ever more time thinking about things like guerrilla marketing and making the customer interaction more personal.

What is new is the speed with which this is gaining weight. (Incidently, one part of the Zwack interview we could not include was how highly he rates the creativity and expertise of local ad agencies, and not just for budgetary reasons. There really is no need to seek out addresses in Soho of London or Madison Avenue in NYC anymore, he insists.)

If it is true that no one-stop solution will fit all comers, it is equally true that there is no one-stop solution at all in this case. But as another of our contributors, Brunó Bitter, adjunct senior lecturer of marketing at CEU Business School, makes clear, the challenge for the future is to take the multichannel approach and effectively make it omnichannel, part of a coherent story-telling whole.

But that is the challenge for 2017 and beyond. Right now I only have this medium at my fingertips, so let me use it to wish you a happy and peaceful Advent, Christmas and holiday season, and to wish all of us a profitable and prosperous – in all senses of the word – New Year. Boldog karácsonyt, as they say in this part of the world.

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Vörösmarty tér (square) in the heart of Budapest is hosting its annual Christmas Fair for 18th time this year, and as ever is attracting hordes of tourists. On the first day of this year’s fair passers-by pose in front of the tree set in the square; the black and white photo shows people walking through Váci the utca shopping street, towards an empty square, but for the tree, in 1985.

2016. 12. 07. 23:11

1 News BBJ

macroscope

NEWS

Productivity and wages: challenges ahead

4

NEWS

'Loss of direction' contributing to labor shortage

5

All eyes on next year’s growth

The latest GDP data turned out to be better than previously calculated, but this year’s growth will likely reach just 2%. Analysts expect the economy to speed up next year, but industry, which gives a good portion of the GDP, still lags behind.

most significant of the sub-sections with relatively large weight. Within industry, the performance of nonindustrial activities rose as well, according to KSH. On the consumption side, the contribution by households was smaller this time, but it remained the strongest fundamental factor. The performance of the construction sector, which has halted growth this year, continued to fall away; it was down by 12% in the third-quarter.

Civil engineering fell most within the sector. The value added of agriculture was up by 21%.

All of the above show that the momentum of economic growth did not continue in to October, so the government’s expectations of an approximately 3% growth for this year will probably not be met; what is more, it could even come in below 2%.

ZSÓFIA CZIFRA

Hungary’s gross domestic product grew by 1.6% year on year and by 0.3% quarter on quarter in July-September 2016, the Central Statistics Office (KSH) reported on Tuesday. According to the second estimate figures, y.o.y. GDP growth was 0.2 percentage point higher than the preliminary reading.

The detailed release by the KSH reveals the structure of the economy: while the main contributor to growth was agriculture, the services sector, which had been seen as another strong segment, showed some slowdown from Q2, although it was still one of the main drivers. The value added of industry grew by 0.8%, within which the value added of manufacturing rose by 0.7% compared to the same period of the previous year. Within manufacturing it was the growth in the making of computer, electronic and optical products that was the

Industry and retail have seen better days

Hungary's Minister for National Economy Mihály Varga delivering a speech at a ceremony awarding successful businesses in his ministry on December 2. He still has faith the economy will grow strongly next year.

(Photo: MTI/Noémi Bruzák)

Freshly published industrial output and retail sales figures might also undermine the government growth expectations for this year. The KSH also published its first reading of October’s industrial performance. Figures show that output had declined for the second consecutive month, falling 2.1% from October 2015, after it fell back 3.7% in September, also on a yearly basis.

As Volkswagen AG plans to temporarily reduce shifts at its Audi factory in Győr from three a day down to two, “it might be difficult to reach even an average industrial production expansion of 1.5% this year”, ING economist Péter Virovácz said. Auto production and associated components account for the biggest

share of Hungary’s industrial output, representing a 30% stake.

In addition, October retail sales grew at their slowest pace since January. The volume of sales in retail shops, according to both raw and calendar-adjusted data, grew by 2.6% y.o.y. in October 2016. The growth rate is surprisingly low; in fact, it is the lowest we have seen over the last two years, bar this January. Analysts, however, say that consumption could pick up in the coming months, as real wages have risen fast this year, and wage growth will be even more accentuated as a result of the hike to the minimum wage and the reduction of employers’ contributions.

Growth to pick up next year The government sees economic expansion picking up speed in 2017.

“Growth is expected to be back up with the government’s housing incentives, wage hikes and payroll tax cuts in the next six years and a pick-up in the absorption of EU funds,” the government said in a statement. Analysts agree: Gergely Ürmössy, head analyst at Erste Bank, raised growth projections for next year to 3.4% from the previous 2.8% – while maintaining its 2.1% forecast for this year.

Less optimistic is ING’s Virovácz, who expects 1.8% growth for the fourthquarter of 2016 and a little below 2% for the full year. However, he emphasized that this is only temporary; next year is likely to see an expansion of above 3%.

Hungary’s economy minister Mihály Varga is even more optimistic: in a recent interview published in weekly Figyelő, he said he expected the country’s gross domestic product to grow by about 4% in 2017. Next year’s budget was passed with a 3.1% growth projection.

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BBJ_2423_news.indd 3

2016. 12. 07. 23:11

www.bbj.hu

04 News

Budapest Business Journal | December 9, 2016 – January 12, 2017

Productivity and wages: challenges ahead New winds blow worldwide and so unusual sailing techniques are needed.

A conclusion of the Prosperity Forum 2016, jointly held by the German-Hungarian Chamber of Commerce and Industry (DUIHK) and the Hungarian Investment Promotion Agency (HIPA), was that while Germany adapts Róbert Ésik, president of HIPA. to the changes rather Cooperation is increasingly important than welcoming them, especially in times of shocking changes.

Hungary is shedding no Brexit, described by Treier as a “heavy strike on the German economy”, or the victory of tears over the passing Donald J. Trump in the U.S. Presidential elections were both unexpected. of past political and economic routines. Yet, End of political correctness both countries are ready There seems to be no debate about to implement changes whether we live in exceptional times or not. “The period of political correctness in order to increase is over and the new style crumbles the previous,” said Minister of Foreign Affairs productivity. and Trade Péter Szijjártó in his short yet ÁGNES VINKOVITS

“Flying from Paraguay, I could make it to the conference in time only because I took Swissair instead of Lufthansa,” said Dr. Volker Treier, deputy managing director of DUIHK, giving a humorous upbeat opening to the Prosperity Forum 2016.

The event was held on November 24, the second day of a strike at Lufthansa that grounded thousands of flights, but Treier’s initial words proved a good departure for an afternoon that was mainly dedicated to the issues of workforce, wages and economic growth in a perilously changing environment.

“I do not want to complain but the world economy does not work out as expected,” Treier said, pointing out that some global figures are even worse than before the crisis. Still, Germany is “remarkably stable”, but, “we cannot be overconfident”, he stressed.

The German economy currently relies on the construction sector and domestic consumption. Yet, there is little reason for optimism since, when it comes to export prospects, German companies’ expectations are below the EU average, and have never been so low, except in 2009.

As both are dependent on exports, Hungary and Germany walk in same shoes. According to Treier, a closer cooperation and better communication between Berlin and the Visegrad Four countries (Hungary, Czech Republic, Poland and Slovakia) is necessary. “We share the same values,” he said.

BBJ_2423_news.indd 4

substantive speech, adding: “This change is not necessarily against our interests.”

According to him, new challenges should not frighten Hungary, as six years ago its economy had already managed to come back from the edge of a cliff, though it took solutions very far from the European political mainstream. Yet, the country successfully broke a previously undoubted dogma, namely that growth, budgetary discipline and a decrease in unemployment cannot happen at the same time. “We have proven that there is no need to choose, and by now we are part of the solution instead of being part of the problem.”

The country achieved all this success while surrounded by “skepticism, wailing and Brusselsʼ attacks”, Szijjártó said, stressing that finally everyone had to acknowledge the Hungarian results.

“This is all good and nice but now we face new challenges,” he stressed. The dogma Hungary is about to gloriously disprove this time says that salaries and productivity cannot increase simultaneously.

Hungary would prove that both aims are achievable simultaneously, the minister insisted.

To do so, “the state investmentpromotion will face fundamental changes from next year”, he said. When applying for non-refundable budget support, companies’ technological developments and added value will have even heavier weight than the number of new workplaces the investment would create. At the same time, the government is also ready to support technological developments in order to keep the existing workforce, he added. A new program to support R&D

Photos: Károly Horváth / HIPA

Péter Szijjártó, Minister of Foreign Affairs & Trade.

Dr. Volker Treier, DUIHK.

projects will be launched and will also cover Budapest.

Significant tax cuts must be among the major tools, too, since budget support and infrastructure are not the major factors anymore when deciding on investment locations but, according to Szijjártó, corporate tax and workforce play a bigger role. He believes that the newly announced 9% corporate tax will make Hungary the most attractive investment destination in the EU, while the lower tax burdens will also enable higher salaries.

higher salaries and more significant IT developments.

Due to the high mobility of the labor market within the EU, increasing wages is a must – not to mention the possible political consequences of unsatisfied masses, Virág added, referring to Brexit and Trump. At the same time, automatization will close off a lot of workplaces, which makes a new labor market strategy even more necessary. As such, the education system also has to adapt. New competencies will be needed and creativity will become one of the most important skills.

Local chances Szijjártó is already happy with this year’s numbers provided by HIPA. By October, the agency has put across 64 agreements, amounting up to EUR 3.2 billion and creating 16,000 new workplaces, which means it has already exceeded its 2015 record performance of EUR 1.4 bln in investments and 13,000 new jobs.

Still, there is always room for improvement. “The more international companies settle in Hungary, the more international firms increase their capacity in Hungary, the more beneficial it becomes for the local SMEs,” Szijjártó pointed out. The government is determined to support small companies in becoming part of the supplier chain of the bigger players, he added.

To increase competitiveness while keeping the Hungarian workforce within the borders the government recently announced a rise in minimum wages, as well as that reduction in corporate tax. These steps allow “the period of the higher salary to come in Hungary”, Szijjártó said at the end of his speech.

Good background The National Bank of Hungary (MNB) shares the idea that increasing the country’s productivity has to be the next step. According to Barnabás Virág, executive director at MNB, a new approach could bring an opportunity not only for Hungary to catch up, but also the entire region.

“High-pressure economy” seems to be the new keyword, a concept that manages labor market issues through

Passion and prospects In the podium discussion, Péter Ákos Bod, an economist and professor at Corvinus University Budapest, hit a different tone to Szijjártó and Virág. “A politician and a central banker should be optimistic indeed, it is included in their salaries, but let an academic man be realistic,” he said adding that Hungary hasn’t got much to be proud of when it comes to productivity.

Dr. László Parragh, the president of the Hungarian Chamber of Commerce quickly replied that he is also optimistic, even though he is not paid to be so. Also, “it might be a better idea to avoid such statements at an event aiming to attract investments”, he added.

Parragh, while acknowledging the achievements of the past years, would rather emphasize the role of education.

He pointed out that while approximately three million people work in the Hungarian public sector, even the most modest estimations mention at least 300,000 Hungarians working abroad.

On top of everything, “these people are probably our smartest and most capable ones”. Knowledge and economy have to be connected, he said. “Hungary should not be a good investment destination because its workforce is cheap, but because it is good.”

Róbert Ésik, the president of HIPA also believes in the ongoing benefits of cooperation between Germany and Hungary: every third new job in Hungary is created by a German company, he said.

2016. 12. 07. 23:11

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Budapest Business Journal | December 9, 2016 – January 12, 2017

‘Loss of direction’ contributing to labor shortage

Industry and academia have come together for a major survey into Hungary’s labor shortage and staff retention patterns.

BBJ STAFF

The study was undertaken by Pivot Human Capital, a Budaörs-based company providing management services such as executive recruitment, consultancy, and communication and the Management and Human Resources Research Center of Gödöllő’s Szent István University, and based on an online questionnaire called “The shortage of skilled professionals and retention of manpower in key positions 2016”. The research was conducted in the second quarter of 2016 and was professionally supported by the American Chamber of Commerce in Hungary (AmCham), the Budapest Chamber of Commerce and Industry, and the National Association of Human Experts. The online questionnaire was completed by 328 HR experts and CEOs. In October 2016, AmCham organized a professional workshop to discuss the study results with the chamber’s HR Committee and Talent Policy Task Force members, and members of the research team. Participants of the workshop agreed, beyond well-known reasons, a new social phenomenon was also contributing to the acute labor shortage.

This is described as part of a general loss of direction: “We are looking for each other, but we do not actually meet”. Participants of the workshop all agreed improvements to the education and vocational system are crucial to solveing the problems of the labor market.

Depending on the scope of their activities between half and one-third of the companies answering the questionnaire said they are struggling with fluctuation exceeding 5%, though this is not uniform across all job titles. Executive and mid-level workforce fluctuation is not considerable, at 5% or less. In the case of sales jobs, 77% of data providers reported fluctuation under 5%. Among jobs requiring higher education,

Most difficult positions to fill (selected jobs) IT specialist engineer quality assurance engineer consultant mechanical engineer waiter/waitress 57% of enterprises said they have less than 5% fluctuation. The highest turnover is observed among blue-collar workers. Some 9% of the organizations studied reported turnover exceeding 40%, while another 13% put it at between 20-40%.

According to the research, the following 12 positions are the most difficult to fill: IT specialist, engineer, operator, salesman, quality assurance engineer, consultant, administrator, mechanical engineer, HR specialist, mid-level engineer manager, waiter/waitress and project manager. Filling a vacant position takes an average of 11 weeks.

Operators and the project manager positions are filled the fastest (around 4-5 weeks), but it can take 18-21 to find an engineer.

Where the labor shortage is the most critical, most of the respondents indicated “low payment”, “lack of skilled labor” and “competition” as primary causes of lack of manpower. However, when describing general reasons behind labor shortages, many respondents revealed that internal organizational problems could also be blamed, such as internal conflicts, bureaucracy, weak employer brand, poor

motivational environment, unattractive organizational culture, and leadership errors. Another problem can be detected in the widening gap between the expectations and beliefs about the workplace of senior level executives and of other labor market participants.

The most commonly used company programs are not considered to be the most effective solutions in attracting and retaining talented employees. While 87% of respondents said they use an employee satisfaction and engagement survey, only 39% considered it “especially effective”.

Similarly, a performance evaluation and bonus system was used in 93% of cases, but thought “especially effective” only in 62% of cases. The highest score (64%) was given to individual training and personal development plans, used by 84%.

Government solutions The research also looked at what value company representatives put on government programs that are targeted to help ease the labor shortage. A revised tax

The highest turnover is observed among blue-collar workers.

Some 9% of the organizations studied reported turnover exceeding 40%, while another 13% put it at between 20-40%. and social security contribution systems is considered an efficient tool by the majority of the responders (85%) in attracting and retaining talented employees. And 74% of respondents felt that supporting non-standard forms of employment (i.e. telecommuting, part-time work, shared work, etc.) would be especially effective.

More than half of the participants found the following seven solutions very efficient: encouraging and supporting training programs (dual training, and special vocational training programs), a more sophisticated income support system, supporting housing costs (construction, workers’ hostels, renting costs), supporting day-care centers and kindergartens within an enterprise, introducing special labor market services, increasing the role of student work (involving secondary and higher education students), and the development of transportation, commuting contributions (i.e. supporting company buses). According to the respondents, the employment (or “renting”) of public workers by non-public administration organizations is the least effective solution.

Similarly, respondents view the support and promotion of attracting foreign employees a solution that would have limited results in easing the labor shortage in Hungary.

“AmCham Hungary supported the survey as we see an overwhelming interest from our members – the largest investors in Hungary – to have a better understanding of labor market trends in general, and specifically of securing and retaining talent,” explained Írisz LippaiNagy, CEO of AmCham. “We understand that in order to improve Hungary’s longterm competitiveness, we must embrace a strategic view of talent, as only with highly motivated and skilled employees can we attract more jobs.”

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Hungary’s Nostromo.io wins at CESAwards

New board of AmCham elected for next term The annual general meeting of the American Chamber of Commerce in Hungary elected a new president and several new board members on Wednesday afternoon (December 7).

Farkas Bársony, managing director of GE Hungary Kft. was elected the new president of AmCham, on a two-year mandate, replacing Ferenc Pongrácz. Dr. Andrea Jádi Németh won the post of second vice president for the upcoming term. The new board, above, from left: Péter Gerendási (Deloitte), Liam Crow (FirstMed), CEO Írisz Lippai-Nagy, secretary treasurer Csaba Làszlò (KPMG), Krisztina Varga (HPE), Bea Előd (Citi), Péter Csucska (Lexmark), president Farkas Bàrsony, Ákos Burján (PwC), second vice-president Andrea Jàdi Nèmeth (bpv Jàdi Nèmeth), first vice president Màrk Hetènyi (MKB), and Judit Zolnay (Metlife).

More than 150 companies, 12 from Hungary, took part in the Central European Startup Awards (CESAwards) in Ljubljana on December 1, competing for the title of the best and most sustainable startup of 2016. Hungary’s Nostromo. io, an all-in-one project management tool designed for teams who work on digital products, scooped the award for “Best User Experience”.

“We are really proud to be part of the Central European Startup Awards and be able to represent Hungary in the regional final,” the Nostromo team said after the prizegiving. “One of our goals was to create a truly usable and lovable product and we are really happy that our users have the experience they deserve, so being the national winner of the Best UX category is truly an honor.”

CESAwards is the Central Europe’s biggest startup festival, launched in 2014 to identify the best startups in the region. Winners of CESA will have the opportunity to compete with all the other regional winners at the Global Grand Finals in Kuala Lumpur, Malaysia, on December 9, 2017.

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2016. 12. 07. 23:10

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Budapest 2024 Olympic bid aims at sustainability, heritage

The Budapest 2024 Olympic bid is emphasizing the compact nature of the city, an inclusive atmosphere, sustainability of the development plan and strong heritage value in competition with Paris and Los Angeles.

GARY J. MORRELL

According to the plans presented at the Property Investment Forum 2016 there will be around 26 competitive venues in Budapest, all of which will be within a six kilometer zone of activity connected by multiple modes of transport. “Olympic athletes will be closer to the venues, the city experience and celebrations in Budapest than in the larger city environments,” said the Budapest 2024 committee.

“The Budapest games would be financially responsible, low risk and more secure and affordable,” said Balázs Fürjes, bid chairman. He stressed affordability, sustainability and the wider city regeneration that the games could bring about. “According to our latest research, 58% of Hungarians are in favor

environment or heritage. The London bid emphasized sustainability in the organization of the 2014 Olympics, and the Sydney (2000) and Barcelona (1992) games are cited as success stories with regard to heritage.

New Danube bridge

Budapest 2024 Olympic Bid information point at the Property Investment Forum 2016. of Budapest hosting the games. However we are up against Paris and Los Angeles, two major world cities and therefore would be surprised if a medium-sized city was awarded the 2024 Olympics next fall,” he added.

Budapest 2024 is regarded as the outsider to Paris and Los Angeles.

“Budapest provides a real alternative city for the Olympic Games with sport in high quality venues, shorter distances and travel times. Holding the games in Budapest would help to pave the way for a greater range of mid-sized cities to host,” said the bid committee. Sándor Finta, architect and urban development director of Budapest 2024 Nonprofit

Zrt., emphasizes the compact nature of Budapest with the Olympic venues located around the city core; the whole city, therefore, would have the opportunity to participate in the event. He describes Budapest 2024 as a “poly-cluster model” in a similar way to Barcelona.

An advisory board for sustainable development has been set up, chaired

by Pál Baross, campus development director at the CEU. “The basis of the bid is future utilization and development,” he commented.

Tamás Ádány, managing director of OTP Real Estate describes the Hungarian bid as “a return to sustainability” with regard to cost and the post-Olympics

According to the bid plans the Olympics will deliver a new Danube bridge and a redeveloped urban transport network in addition to re-invigorating some of the currently neglected areas of the city such northern Csepel. The Olympic village, for example, would be located in southern Buda. Around 50% of the sites are regarded as already available for redevelopment, many of which are brownfield.

According to a feasibility study undertaken by PwC, Budapest 2024 would provide 19,000 new jobs in 20202024 in addition to revenue generated through hotel demand and the like.

Risks include raising the capital to achieve the Olympics and the price of services that could rise for residents of Budapest. However, Olympic games have a multiplicative effect on revenues; Barcelona has had a significant rise in tourist revenues that has been sustained for several years.

Tamás Lőcsei, partner at PwC estimates that Budapest has around a 30% chance of being awarded the games next year, although the city offers an excellent alternative to Paris and Los Angeles.

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Budapest Business Journal | December 9, 2016 – January 12, 2017

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Borsodi Sörgyár names new marketing director Ágnes Peresztegi has been appointed marketing director of Borsodi Sörgyár.

She will be responsible for the marketing of the Borsodi brand and other brands marketed by the brewery.

Previously, Peresztegi worked as senior marketing manager at Vodafone Hungary. Prior to that she gained experience in brand management at FMCG companies such as Heineken, Mars and Unilever.

Peresztegi obtained her first diploma in international marketing at Budapest Business School, and later graduated as a sociologist-economist at Corvinus University, and completed the MBA program at CEU in July 2016.

ManpowerGroup Hungary welcomes new Country Manager

Ottó Vég has been appointed Country Manager at the Hungarian office of human resources firm ManpowerGroup, taking effect from December 12. He will serve in the group’s Budapest office, according to a press statement sent to the Budapest Business Journal. Vég acquired professional experience on an international basis, having spent 15 years in the FMCG sector and the

last eight years in HR services. He has experience in both sales and management, which played an important role in his recruitment, the press statement said. “I am sure that Ottó Vég will represent added value to the realization of the company’s strategy, on the lines of making ManpowerGroup a market leader in Hungary,” said Riccardo Barberis, Southeast Europe regional managing director of ManpowerGroup. “Though the labor market is posing ever greater challenges for HR firms, we see significant potential in terms of the labor force in Central Europe. Hungary is the home of great professionals,” he added.

Mazars welcomes new tax advisor Dr. Dániel H. Nagy has joined the tax advisory group of international audit and consulting group Mazars, serving the company as a senior tax manager, as of November 15. “We have high expectations as Dániel has decades of professional and leadership experience,” Mazars partner Sándor Szmicsek said. “His professionalism and commitment further strengthens the domestic prestige of Mazars,” he added. After receiving his degree from the University of Szeged in 2002, Nagy joined the National Tax and Customs Administration (NAV), where he worked until joining Mazars. The firm has been

in Hungary since 1991: it is currently the fifth biggest company on the local market, employing 110 professionals.

Apollo Tyres appoints HR leader for Hungarian plant

Tamás Tarnai has been appointed new HR head at Apollo Tyres’ Hungarian plant, a state-of-the-art factory in Gyöngyöshalász currently under construction in a EUR 475 million investment. Tarnai will be responsible for human resources at new facility, reporting to plant head Csaba Mákos. Previously, Tarnai was a human resources and general affairs director at Suzuki Hungary; prior to that, he had more than nine years at Hungarian oil and gas company MOL. He was also at TROST Auto Service Technik, where he built up the HR function from scratch in a challenging post-integration environment. “Tamás Tarnai’s rich experience in HR and in multi-cultural environments will be of immense value to Apollo,” said Kannan Prabhakar, managing director of Apollo Tyres Hungary. “I look forward to playing a significant role in establishing Apollo Tyres as one of the premier manufacturing facilities in Europe; to ensure Apollo has highly committed, well-performing manpower as part of our ‘One Family’. And beyond that, the availability of superior Apollo products in Europe,” said Tarnai.

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High yield trough subletting out apartments, without headaches

As high as 6-7% yield with renting Cordia homes

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In a period of interests and government bond yields on a historic low level – and after the broker scandals – more and more people are looking for a safe way for their savings and investments, which at the same time can give significant yields. The boom of the renting prices drives the attention to the real estate market even of those who so far shied away from the tasks of renting a flat. „According to our survey approximately ten thousand people in Budapest and the bigger cities in the countryside plan to buy newly built real estates as an investment in the next five years, and a similar proportion would buy for their own use and investment at the same time” – said Tibor Földi CEO of Cordia, member of the Futureal Group.

A yearly 6-7% gross yield from the rental fees can be reached from Cordia’s well

located flats of stable value, which can be rented quickly and on a high price, but even the net yields are many times more than bank interests. It is no accident that half of the properties built by Cordia are often sold on the drawing board.

It is worth to commission the Cordia property management team with the renting tasks, which already offers full service to 300 apartments owners. The unique package of services includes everything from technical inspection, through the optimal interior arrangement and furnishing, the advertising of the property, drawing up the contract with the tenants, tracking the utility bills and common charges, to keeping the conditions of the property checked. The owners do not even need to deal with the residents meeting either.

In addition to the location and accessibility, the easy renting of a property is the most important feature for those who buy for investment, but the businesses near the real estate can be important as well. Four out of the eight property development projects of Cordia started this year have a concept and location that is an especially good choice for those who would buy homes to rent.

• The development underway on the award winning Corvin Sétány, Corvin Atrium will be ready in 2018 as a part of the promenade. 531 flats will be built here of which many is already sold. The completely renewed quarter of the city is one of the most popular inner city rental locations.

• Rózsa55 apartment house near Andrássy Boulevard and the City Park is located

in the most popular neighborhood of downtown Budapest, where ideal apartments can be designed for every need of visitors from abroad for short term rentals.

• Young City is being built on one of the greenest parts of the 13th district with exceptional transportation, at an achievable price, near the Árpád Bridge. Many workplaces of the Váci Road office district is near, thus these homes can be a good choice for those who are thinking in long term renting.

• Grandio is being built in the party district in Nagydiófa Street; where quality apartments are designed for short-term rental to meet every need of visitors abroad.

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Budapest Business Journal | December 9, 2016 – January 12, 2017

Family inheritance, national treasure

Sándor Zwack took over Zwack Unicum Nyrt., maker of Hungary’s unique bitter liqueur and a slew of other leading spirits, from his father, Péter in 2008. That year was the best in the previous ten, but was followed by the economic crisis. Now business is looking better again. He sat down with editorin-chief Robin Marshall to discuss how you keep a 225-year-old product relevant for today’s internet generation.

ROBIN MARSHALL

Q

Congratulations: the recently released H1 figures for the business year that started in April show after-tax profits for Zwack Unicum up by 41.6%. How has that been achieved?

A: Purchaser confidence has clearly improved; that has certainly contributed to the figures being what they are. What we have seen in the past year or so is that Unicum is growing again, here and abroad, and not just in the mid- to upper restaurants and bars, but also the top establishments. It is the first time in quite a while we have seen that.

Unicum Szilva [Plum] has done a lot for the brand since we introduced it four years ago. It takes about two years for the market to assess any new brand. Initially you almost always do well just because of the promotion and distribution. Szilva is still doing well, so we know it also has a good customer base by now.

The figures are indicating that we are continuing to do well. We are looking at a good Christmas, which is important; we have two peak times, Christmas and Easter, but Christmas is very clearly the biggest. The on-trade is busy, too, with our brand ambassadors doing a lot through their networks, especially social media.

Hubertus is also doing really well because of the new taste variations, as is Kalinka, the second largest Vodka brand in Hungary, which we are “premiumizing”.

We are bringing out a new product, Unicum Riserva, in time for Christmas, which is blended with six puttonyos Tokaj [the sweetest and therefore highest quality version of the wine] and then aged in used Tokaj barrels. It is a bitter aimed at the top, top end of gastronomy.

A lot of our success this year is down to Unicum and Unicum Szilva, and to doing the right activities. We have been very creative on social media. We have done a viral image film only for the internet for

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Sándor Zwack takes a sample from one of the many barrels in the Zwack Unicum cellars in Budapest.

“We have a very old brand – 225 years last June – and to keep that relevant... is very difficult.

Our motto is ‘Tradition and innovation’, the thing is to find the balance between the two.”

Christmas, for which we targeted 500,000 views by the end of December; we had already received 200,000 views in the first two days.

Q

You are a scion of the family whose name is given to the company. Does that sense of family legacy bring an extra dimension of pressure for you?

A: I have to watch what I say and do, I can’t just say anything that pops into my head, because of the reputation of the family and the company, because in a way I am responsible in my role for all the people working in this company. So I suppose there is a certain pressure there, especially if you have a public profile.

Not that I live my life particularly in public; it is actually very simple. I’m quite traditional, I like my family life; I’ll go out for a drink with friends every now and then, but that’s all.

[Laughs] I guess I never really think about that pressure until I am asked, like now, and then I realize “yes, this is quite a thing”. I am the sixth generation of Zwack, this is by far the oldest company in Hungary, and one of the oldest in

Europe in our sector. I am very proud of that. Sometimes I will go the museum and look at the photos of my grandfather and great grandfather and think about what they achieved and overcame. They had a whole set of different problems: war, the Siege of Budapest, emigration, incarceration, being sent to labor camps.

When I took over my father still came in every day and sat at his desk and did his stuff, even though he no longer had a formal role in the company. Sometimes I would go to him with a problem and he would look at it in a completely different way from me, because he went through a hell of a lot too. These guys were cut from a different cloth.

Q

The company has been around since 1790. How do you keep it relevant, how do you win over new generations to this old Hungarian tradition?

A: That’s a challenge for us. We have a very old brand – 225 years last June – and to keep that relevant for the younger generation is very difficult. Our motto is “Tradition and innovation” and the thing is to find the balance between the two.

You also have to be smart about it. We couldn’t combine Unicum with pineapple, say, that would be ridiculous and no-one would buy into it or buy it. But with szilva we are talking about a fruit that is well known in Hungary, part of the Hungarian tradition of szilva pálinka. Unicum Szilva is the only herbal liqueur in the world where we have taken the liqueur and aged it with the fruit. That is how we can be innovative, but keep an eye out for the tradition too. We have to find new ways of

consumption, have to come up with new drinks. That is what we do, essentially, all day, every day; try to figure out where there’s a hole in the market and then fill it. And that’s the most difficult thing in the world. Spirits have been around for centuries; it is very difficult to find something new. And we have to do more and more of that to stay relevant. And we need to do more foreign exports: there is huge potential, especially with Szilva and we are certainly working on increasing that.

Q

What has changed in the time you have run the business?

A: We have had to find new communication methods like social media. TV ads are still very relevant; in Hungary it is still the most cost effective way of reaching the biggest cross section of society, but 18-yearolds to 20-somethings do not watch TV anymore. They are on their computers or mobiles, looking at YouTube, or Snapchat, or Pinterest, or Facebook, or whatever. And you have to be careful with what you communicate; you can’t bullshit them; they’ll call you out straight away. You have to keep up with these trends, to be involved with them. But we are the number one brand in Hungary, so we can’t just keep up, we have to try and preempt them; when the trends come to Hungary, we want to be the first with them, at least in our segment. In the last three or four years the impact social media has had, and the responses it has required from us, has been by far the biggest change I have seen.

2016. 12. 07. 23:10

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Cutting through the data clutter

With more than 20 years’ experience working across Southeastern Europe, including many years representing Saatchi & Saatchi, Radu Florescu was a pioneer of the Romanian advertising industry. Born in the United States, but with family roots in France, Romania and Hungary, he founded the Centrade Group in 1992. In January of this year Centrade and Cheil Worldwide Inc. announced a partnership covering the region. In April they opened their Budapest office. On Thanksgiving Day, Florescu sat down in New York for a skype chat with editor-inchief Robin Marshall to review progress.

ROBIN MARSHALL

Q

How has the first year of the strategic partnership between Centrade and Cheil mapped out?

A: A lot can be said about being smart or being lucky. I probably consider myself to be more of the latter, and we are certainly in the right place at the right time. Romania, especially, has one of the best growth rates in Europe, if not the best. I am also very pleased with the results from Serbia and Croatia, Slovenia and the smaller [former Yugoslavia] markets we serve through them. We are profitable after one year of operations, which I think really says a lot about the people working with us. I am very happy about the results to date, and very bullish about 2017.

Q

How did the relationship with Cheil come about in the first place?

A: Cheil Worldwide’s HQ is based in South Korea. They have a strong worldwide presence where Samsung operates and Samsung is present in most East European markets [Albania, Bosnia & Herzegovina, Croatia, Hungary, Slovenia, Macedonia, Montenegro, Romania and Serbia]. Cheil did not

BBJ_2423_biz.indd 12

our strength is our diversity. We have just developed an idea of Viktória’s in Romania, not Hungary. Viktória is a great project manager, so if I need her to oversee something in Romania, I’ll use her. We don’t necessarily need to have entire creative teams in each country.

Our regional platform allows us to bring in talent where it is needed. That could be a designer from Zagreb or Bucharest to work on a project in Hungary. At its core, our job is about having great ideas, and great ideas should not be held in by borders; they should transcend them.

Q Radu Florescu, founder of Centrade Group. want to start from the ground up; it had limited experience in these markets and was conscience that Eastern Europe can be difficult to operate in. We have been operating in Southeastern Europe for 25 years. It seemed like a perfect match up.

Q

How does the partnership work in practice?

A: I feel we are very much part of the Cheil family. I have a lot of confidence in the European management; they are very switched on and have an aggressive and ambitious agenda, and I share those ambitions. You know, two or three percent growth is not “growth” to me; that is not what I would describe as good business. Too much emphasis today is put on cutting or maintaining costs. The advertising business, for all the talk about technology, is still really about putting out good ideas. Content is still king. If you don’t have good content, whatever you are doing, it is just rubbish, worthless.

Q

Why move into the Hungarian market now?

A: Three reasons. Firstly, I thought it was a great opportunity for Cheil. Some people think of them as a one-client company; they are not, but they are present in all markets where Samsung is, and Samsung has a sizable operation in Hungary.

Secondly, it is strategic. Hungary, arguably, is a more advanced market than Romania, and that presents great opportunities. I’m looking at Hungary as a regional opportunity and always ask the question: what can we leverage from the resources and experience that can work locally? People don’t see it as such a different market anymore.

Thirdly, I am interested in Hungary, and always was. I think Budapest is an absolutely beautiful city; you get that real sense of old empire when you walk the streets, which I really enjoy.

Given the family connections, I was always interested in both Romania and Hungary.

Q

How big is the team in Budapest?

A: Seven people, but we are looking to add to the team in 2017. It depends on the amount of work, but I am always keen to invest, so we will be looking to add three people in the near future. The key, of course, is getting good people, and I was super impressed when I held my initial interviews; the talent we discovered was very impressive. And I can’t say this enough: Viktória [Buday, business manager for Hungary] is truly impressive.

Q

What are your goals for Hungary?

A: Regionally, in the last three years things have been going well, but that is exactly the time when you have to think of changing how you operate. In Hungary, we are still at the beginning, there are still a lot of adjustments to be made, things that we can do better.

We have a management meeting every Monday and one of the things I am always asking is what can we eliminate to free up time and become more efficient?

In the next two years we want to be an agency known for its outstanding content. We are not there yet, but that is where we want to be. To get there will require a lot of little steps, but we know what we need to do. In Budapest we are somewhat known on the market. The next step is we want to be better known, and known for doing something good.

And after that we want to be known for doing something that clients care about, because, ultimately, that is when you are doing really well. Achieving that in two years is ambitious but doable; it depends on having the right people.

Q

What would you say is the signature approach of your company?

A: I probably overuse the word, but it is about being pragmatic, leveraging what we do in one country to apply in another for the benefit of our clients. I am a big believer in cross-fertilization;

What are the particular challenges of working in this region? Are you able to replicate messages or campaigns across all the markets you cover, or does each country require a tailored approach?

A: I don’t pretend to be a great expert on the Hungarian market, but it seems to me that it is similar to other countries of Europe. There is no great marketing divide between Eastern and Western Europe anymore – that has almost all gone now. Mainly the approach is the same, but importantly there remains significant growth left in some markets, including Hungary.

You have to be conscious of the consumer, what is trending, what are they looking at. There are templates that are international, where we have actual results that prove they can be very effective.

Some examples of international template use local celebrities, and we tweak things here and there for each market. No two countries are completely the same, but nor are they completely different.

Q

What do you think the upcoming technical trends will be for the region and for Hungary?

A: There’s a lot of talk about technology, but it is just a medium, like any other.

Our challenge is to look at the world today and interpret consumers. People have never had as much information at their fingertips as they do now; it is thrown at them all the time via TV, screens, mobile phones, laptop, etc.

Making a choice is becoming so much harder; people have no chance to sit back and reflect. So the challenge is how do you get to consumers? You have to cut through the clutter of data. The media landscape is much more complicated and there are increasing challenges creeping up everyday. But in 2017 will those challenges be the same as they were in 2016? Probably not. I suppose that our marketing strategy lifecycle has the expectancy of the lifecycle of a mobile battery. Short lived and looking to improve every round.

Hungary was a leading market in the 1990s. It has slowed relatively speaking somewhat since then, but there is potential for a renaissance. It is always good to shake things up, and my intention for the group is to do exactly that. I am very proud of our connections with Samsung; it is an extraordinary company to work with, has world-class ideas, is adept of using technology, of course. Can we leverage this to expand the opportunities in Budapest? I think we can.

2016. 12. 07. 23:10

Experiences to last a lifetime qatarairways.com

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2 Business

Budapest Business Journal | December 9, 2016 – January 12, 2017

sponsored by

INNOVATION Insight A promise is a promise

Since this was the first time we did this, obviously some fine-tuning won’t hurt.

It will be carefully analyzed whether the speakers and the workshops fulfilled expectations. The overall impression is that we are heading in the right direction and up to 95% of the program was perfectly right. The remaining 5% is expected to be made up from the feedback of the startups.

Although there is still some way to go to the January 12 demo day for the participants of Telenor Accelerate, Hungary’s first corporate startup program, some provisional conclusions can already be drawn as to what extent expectations have been met on the part of mastermind and host, Telenor Magyarország. Vice President for Innovation, Zoltán Takács shared his thoughts with the Budapest Business Journal.

With the bulk of the program behind you, what is your overall assessment?

I believe the primary goals have been reached: we have launched a one-of-a-kind program that was completely new around here. From day one onwards, it was clear that there was huge demand for it. We were pleased to witness that something was started on the market and an up-tothen non-existent corporate development category was created. A promising sign is that other large corporations have also begun to consider running similar projects, as they have realized how much they can gain as a result.

Participants were happy to report that, to their relief, a sizeable entity such as

Telenor turned out to be very innovative itself. This should be reassuring.

We are constantly monitoring their level of satisfaction in order to find out whether what they are getting meets their expectations and how valuable they find this experience.

Our ultimate purpose was to demonstrate our innovative side and we are glad this effort has been recognized.

Which startups hold the promise to make it big and which would Telenor most probably work with in the long run?

Telenor has a stake in every participating startup and we are equally happy to work with all of them. It is a bit premature to talk about future cooperation, though.

It will be for the next round of financing

Zoltán Takács, vice president of innovation. to decide which ones can take their business to the next level. Everybody has improved a lot already. In some cases, it was more like a ‘one step back, two steps forwardʼ approach, but there is nothing wrong with that. On the contrary, the aim was to get the corporate goals straight.

These young firms cannot be at the same state; some of them already have clients, whereas others are only looking forward to market validation.

What would you have done differently in light of the experience so far?

The program triggered quite a buzz in town. Is there a chance the story will continue any time soon?

We still need to wait till the end, that is when the final conclusions will be drawn and shared with the public. Telenor has had a positive experience and the plan is to run a similar program on the basis of what we have learned in the first one.

At the upcoming demo day scheduled for January 12, the teams will be introduced to potential investors, which will be decisive for them. What matters is that the participants appreciated our flexibility and the fact that they were treated like customers by Telenor. We have delivered on our promise to them.

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2016 10 19 15:18

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Budapest Business Journal | December 9, 2016 – January 12, 2017

15

Hotel chain MEININGER expanding to Budapest

A new MEININGER hotel in downtown Budapest plans to build on a so-called hybrid model that combines the comfort of traditional hotels and the flexibility of hostels, offering lucrative value for money.

LEVENTE HÖRÖMPÖLI-TÓTH

Fővám tér undoubtedly offers a great location in the city: not only is the legendary Vásárcsarnok marketplace situated there, but it is also a hub for a huge number of bars, restaurants, and shops, and is a perfect starting point to explore town.

German hotel chain MEININGER could hardly have found a more ideal location for the latest stage of its expansion.

“We are entering an important market in having signed the operation agreement.

The number of tourists visiting Budapest is growing dynamically,” commented Naveneet Bali, Chairman of MEININGER Hotels, on the strategic step. The developers broke ground in late November, paving the way for a 6,600 sqm, seven-story facility with 184 rooms and 751 beds. kempi-bbj-252x158-201611:Layout 1

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János Bácskai (mayor of District IX), Gusztáv Biener (government commissioner for tourism), Zoltán Apáthy (managing director, BedroInvestment Kft.), Eric van Dijk (COO, MEININGER) and Árpád Bognár (Swietelsky).

As Zoltán Apáthy, managing director of developer Bedori Investment Kft., explains, the process of getting to here has not been that easy since, right after it had bought the property, the recession hit and it was very difficult to find a reliable operator that the banks were also happy with. “We talked to many candidates, but in the end MEININGER offered the terms that were most ideal for the banks, which was key for financing,” he told the Budapest Business Journal.

Absolutely positive The only potential problem the developer is facing right now is to finish construction on time. Apart from that, they are all set as 11/22/16

4:18 PM

MEININGER will run the establishment under a 20-year lease agreement. “I’m absolutely positive that this will be a success. The location is great and the city’s popularity with tourists is growing by the day. I don’t believe it would be a problem to reach a high occupancy level,” Apáthy added.

András Holczer, feasibility manager at MEININGER Hotels, is equally convinced that the Budapest development fits perfectly into the business concept of the company. The firm was established in Berlin in 1999, so it is relatively young, but things quickly sped up with new openings following one another in various German cities. After targeting Western Europe, it was only a question

of time before CEE came on to the radar.

MEININGER now runs 16 hotels in ten European locations and the plan is to enter the market in every major city on the continent. Ambitions are best underlined by those 12 contracts that have been signed by MEININGER with property developers to complete projects and ensure new openings up to 2019. The Budapest effort is part of that process and the hotel near Fővám tér is scheduled to open as early as in the spring of 2018.

Optimism is based primarily on the hotel operator’s hybrid concept. “This combines the strengths of hotels and hostels. One of our typical rooms contains a double-bed and a bunk bed which is very much loved by families,” Holczer said. “We also have multiple-bed rooms, and apart from that a shared kitchen and a large community area also recall the hostel ambience. In the latter, guests are welcome to hang out, play pool or on PlayStation.”

Since MEININGER targets a lower price range and wishes to compete on the basis of value for money, the question that immediately comes to mind is how it will fair in competition against Airbnb. Holczer is confident in this regard. “Airbnb places don’t have a concept, there is no customer experience, no breakfast, no proper design.

And among our major customer groups are large tourist groups, backpackers and classes on excursions who simply could not be accommodated in Airbnb facilities because of lack of capacity.”

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16

Budapest Business Journal | December 9, 2016 – January 12, 2017

The present and future of H Cost savings

The average Hungarian SSC realized cost saving in the range of 30-50% Comparison of anticipated and realized operation cost savings

11%

I< 10%

16% 19% 17%

f1

30% 27% 12% 16% 17% 10%

Hungary

Global

25%

10-20%

17% 25%

20-30%

17% 17%

30-40%

33% 25%

40-50%

11%

25% 8%

>50%

14%

8%

Planned cost savings

Realized cost savings

Choice of location

Key factors influencing the choice of SSC location Workforce availability, skill-sets, language potential Labor costs Location support infrastructure Proximity to core business location(s)

29% 31% 24% 25%

10% 11%

Economic environment (tax, politics, economy)

13% 9%

Co-location with other corporate functions

8% 7%

Quality of life (cost of living, location attractiveness) Legislation

f2

13% 13%

Hungary

0% 1%

Organization

Organizational strategy for the next two years

f3

Multiple strategies

53% 53%

33% 23%

7% 17%

Outsourcing instead of SSC

7% 7%

Hungary

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activities performed by these centers has also continuously improved. The typical Hungarian SSC no longer performs straightforward transactionaltype activities, but offers value-adding and knowledge-intensive services to its customers. The Hungarian SSC industry has become a solid, mature industry even on a global scale; its SSCs are moving up in the value chain.

Another development of the last three years is that the importance of locations outside of Budapest have been increasing: quite a few centers that were originally set up in Budapest have opened a second location around the country. “These new locations provide additional security from a business continuity perspective and also enable these companies to exploit the diverse employee pool of different locations,” says András Loós, a director at PwC Hungary. “There were also some new market entrants who have selected their primary location outside of Budapest.

These are typically larger cities with strong universities, such as Debrecen, Szeged and Pécs, just to name a few,” he explains.

“Local municipalities have started to realize the importance of the SSC sector and are now on the hunt for new investments, and actively supporting potential investors in their site selection process. The significance of locations outside of Budapest will likely continue to grow in the next few years as the Budapest labor market gets more saturated, and because of more favorable state aid and incentives,” Loós adds.

Cost savings (f1)

Global

Multi-functional SSC

SSCs are one sector of the Hungarian economy that continues to perform strongly. The industry has created thousands of new jobs in Hungary since the first centers were established in the late 90s. When PwC released its previous survey in 2013, there were 80 SSCs operating in Hungary, employing 30,000 individuals. According to the latest figures published by the Hungarian Investment Promotion Agency (HIPA) the number of centers exceeded 100 by the middle of 2016 and these now employ more than 38,000 people.

A total of 75 companies from various industries in more than 20 countries worldwide participated in the global survey, collectively representing about 300 Shared Service Centers. Some 15 Hungarian SSCs participated in the local survey from a wide range of industries.

The survey participants employ more than 11,000 people in Hungary, so their responses provide significant coverage of the local SSC industry.

These employees are typically highlyskilled individuals with university degrees who speak multiple foreign languages and perform complex and value-adding activities. New companies are still entering the Hungarian market, but existing players have also been expanding scope and service: a significant portion of the industry’s impressive 20% increase of the last three years has been largely driven by existing centers.

But the evolution of the sector is not just a numbers game: the complexity of

Hungary is often short-listed due to its quality workforce at an advantageous cost, strong infrastructure, and good location.

Furthermore, the incentives available further improve the business case.

Most of Hungary’s SSCs are set up in the capital, Budapest, which offers a large pool of university students who speak foreign languages. However, an increasing number of companies are investigating the possibilities offered by university cities in the countryside. A Choice of location (f2) huge number of fresh graduates who speak The most crucial criteria remained the foreign languages are available in those availability of skilled workforce. More than cities – which creates the opportunity of 29% of Hungarian survey participants a win-win situation: the fresh graduates decided on the location primarily based can start a (multinational) career in their on skills sets and language skills of university-city, and the SSC can attract staff. The second most decisive factor is motivated talent in a less competitive obviously staff cost: 24% of Hungarian environment and at a lower cost than in survey participants cited this as the most Budapest. Not to mention that the highest important item.

(50%) regional aid intensities are available The Shared Service Centre sector has in cities like Debrecen or Szeged. This grown to become a significant presence in means that even one year of personnelHungary since the 1990s, with more than related expenses for the new hires can be 100 SSC sites operating currently. When received as cash subsidy, and tax incentive a global company considers Central- out of their two-year personnel expenses.

Eastern Europe for establishing such Additionally, training subsidy is also a center to focus on specific activities, available to encourage training programs.

Based on the survey responses, Hungarian SSCs are clearly delivering a higher level of cost savings than originally anticipated and also performing better than the global average: 66% of the Hungarian respondents reported realized costs savings of 30% or more, while the same result was achieved by only 40% of the global respondents.

3% 3%

Global Business Services (GBS)

For the third time, PwC has surveyed the Hungarian Shared Service Center sector as part of an in-depth look at the global market.

Here are just some of the highlights.

Global

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f Hungary’s SSCs A shortage of skilled workers now appears to be an overarching and general concern in the Hungarian economy.

This impacts some functions of the SSC industry more severely than others: the IT sector appears to be the most vulnerable at the moment. Therefore, the government and universities should focus on ensuring the Hungarian education system will provide sufficient numbers of young professionals who possess the right skill-sets and foreign language knowledge, are flexible to adapt to the constantly changing environment, and are committed to life-long learning by the time they finish their studies. There are signs of more intensive cooperation between universities and SSCs to achieve this result.

Another challenge the SSC industry will have to face in the near future is the impacts of digitalization and the fourth industrial revolution: robots will not only appear in manufacturing facilities but some administrative functions are also expected to be fully automated, and human labor force to some extent will be replaced by software solutions. The more rule-based and standardized these activities are, the easier it will be to apply

Staff satisfaction

András Loós, director, PwC Hungary.

Robotic Process Automation solutions which will make it possible to automate processes without having to change the existing IT systems. Machine learning and artificial intelligence will create opportunities that cannot be foreseen yet. Since these software solutions will make some of the currently existing SSC jobs redundant, the more value-adding and knowledge-intensive activities the Hungarian SSCs are performing the less likely their headcount will be significantly impacted by digitalization.

Hungarian SSCs have been able to deliver a stronger than expected performance: they managed to exceed the planned targets both in the areas of cost saving and capacity reductions.

With regards to cost savings the actual performance of Hungarian SSCs is even more impressive than the global average. However, the majority of such cost reductions is still realized through decrease of payroll costs which will not be sustainable in the longer term. SSCs, both in Hungary and globally, should focus on how to realize cost and capacity savings through the efficient use of IT solutions and common infrastructure in the future.

SSC locations are selected primarily based on two criteria: the availability and cost of skilled workforce.

“This message is loud and clear: no matter how well-established the transport and telecommunication infrastructure of the country is, no matter how attractive a location Budapest appears to be from a quality-of-life perspective, and no matter how lucrative government incentives are, if decision makers have the slightest concerns about the availability of a qualified labor pool in sufficient volume and on a sustainable basis, the country will struggle to convince potential investors,” warns Loós.

Consolidation

Plans of geographical consolidation

f4

Oreganization (f3) The future plans of Hungarian SSCs are very much in line with the global trends and these also indicate the growing importance of multi-functional or Global Business Services. More than half of the Hungarian survey participants target a Global Business Services framework, while an additional 33% plan to establish a multi-functional SSC platform in the next two years. There is a very limited number of respondents who are considering an outsourcing strategy instead of the captive SSC approach, either globally or in Hungary.

Consolidation (f4) Future plans of SSCs, both in Hungary and on a global scale, reveal that more than half of the organizations target further regional consolidation of services. More than 30%

BBJ_2423_biz.indd 17

Most of the survey respondents reported high levels of staff satisfaction, both globally and in Hungary. The Hungarian results are even more favorable than the global average: none of the local SSCs reported a staff satisfaction level lower than 60% meaning that at least 60% of their employees rate the working conditions as either “good” or “very good”.

Staff turnover (f6) The Hungarian results show an interesting dynamic: only 9% of the survey respondents reported annual staff turnover exceeding 20%, which is a better result than the global average (13%). However, the portion of respondents with relatively low turnover (less than 10%) is only 27% in Hungary, whereas this number is higher on the global scale (43%). Predominantly the average turnover rate in the Hungarian SSC sector is between 11-20% as confirmed by 64% of the survey respondents.

20%

Global bundling in SSC structures

33%

Regional bundling in SSC structures

50%

24%

56%

Global

Hungary

Working conditions

Percentage of staff that rated working conditions as “good” or “very good” > 70% 60-70% 50-59% < 50%

70% 69% 30% 21%

f5

0% 5% 0% 5%

of the Hungarian survey participants even plan to bundle services globally.

Working conditions (f5)

17%

Multiple strategies

Hungary In our experience, some SSCs in Budapest are looking to increase their headcount in the non-metorpolitan cities as a second- or third-stage extension. Of course, examples show that presence only in the countryside is also tempting.

17

Global

Staff turnover

Annual staff turnover over the last three years

f6 9% 21%

18% 22%

>5%

5-10%

Hungary

64% 44% 11-20%

9% 13% >20%

Global

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Budapest Business Journal | December 9, 2016 – January 12, 2017

Efficiency of tax systems bound to speed up whitening of the economy

Electronic systems are key to make tax compliance smoother, but it is only one part of the story, Andrew Packman, leader for tax transparency and total tax contribution at PwC UK says.

LEVENTE HÖRÖMPÖLI-TÓTH

Q

This is the 11th time the Paying Taxes report has been prepared by PwC. To what extent have its key findings been implemented by decision makers along the way?

A: The purpose is to provide data for decision makers so that they can decide whether and how they want to alter their tax systems. We are not suggesting that the only reason why governments are reforming their tax systems is because of this report. However, they use it to identify issues to think about. As to the compliance burden, the time it takes to

to comply with tax obligations, the harder it is to go from the informal sector to the formal one. So if you want to cut the black economy, facilitating compliance can be part of the journey.

Q Andrew Packman, leader for tax transparency and total tax contribution at PwC U.K., talking at the Budapest launch of Paying Taxes 2017. get the tax administration done, a huge range of between 100 and 2,000 hours exists. In the most inefficient systems, there is a great deal of productive effort, which is wasted. Large-scale investments are under way globally in order to set up and improve electronic systems that can allow, among other things, to identify high-risk tax payers.

Q

Does such a commitment to digitalization have an impact on the grey economy as well?

A: The informal economy is present in many countries. The more hours it takes

The report says that firms need to wait for more than five months on average to get their VAT back. Could a widespread use of electronic systems improve that situation too?

A: Some governments may not have the budget to make the refunds in the first place. In certain countries it takes more than a year to get the VAT back.

The use of electronic systems and data analytics should enable authorities to tell when VAT repayments are due.

In the European Union, Austria is the quickest to make the refund, paying the due amount back in around three weeks.

So digitalization is not the whole story, but definitely part of it.

Q

According to one of the findings, the post-filing administrative burden is huge, causing cash flow and administrative delays of up to two years for companies. What measures could cut this time significantly?

A: It’s all about risk assessment. The key is to make a distinction between

trusted tax payers and those for whom that may not be true, so that you can put your audit resources where it is most effective, and avoid putting a compliance burden on compliant businesses. If you can do that, both sides benefit, the government and companies alike.

Q

But as data highlighted in the PwC document shows, tax authorities tend to presume that tax payers do something wrong: 70% of VAT refund claims trigger an automatic audit, whereas 58% of voluntary corrections to corporate tax returns have the same consequence. Shouldn’t this approach be changed?

A: It will vary, of course, depending on the nature of the tax systems. Tax authorities have the obligation to ensure that all taxes are collected. And they tend to follow the approach of auditing rather more than less because they would rather audit a compliant tax payer than miss a non-compliant one. It would be too simplistic to say this is an easy way. Especially in Eastern Europe, VAT is a big issue and fraud can cause a very significant tax gap, so it would be wrong to give the impression that authorities would like to place an inappropriate burden on companies.

Global tax compliance burden falling, post-filing phase still has obstacles

The latest report by the World Bank Group and PwC on taxes has found that postfiling processes for Value Added Tax and Corporate Income Tax returns are amongst the most challenging to comply with. General efficiency figures in Hungary have been improving, yet in some respects still lag behind the EU average.

LEVENTE HÖRÖMPÖLI-TÓTH

For the 11th time, PwC together with the World Bank put together an annual report called “Paying Taxes”, which, by collect-

BBJ_2423_biz.indd 18

ply with tax requirements, a drop of eight hours compared to last year. The overall performance of Hungary has been positive in the past decade or so. As highlighted by Dóra Máthé, tax partner at PwC Hungary, the total tax rate fell from 56.6% in 2004 to 46.5% in 2015; however, it still lags behind the EU-EFTA average of 40.3%.

Tax obligations

Dóra Máthé, tax partner at PwC Hungary. ing data in 190 countries, models how easy it is for a standardized, mediumsized domestic company to pay its taxes.

The overall picture according to “Paying Taxes 2017” looks rosy since, yearon-year, key indicators such as the time consumed by compliance, the number of payments, and the total tax rate continues to fall globally. On average, the total tax rate is 40.6% of commercial profits, down by just 0.1 of a percentage point from last year. The average mid-size firm makes 25 tax payments per year (down 0.8 payments) and its takes 251 hours to com-

Complying with tax obligations takes less time too: it is down 19% since the first PwC assessment, but the current total of 277 hours continues to significantly exceed the EU-EFTA average of 164 hours. As for the number of payments, the EU-EFTA figure of 11.8, slightly more than that for Hungary, where it is 11.

“In the past six years, the goal of the Hungarian government was to shift the balance from income taxes to consumption taxes, which approach is not expected to change, but the ultimate purpose is to reduce the number of taxes and tax rates alike,” Máthé noted.

This year’s PwC study introduces the so-called post-filing index for the first time.

The smooth functioning of VAT refund systems is key in this regard and it turned out that, where such a scheme exists, on average

it takes a little more than 14 hours to make the VAT refund claim, but firms then have to wait more than five months to receive the refund.

Since in Hungary reclaiming VAT most likely triggers an audit, time spent on compliance with a VAT reclaim takes around twice as long as the regional average. However, the refund itself takes less than in a typical EU and EFTA country.

Another issue is the voluntary correction of corporate income tax returns. On average, it takes the case study company almost 17 hours to correct an error in its CIT return. If the tax authority requires an audit, that will take a little more than 17 weeks to finalize.

“Until now there has been little information around the cost of post filing procedures. The new post-filing index has shown that there are considerable variations around the world in how tax authorities approach VAT refunds and corporate income tax audits,” Augusto Lopez-Claros, director of the global indicators group at the World Bank Group said. “We hope that the new data will allow governments to better understand the impact that these procedures have on business and will help encourage them to reform and enhance them to make it easier for companies to do business.”

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19

When two-into-one does go

Differing customer needs led Invitel Group to split one company into two. CEO David Blunck says the move is paying off for clients and group alike.

typically three-play (TV, telephone and internet). Invitel says it has a market share of around 5%, partly because it has no residential presence in Budapest. Rather, its strongholds are in towns and cities like Gödöllő, Vác, Szeged and Esztergom.

Clearly there is geographical room to grow that footprint, but for now Blunck says the company is concentrating on improving services, and especially connection speed, and that, too, is bringing results.

“A little more than half the network is capable of handling high speed internet.

We are now working hard on executing an investment program under the auspices of the EU, known locally as ‘szupergyors’ internet, through which 100,000 homes will be connected in the next two years.”

Such investments seem to be paying dividends. “Our country market share is growing, so we believe we have more upside to see here.”

ROBIN MARSHALL

If you are a Hungarian customer of Invitel Group, you could be John Smith (or rather Kovács János) from down the road, or you could be a large enterprise, such as MOL. When the telecom markets in Hungary were first privatized, your requirements would likely have been pretty much the same – centered on voice telephony – differentiated only by scale. But as time has marched onwards, residential and commercial customers have grown ever further apart in what they are looking for.

It was this divergence that led in June to Invitel splitting up one company into two distinct units.

“The two sides of our customer base no longer look the same, and that really caused us to have a rethink at the beginning of 2015, when I became CEO,” explains David Blunck. He has been in Hungary with Invitel Group, Hungary’s fourth largest telecoms provider, since 2012, initially as CFO. The restructuring involved creating two verticals in which all elements, from sales and marketing and customer care to focused operational and IT teams, were contained. As Blunck puts it: “It means a guy in our residential unit’s engineering team wakes up in the morning and he knows he is only going to be serving the residential market. It wasn’t always like that.”

Deciding it was better to figure out how to detach the two units out of the public gaze, the first steps were not communicated externally. “We made the internal reorganization last year and found it worked quite well. We were getting good feedback from our customers, and particularly our corporate customers. Sometimes they just need to talk engineer to engineer; the new set up allowed that interface.”

Happy that the move worked internally and had visible benefits for the corporate customers (Blunck says there would be little reason for residential customers to notice any change, and that seems to have been the case), the company began the process of separating the units from a legal and branding point of view.

Invitel handles residential customers, commercial customers are served by Invitech Solutions. Blunck heads both as CEO of Invitel Group.

Good feedback “It is still early days, but we have received good feedback from the customers who have recognized that there was substance behind the reorganization, it was not just empty marketing re-branding, but we were right to have the ambition to do it.”

BBJ_2423_biz.indd 19

Positivity

David Blunck, CEO of invitel Group.

“We made the internal reorganization last year and found it worked quite well. We were getting good feedback from our customers, and particularly our corporate customers.

Sometimes they just need to talk engineer to engineer; the new set up allowed that interface.”

Invitel Group had a consolidated turnover of EUR 150 million last year, split roughly equally between the two units. But the group has up to now lacked the basis for measuring business unit profitability.

“One of the other reasons we split the business into separate legal entities is to give us, internally, greater visibility about where our costs and revenues meet, so we can see where we have the greatest returns and are therefore able to make better investment decisions. The finance team is now busy preparing standalone financials for the new legal entities. We have done our modeling, of course, but are eager

to have actual figures to start achieving business benefit.”

So the customers seem happy, and the management is, but what about the staff?

How do they feel about moving from one large company to two smaller ones?

“That’s a good question. We have been emphasizing that we are all part of Invitel Group. Legally we are now three divisions [there is also an SSC that handles finance and central administration duties], supporting two groups, and we are all part of the Invitel Group family. We have been at pains to emphasize the cohesiveness of the group.”

And the fact remains that, even given their separate identities, the two divisions remain large players on the market. And successful ones, at that. For residential customers, there are two key markets. “We continue to see growth in both core areas, TV services and IT services. Both have ratcheted up, and both play to the strengths of a separated organization.”

Room to grow Indeed, considering Invitel started life as a traditional telephone company, TV is playing an ever more significant role. Two out of every three new residential sales in Hungary involve TV in some form,

Commercially, too, there seems to be plenty of upside positivity. “Demand for IT projects in general is growing, and people need access to data center services: we have a very strong pipeline of customer requests in that area. Our bread and butter data center service is plain old server hosting, but our enterprise customers are increasingly benefitting from our cloud infrastructure platform.”

Security and reliability are key customer requirements. “We are able to meet all the security requirements of extremely demanding customers such as banks,” Blunck says. And because they can do that, they can offer better services to other clients, too. “We have redundant power supply, fire suppression, 24/7 monitored security.

We can offer customers a better product at a lower price than they can do for themselves.”

That’s physical security, but cyber security is also becoming more popular, partly driven by stories such as November’s Tesco Bank hack in the U.K. where some 40,000 customer accounts saw “suspicious” activity, with money stolen from at least half of those accounts. Such attacks are concentrating minds, Blunck says.

“We are finding more and more customers are treating IT security as something that the entire C-level suite needs to look at, and not just the CTO. We offer a comprehensive event monitoring solution which is constantly checking the network, looking for suspicious patterns, which can be defined for each customer.” If that represents the top end of the security spectrum, there are simpler things that can also make a difference, such as making sure servers have the correct patches and that software is up-to-date.

“It’s not sexy James Bond type of work, but it is just as important,” Blunck insists. And for a firm like Invitech Solutions, which can take customer’s data on a single unified journey from hard drive, through local area networks, wide area networks to the data center and the servers, it is a simple and effective way of offering peace of mind.

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3Special Report BBJ

Deals of the Year 2016

State activity less visible on Hungary’s M&A market

Having survived a few hazy years after the global financial crisis hit Hungary, the country’s M&A market is now showing a stable recovery pace.

But while investors previously favored IT and the banking sectors, this year they focused more on the manufacturing sector.

The dominance of domestic transactions continued in 2016.

ZSÓFIA CZIFRA

Hungary’s M&A market had got back to its feet again by the end of 2015 and is now at its pre-crisis level. The market saw a stable first six months this year, the estimated market size increased by 9% in terms of value versus the first half year of 2015 and by 21% versus the second half year of 2015. In the first six months in 2016, 64 deals were disclosed and published in Hungary, which is a 9% decrease compared with H1 2015. Since the first half year of 2011, when 69 deals were closed, this has been the third most active period, in terms of the number of publicly disclosed transactions, the latest available M&A barometer by EY reveals.

Unlike in previous years, manufacturing was the most active industry in Hungary, ahead of the IT and technology sector that has led the market for many years.

According to the EY study, in the first half of the year, 11 deals occurred in this sector compared to eight deals in the same period in 2015. The manufacturing sector was dominated by strategic deals in terms of volume of transactions and foreign investors, mainly from Germany and Italy, performed six out of the 11 transactions.

Although the year hasn’t yet ended, and therefore no exact figures are at hand, based on transactions already published and according to feedback from market players, EY forecasts that the mergers and acquisition market will see a weaker second half year after closing a strong first half, Margaret Dezse, partner and head of transaction advisory services at the Big4 company told the Budapest Business Journal. According to her, this is mainly due to the fact that the investment period for the JEREMIE funds has closed, and that there is thus far no information about

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Capital Association, Baker & McKenzie and M27 Absolvo.

Sellers will also be active on the market, and the fact that Hungary is among the top three investment targets of the region is good news for local companies.

Also worth mentioning is that Hungary is the most attractive country in the region when it comes to venture capital investments: 30% of all VC investments were realized in Hungary. Therefore several exits will likely take place in the future, strengthening the supply and thus generating competition on a market where several thousand enterprises now face the problem of succession.

MOL snaps up Agipʼs filling stations. Lars Höglund, MOL Group retail senior vice president, explained the rational behind the move in an interview with the BBJ in our September 30 issue. any significant number of venture capital investments in the second half of the year.

Domestic transactions continue to dominate the M&A market, and this hasn’t changed for the past six years, says Dezse; in 56% of the deals both the target and buyer were Hungarian entities. The most frequent origin of inbound investments includes USA, Germany, Czech Republic and Italy.

State dominance less visible The Hungarian state’s activity decreased on the Hungarian M&A market in the first half of the year, compared to previous years. It is worth noting that while in the last three years the state was rather on the buyer’s side, in this case it appeared as the seller.

“The state continues being an important player of the domestic M&A market, but even with the past few years in mind, we wouldn’t call that role dominant,” Dezse opined, adding that there are certain sectors, however, where state activity is rather outstanding.

It is difficult to assess the role of the state on the transactions market, Tamás Simonyi, director at another Big4 company, KPMG, told the BBJ. There are deals where, while a privately owned company plays the role of the buyer, it is widely known that the company has very good relations with the government, which makes it hard to decide whether this is a state or a market transaction, Simonyi said. As an example, he mentioned the Hungarian media market where many of the media outlets are now, as a result of several acquisitions that took place in the past one or two years, in the hands of companies said to be on friendly terms with the current administration.

As strategically important acquisitions have already taken place, Ervin Apáthy, director of corporate finance at PwC thinks that the state and state-owned companies will be less active on the buyer’s side.

Banks relieved

According to Simonyi, it is a significant achievement that during the year banks have cleansed their commercial real estate-backed non-performing loan portfolios by selling them to funds. Erste Bank has disposed of its non-performing mortgage portfolio, which is an important landmark transaction. Should there be viable demand for credit, some of the banks will find it easier to lend more.

As for the whole year, Simonyi thinks that while the value of the market is not likely to reach last year’s total, the number of deals might be higher in 2016. “State dominance will continue, albeit in a less visible fashion,” he summarized.

“The lively activity seen on the market in the first half year continued through the second half of 2016, and for the remaining days of this year, we expect closures; there are several deals to be closed at PwC too, both on the seller and the buyer side,” Apáthy from the PwC told the BBJ. He added that some of the deals might only be realized in 2017.

According to Apáthy, foreign buyers are coming back. “The effect of the current [credit rating] upgrades, together with the somewhat softening judgment of Hungary, is significant. We expect an even more spectacular acceleration on the market from next year,” Apáthy said.

Competition to pick up As for the future, experts expect a livening competition and strengthening supply on the market next year. Although there has been a setback in the first three-quarters of 2016, experts and investors expect a boom in the coming period, as a great amount of liquid capital is seeking its final target.

Companies listed on the stock exchange or private equity firms have a pressure to grow, so a good amount of deals are expected in this area as well, as concluded at a recent conference organized by the Hungarian Private Equity and Venture

Most important transactions of the year IBM bites into Hungarian startup The year kicked off with a large-scale international IT transaction: In order to expand its cloud-based computing services portfolio, IBM purchased Ustream, a seller of video streaming services, in a deal valued at USD 130 million. Co-funded by Hungary’s Gyula Fehér, Ustream is based in San Francisco, and had about 300 employees in January.

South African company acquires Hungarian nutrition firm A private equity fund (PEF VII) managed

by Polish Enterprise Investors, together with its minority co-investors (including Morgan Stanley Alternative Investment Partners) agreed to sell a 100% stake in Hungary’s Scitec Nutrition, to Ascendis Health, a South African publicly listed health and care brands company in May. The value of the deal was EUR 170 mln.

Richter buys Swiss biotech firm Hungarian pharmaceutical company Richter acquired Swiss biotech company Finox Holding for CHF 190 mln (USD 194 mln) in June, expanding its presence in major European markets. The deal gives Richter global rights for Finox’s female infertility medicine Bemfola in all markets apart from the United States. With the deal, the Hungarian drug maker will be able to reduce its reliance on its biggest market, Russia, and also in Ukraine, which has been hit by an economic crisis.

Hungarian haulage company head retires Private equity firm Mid Europa Partners acquired Waberer’s International Nyrt. from its founder, György Wáberer in June. With the deal, Mid Europa increased its stake from 56.8% to 97.1% in the company. Wáberer also announced his retirement.

MKB-Euroleasing Autópark sold ALD Automotive acquired 100% of the shares of the Hungarian fleet management

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MOL completes ENI acquisition Hungarian oil and gas group MOL announced at the beginning of August that it had completed the acquisition of ENI’s Hungarian Downstream oil business. As a result, MOL’s retail network grows by 173 service stations.

MOL has been actively expanding its regional network of filling stations.

Last July, the company acquired ENI’s Czech and Slovak downstream business, including the Italian company’s retail network under the Agip brand. In April 2016, the European Commission green-lighted MOL’s acquisition of ENI’s Slovenian retail and wholesale business.

Banking sector had busy year A long-awaited deal sealed The Hungarian state and the European Bank for Reconstruction and Development (EBRD) in June finalized the acquisition of 15% stakes each in the local unit of Austrian banking group Erste, as per an agreement made in February 2015. Hungary reportedly paid HUF 38.9 billion for its 15% stake, which it acquired through a firm called Corvinus Zrt. Ten days after the deal was closed, Austria’s Erste Group raised capital at its Hungarian unit with the sale of about HUF 78 bln in new shares, which were subscribed through a private placement.

Budapest Bank – the state can’t get out The Hungarian government’s efforts to sell Budapest Bank have stalled, raising doubts about whether it will be able to meet a pledge it made in 2015 to sell majority shareholdings in the sector within three years. The government bought the bank last year from General Electric Capital Group for USD 700 mln.

The deal was funded from forint-based market financing raised by Corvinus’ parent, the Hungarian Development Bank (MFB).

MKB Bank sold There was speculation that the government would merge Budapest Bank with MKB Bank, which the state took over from BayernLB in 2014, to further strengthen the building of a domestically-owned banking champion, despite the different profiles of the two banks. Instead, the state sold its holding in MKB to a consortium of private investors for USD 134 mln in June. Hungarian private equity fund Metis bought a 45% stake, Blue Robin Investments SCA also took a 45% stake and Hungarian pension fund Pannonia acquired 10%.

OTP buys AXA Bank Hungary’s OTP Bank completed the acquisition of Brussels-based AXA Bank Europe’s retail lending and savings, as well as its corporate portfolio in Hungary, at the beginning of November. The two parties signed the agreement about the deal in February.

OTP said at that time that that the deal would boost its mortgage portfolio by almost 25%.

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Great deals in manufacturing

ThyssenKrupp Ferroglobus buys IB Andresen Industri Hungarian ThyssenKrupp Ferroglobus Kereskedelmi Zrt. acquired Győr-based Ib Andresen Industri Magyarország Kft. in its entirety through its own resources, taking over leadership in February. The new company operates under the name Materials Processing Hungary Kft. Italy’s Sofidel acquires Forest papír Italian Sofidel Group signed a deal with Hungary’s Forest Papír Kft in March. The transaction included the acquisition of the Forest brand of tissue products like toilet rolls and kitchen paper, as well as finished product sales in the brand and private label segments. Sofidel also bought converting lines in Lábatlan and Leányvár and a converting plant in Piszke with an overall converting capacity of 30,000 tonnes.

Zrínyi Nyomda takes over local peer Zrínyi Nyomda, the Hungarian subsidiary of Germany-based printing firm Euro-Druckservice (EDS), acquired its Hungarian peer Ipress Center Central Europe in November. The price of the deal was not disclosed.

Media market restructuring Mediaworks gets foothold in regional press Without disclosing a purchase price, Mediaworks Hungary, established by Vienna Capital Partners two years ago, announced in July that it intended to buy Pannon Lapok Társasága Kiadói Kft. (PLT). The Hungarian Competition Authority later approved the deal. PLT published county dailies and has local digital media channels in four counties (Fejér, Vas, Veszprém and Zala) in western Hungary.

Opimus buys Mediaworks In October, Hungarian holding company Opimus acquired Mediaworks from Vienna Capital Partners. Opimus Press Zrt., part of the Opimus Group, is a firm affiliated with Lőrinc Mészáros, the billionaire mayor of Prime Minister Viktor Orbán’s hometown of Felcsút.

Only two weeks before the deal was revealed, Hungary’s largest left-wing daily Népszabadság was shut down without warning.

Left-wing daily swaps ownership Hungarian left-wing newspaper Népszava was sold to Swiss-owned Marquard Média in October. The paper had been struggling financially for years. The sale does not affect Népszava Lapkiadó Kft., but it does concern the publishing rights of the paper, which are currently held by TGD Intermedia SA, which is tied with a Socialist Party politician.

Mészáros buys Echo TV Owner Gábor Széles sold right-wing Hungarian commercial television channel Echo TV to Lőrinc Mészáros in November.

No purchase price was revealed.

Figyelő gets new owner Terror House director and government commissioner Mária Schmidt purchased Hungarian business weekly Figyelő in December. The business weekly’s circulation is reportedly 7,000 to 8,000 copies.

EXPERT OPINION

Short-term problems before longer-term gain Some view “interesting times” as a Chinese curse. Others see opportunities in change. One thing is certain: this is an exciting period for Hungarian real estate.

“We are living in a very exciting and interesting period for real estate,” says Valter Kalaus, managing partner, VLK Cresa, the tenant representation specialists.

“In the last four to six years, we have not seen much activity at all.

Approximately one year ago, that changed dramatically. We have seen a lot of development activity, and we now have a dozen new office buildings under way, mostly in the Váci corridor and the south Buda sub-markets. They will bring 300,000-400,000 sqm of new office space, adding approximately 10% to the existing stock of 3.3 million sqm, of which 2.6-2.7 million sqm is speculative class “A” and class “B” offices, and the remaining 700,000 is owner-occupied.”

These new office buildings will come on to the market in late 2017 or early-to-mid-2018, but that is of little comfort if you are looking for office space now.

“Next year, tenants who are up for lease renewal will have a very difficult situation,” warns Kalaus. “Right now the market is very tight for space.

Vacancy rates are very low, below 5% in south Buda. Rental rates are going up, incentives are decreasing. It is definitely a landlord’s market.”

The investment market has also seen a sudden reawakening. “Up to 2014, we have not seen much investment, mainly because banks weren’t lending. A few people were selling, or trying to, but they were asking very high prices, and with no financing on offer, no one was buying. That all changed with the sale of the Green House by developer Skanska Property Hungary to Diófa Fund Management two years ago. In the last 24 months we have seen 25 investment transactions in the office market alone. Of those, 12 have taken place in 2016.”

OPTIONS Tenants need to understand their options, Kalaus says. With a limited amount of new supply for the next 18 months, the best advice would be to try and get a short-term lease extension, but that can be very difficult, as landlords of existing buildings are also trying to take advantage of the current situation.

Valter Kalaus, managing partner, VLK Cresa.

“It is extremely important to have representation, a good advisor who knows what can be done and what should be done. On the Váci corridor there will be four or five new office buildings that, superficially, appear to be very similar. A tenant representative can help you understand the differences and which will work best for your business. And even if you are on good terms with your landlord and are able to secure a rent reduction or lease extension, that doesn’t mean it is the best deal available on the market. You will need outside, specialist help to attain that.”

CYCLICAL BUSINESS Real estate is a very cyclical business.

If today’s market is a landlord’s, it won’t always be so, Kalaus counsels.

“Two years from now we can expect increased supply, and demand will not be able to keep up with this. We will see rental rates stop rising and incentives come back as vacancies rise. Some new companies might come to the Budapest market, but almost all the major players are already here, so there is unlikely to be a large influx of new businesses to take up space. There is potential for more buildings beyond those we already know about, and some developers are talking now, in the marketing phase, about coming to market. But most still want to secure an anchor tenant before committing to actual construction. The braver ones started a year ago and will complete in the next three-to-six months. They will definitely have a competitive advantage, but we are not at the stage where we can expect many purely speculative projects to go ahead.”

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company MKB-Euroleasing Autópark and its Bulgarian subsidiary MKBAutopark EOOD. The sale was closed in June.

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2016: the year real movement returned to the real estate investment market

In what is arguably the biggest single asset transaction in the Budapest office market, the Austrian CEE specialist investor CA Immo acquired four buildings totaling around 70,000 sqm of space at the Millennium City Center on the Pest bank of the Danube from TriGranit and Heitman in September for a reported EUR 175 million. This has set a new post-2007 benchmark.

GARY J. MORRELL

Yields in Budapest are compressing and Nordic Light was not officially offered to the market but a deal was agreed that is due to close at the turn of the year. investment volumes are set to be the highest since the economic downturn.

Competition for product is increasing with That wasn’t to be the only signal of the 60 mln, liquid in terms of future re-sale Magyar Posta Real Estate Investment 5-7 bids for each asset. growing presence of institutional investors potential and has future potential rental Fund, managed by Diófa Fund At the end of March, Zeus Capital in Hungary; in September Germany- growth. This is a typical deal that other Management, forward purchased the Management had purchased the based asset manager Corpus Sireo investors want to do.”

12,700 sqm V17 office building from Wing 21,000 sqm Váci Corner in the Váci út purchased the 25,500 sqm landmark Park for an undisclosed fee in the second half business corridor for an estimated EUR Atrium office center from Accession Fund, Flagship store of the year. The office market is recording 55 mln from HB Reavis (at the time the managed by GLL Real Estate Partners, positive indicators as Wing is also biggest deal of the year). Zeus Capital for a reported EUR 50 plus mln. “This was In the central fifth district, Horizon developing the 57,000 sqm built-to-suit Management was an SEE investor and sold at the top of the market and has again Development delivered 6,200 sqm of Váci 1 Magyar Telekom Group headquarters. subsequently saw the opportunities in the been sold to new German money,” said retail space fully let to H&M in May that now The circa HUF 50 billion project is due to Budapest office market.

Tim O’Sullivan, head of capital markets serves as its flagship store in Hungary, and complete in the second half of 2018. This Elsewhere in Budapest, Europa CBRE, at the Property Investment Forum is, indeed, the largest H&M outlet in CEE. is currently the largest single block office Capital and its local partner, 2016, organised by Portfolio and RICS. The classic, UNESCO World Heritage listed center under construction in Budapest, ConvergenCE sold of the 23,000 sqm “The yield was sub-7% for an asset that is Central European building with 13,700 according to Wing.

Eiffel square to the Germany-based more than 12-years-old. This is an asset sqm of office, retail and service space was Benjamin Perez-Ellischewitz, head of asset and investment manager KGAL in with sustainable income, a proven track subsequently purchased by the Munich- capital markets at JLL, estimates total record, not too big as it is under EUR based GLL in November. investment volume for the year at EUR June for an undisclosed fee.

1.8 bln-1.9 bln depending on which deals close and which are held over till next year. He divides the total as 40% office, 30% retail, 15% logistics and the remainder hotels and buildings for refurbishment.

“More core deals are needed before the major institutional German investors such as Deka re-enter the market,” he said.

CBRE’s O’Sullivan puts what he defines as “the true investment total” so far this year at EUR 1.2 bln. He sees office as the most popular asset class with about 50% of the market, followed by retail and industrial. “There is a lot more available in the office market than in the retail sector. Most of the current office assets under construction will be at least 50% pre-leased before construction is finished. The current pipeline is sustainable but I would not like to see a lot more. There has been three or four significant industrial deals concluded this year, although there is no new supply in this sector to maintain this The landmark Park Atrium office center was purchased in September by Germany-based asset manager Corpus Sireo. volume next year,” he commented.

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EXPERT OPINION

CA Immo acquired four buildings at the Millennium City Center for a record EUR 175 mln.

As part of a CEE portfolio transaction Logicor, the logistics platform of Germany’s Blackstone, acquired the one million sqm Immofinanz logistics platform, including around 100,000 sqm in Hungary, in February. In another deal, the Hungarian OTP Real Estate Investment Fund purchased a 35,000 sqm logistics facility in south Buda in June, following the purchase of a 30,000 sqm logistics center in Győr two months earlier.

‘Double that figureʼ Mike Edwards, head of capital markets at Cushman & Wakefield, expects overall investment volume for the year to be close to EUR 1.5 bln. “Obviously we can always argue about how this number comes about and there are always some deals that it could be argued are not transactions. If we look at where we were a year ago then we are double that figure. We have seen the re-emergence of cross-border funds, although domestic funds have been absolutely critical in recent years. Diófa Fund Management have been buying stock that previously would have been brought by the German funds,” he said at the Property Investment Forum.

Prime investment yields are estimated to be mid-6%, with high street yields having been transacted at 6% and below.

Perez-Ellischewitz estimates that prime office yields will fall to the 6.5-6.25% range in the next 12-18 months, retail could fall to 6.25% (although there is a limited supply

of prime assets and liquidity) and logistics will fall to 8%. Across all asset classes he sees 25-50 basis point compression in the coming year.

O’Sullivan estimates that yearend office yields will be sub-7% compared to shopping centers at 6.25% and industrial at around 8.25%, and hotel will see a drop, although there has been no big transaction to prove this.

One of the most established developers in the Budapest and CEE market, Skanska, has delivered the two-phased, 26,200 sqm Nordic Light on the ever popular Váci út. Nordic Light was not officially offered to the market but a deal was agreed that is due to close at the turn of the year after discussions with a handful of investors. The company sells 5-6 offices a year in Central Europe and takes around 20-25% of the total volume of office buildings sold according to Skanska. “In Poland, our major investment clients are German open-ended funds and domestic capital activity has never exceeded a 10% share of office transaction market. However, throughout CEE there has been a very strong emergence of local open-ended funds. Last year Hungary saw a record domestic capital transaction share of 50%, but this year it is expected to be lower,” said Adrian Karczewicz, head of divestments CEE at Skanska Commercial Development Europe.

He estimates prime office yields for Budapest at 6.5% compared to sub-5% for Prague, close to 5% for Warsaw and 7.5% for Bucharest.

Magyar Posta Real Estate Investment Fund forward purchased the V17 office building.

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may arise (e.g. the hands of the parties are tied by the provisions of consumer Dr. Gergely protection in the case of consumer Szalóki debtors). We do not have space here Attorney at law to list and introduce all such problems exhaustively.

To illustrate the SCHOENHERR HETÉNYI complexity of the issue: the provisions ATTORNEYS AT LAW of the Hungarian Civil Code on the transfer of contracts, subrogation Is selling the ultimate solution of rights and assignment of claims for banks to handle their non- will be confronted with secured performing loans? What can be transaction regulation, and all of the done if restructuring is not sufficient aforementioned with the terms of the anymore? In the last couple of underlying agreements. This requires years, these were the most critical a thorough due diligence in all cases. questions for the Hungarian financial The guidelines of the Hungarian National Bank will also need to be sector. But insecurity regarding the taken into consideration when setting implementation of large scale non- up the structure of a sales transaction, performing loan sales and how to besides the provisions of the banking tackle the (regulatory) difficulties now laws. All of these are complemented seem to be over. by the specific rules applicable to the different areas of law depending on Non-performing loans have been on the the feature of the transaction (e.g. the rise in both the retail and commercial aforementioned consumer protection) sectors in Hungary, and are causing and on the characteristics of the considerable problems in the Hungarian parties (e.g. competition law or labor financial sector. The sale of non- law), and they also have a decisive performing loans was discouraged by an effect on the transaction structure. unfavorable legal climate. Working out The final structure of the transaction of such non-performing loans, in turn, is realized in the form of separate is considered an unattractive option as but closely connected contracts that effective legal measures are lacking, with have been developed to address all of the aforementioned factors. The existing options favoring debtors.

The purchase of loan receivables is a harmonization of such contracts is a licensed activity in Hungary, meaning that particular challenge, even at the stage prospective buyers are expected to have of preparation of the first drafts, but the a valid Hungarian banking license (or a more difficult part is maintaining balance license issued by a European Economic throughout the negotiations.

Area member state passported into Schoenherr has provided an attractive Hungary). The licensing requirement, as solution to its clients in the last two years in the main impediment to the sale of non- these transactions with its new approach performing loans, was reinforced by the of integrated regional cooperation. That volatility of Hungarian legislation, the lack is how we utilize our regional market of effective enforcement measures and the experience gained in the past years in lack of an effective secondary loan market. Hungary and throughout the CEE and SEE The deleveraging of non-performing regions. We have developed innovative loan portfolios is particularly important legal structures and efficient procedures for Hungarian banks forced on the one to tackle all of the aforementioned legal hand by the market, and on the other hurdles. Schoenherr Hungary has used hand by regulatory pressure. After the these procedures to enable its clients financial crisis, banks were confident to conclude transactions effectively and about their capability to recover claims efficiently, both on the seller and buyer from non-performing debtors and to sides. In the biggest deal in the banking enforce their collateral. It is now apparent sector this year, Schoenherr Hungary that, with the steadily increasing pressure assisted a major Hungarian bank on banks, the traditional work-out throughout the sale process of a nonprocess does not produce results within performing secured retail loan portfolio the desired time period and, therefore, in Hungary. the banks have turned towards the sale of these non-performing loans.

Many large-scale, complex legal problems arise with the sale of nonperforming loans, and, depending on the attributes of the non-performing loan portfolio, other legal difficulties www.schoenherr.eu

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Deal of the Year – How can Schoenherr assist in the sale of non-performing loan portfolios?

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CEU BUSINESS SCHOOL

CEU: Branded content needs to become omnichannel Brunó Bitter Adjunct Senior Lecturer of Marketing CEU BUSINESS SCHOOL

The importance of producing branded content has been growing continuously since the invention of the web. With the benefit of hindsight, we recognize four large waves pushing the need for branded content in the past 20 years.

Wave 1 – Dot Com In the early years of the web there was a naive vision that “if you build it they will come”. With the internet quickly reaching the first milestone of more than 1 million websites it became clear, however, that a website in itself is not an enduring attraction. More was needed and that “more” was good content. Content became key to driving inbound traffic and leads.

native advertising, brands, agencies and

publishers, all need to become savvier in The key challenge for the next creating content. years is to infuse content into From multichannel to the customer journey and to omnichannel integrate all these channels to Content marketing is multichannel: it is effectively achieve omnichannel. happening in social media, in SEO, in

native advertising, in PR and beyond.

The key challenge for the next years is to Wave 3 – Organic Search infuse content into the customer journey For many years, SEO was a technical and and to integrate all these channels to narrow field, promoting sites to increase effectively achieve omnichannel. The the number of backlinks or inbound links. heart of the problem is that many of In 2011, Google introduced an update to these channels are now separated by its search algorithm named “Panda” and departments, by agencies, by budgets, suddenly SEO and content marketing by disparate briefs – by silos –, as if they were no longer two disparate marketing were very different things. The truth tactics: Google made it clear that they is, of course, that all these channels go would reward brands that publish quality, together, overlap, blend, cohere. We need consistent content. content marketing omnichannel more than ever.

Branded content has become the lubricant holding together the ecosystem of paid, owned and earned digital media. Wave 2 – Social Media the early years of social media Content marketing has hit In there was a “grace period” for brands. the mainstream threshold On Facebook, if a company collected Wave 4 – Native Advertising followers on its brand page their fans in the past two-to-three would see all their updates. Then, around Native ads match the visual design of Facebook debuted a new type of the experience they live within, and look years with more than 70% 2009 default sorting order, based on popularity. and feel like natural content. The largest of B2C and B2B marketers Brand advertising had to adapt quickly social platforms monetize with native, to this evolution of Facebook’s algorithm in-feed ads, including Facebook, Twitter, in Hungary now saying and marketers had to learn that engaged Instagram, and Tumblr. In Hungary, in conversations would get their posts and particular, 444.hu and CEMP’s index. they plan to increase their advertisements shown more regularly. hu stands out on this front. The rising content marketing efforts This increased the need for quality prominence of native advertising content that can make users want to is also fueled by the phenomena of next year. ad-blockers. To excel in this new era of engage in the conversation.

Brunó Bitter is digital communication and branding expert, founder and CEO at Next Wave Europe (nextwaveeurope.com), senior partner at Kaikaku Consulting and Adjunct Senior Lecturer of Marketing at CEU Business School.

This column is part of a continuing series of opinion pieces from experts at the CEU Business School in Budapest. The opinions stated here do not necessarily reflect those of the Budapest Business Journal.

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2016. 12. 07. 22:32

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Budapest Business Journal | December 9, 2016 – January 12, 2017

What will almost certainly be the biggest CEE M&A deal since the crisis could be completed before Christmas, according to experts familiar with the details who have spoken to the Budapest Business Journal under Chatham House rules (meaning we cannot identify them).

ROBIN MARSHALL

The M&A involves the sale of SABMiller’s regional brewing operation, which includes such famous beers as Czech Republic’s Pilsner Urquell. The major business is in Poland and Czech Republic, but there are also breweries in Romania and Slovakia. In Hungary it will mean new owners for Dreher Sörgyárak Zrt. and its Dreher, Arany Ászok and Kőbányai Sör brands.

The sale comes as a result of the October merger between Anheuser-Busch InBev (AB InBev) and SABMiller, the world’s two largest beer companies. While there has been speculation the European Commission imposed the spin-off of the CEE breweries as a condition for it granting regulatory approval to the deal, our sources indicate AB InBev and SABMiller rather went to the EC and offered the sale voluntarily as a sweetener. The divestment allows the new mega brewer to concentrate on markets like China and, most especially, Africa.

Strategic Those in the running for the CEE brewers include private equity firms, other international brewers and one Czech group which seems mostly interested in bringing Pilsner Urquell back into Czech ownership. Japan’s Asahi has already brought the Peroni and Grolsch brands in an earlier Western European spin-off, and presumably would see synergies

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and strategic benefit in buying some or all of the CEE brands. Intriguingly, Hungarian oil and gas giant MOL had earlier indicated an interest in bidding in a consortium with Polish partners, although it now seems to have dropped out of the picture.

Sources tell the BBJ that binding bids are due in mid-December. From there, things are likely to move at pace, much as M&A deals did at the height of market activity around 2007-8. AB InBev may go forward with a couple of bids, but it is just as likely to pick a preferred bidder and look to have a sale and purchase agreement within two or three days. The whole thing could be signed before Christmas. Based on what is probably best be described as “informed speculation” of the preliminary bids, the spin-off could well be worth EUR 5 billion.

The AB InBev-SABMiller merger has been valued by many at around USD 100 bln. According to the Financial Times, it is the biggest M&A deal ever in the U.K. (SABMiller was Londonbased), and the third-biggest globally.

The merged entity is now the world’s fifth-largest consumer products company (bigger than Coca-Cola, which has been suggested as the next potential target, but behind Nestlé, Procter & Gamble, PepsiCo and Unilever in revenues).

It is now responsible for selling one out of every four beers around the world.

EXPERT OPINION

The world of M&A transactions according to a tax advisor Judit JancsaPék Tax Advisor | Partner LeitnerLeitner Mergers and acquisitions can have many advantages if all goes well. But they can also be harmful and produce integration difficulties, resulting in financial losses and a less productive workforce if the process does not work as planned.

M&As typically involve a substantial amount of due diligence and transaction planning by the buyer and in some cases by the target too.

Before committing to the transaction, one should ensure one knows what one is buying. A due diligence aims to reveal the nature and extent of the target company’s contingent liabilities, problematic contracts, uncovered financial positions, historical taxation failures, litigation risks and much more.

within the post-acquisition structure.

It is also necessary to ensure such tax positions are safe by regular consultations with, or requests for rulings from, the financial and tax authorities, and ministries.

Successful mergers, de-mergers, spin offs and other corporate transformations are made by good timing and thorough planning. However, in Hungary a domestic merger takes about nine months, while a crossborder matter could last 11 months, and involve two financial closings. The owners may combine the financial closing necessary for the merger with the statutory financial closing of the participating entities, thus eliminating one extra closing and reducing the transition costs. You can shed an extra closing either at the beginning of the transaction and finalize the merger around September/October, or at the end of the transaction by starting it with an extra financial closing in March/ April and then finalize the merger in December.

Nowadays, the importance of tax due Such corporate transformations also diligence is increasing even more: require the joint work of lawyers, problems revealed in VAT matters or auditors and tax advisors, which have employment taxation could create the potential to prove a disaster without incredibly high risks for the buyer, effective coordination. Just a few days’ especially if we consider the 50% delay in the registration of the merger, general tax penalty for unpaid taxes for example, from December 31 to and potentially unlawful deductions. January 3 the next year, results in the A mistake or non-proper treatment of obligation to handle the three days such general tax types might easily in between as an additional financial lead to a system error that would be and tax year. That results in an extra a disappointment, to say the least, if financial year-end closing, B/S and P/L revealed by the tax authority during the preparation, audit and tax return filing first audit after the deal. obligations.

Obligations connected with transfer pricing (clearing prices between associated companies) is another related area that carries not only a risk of tax differences, but also very high default penalties for potential noncompliance. The default penalty of HUF 2 million which is due per transaction, per annum is the highest within the region, without even mentioning the potential multiplication of such fines.

The increasing number and volatile nature of Hungarian sectoral industry specific taxes also represents a high risk factor, especially for foreign investors.

When thinking about the taxation issues, one should also concentrate on the future; can the tax advantages or allowances of the target be maintained, or might new ones may be achieved

Planning these activities carefully and properly anticipating the related issues that could arise may determine the success or otherwise of the M&A deal.

LeitnerLeitner undertake to coordinate the entire M&A procedure, to carry out the financial and tax due diligence, to cooperate with lawyers, to help in contract negotiations, lead the transaction structuring and postacquisition planning. We are also support our clients in leading the mergers, organizing the participants, ensuring tax positions by rulings and negotiation with financial authorities, and we also participate in the deal as a merger auditor.

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

EUR 5 bln CEE deal to see new Dreher owner by Christmas?

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An Englishman celebrates a Hungarian countryside Christmas

This will be my second Christmas in Hungary and I’m looking forward to it in a way that I haven’t since I was a child in England.

DAVID HOLZER

A couple of days before Christmas last year, my partner’s mother bustled into our apartment. She’s a whirlwind of energy who radiates the kind of glamour I associate with a retired movie star like Gina Lollobrigida or a tiny Ava Gardner. I certainly don’t picture her cooking.

But cook she did. All day. Shoulder to shoulder with my partner, their perfectly coiffed blonde heads bobbing as they chattered away in a kitchen filled with

light and the most wonderfully aromatic warmth. When my partner’s mother finished, she washed her hands, rolled down her sleeves, bundled herself up in her coat, scarf and fedora and vanished out the door. We didn’t see her again until the New Year.

I was baffled until my partner explained that generations passing down recipes and cooking together is fundamental to the Hungarian Christmas ritual. Ever since my partner’s father passed away, her mother doesn’t like to cook but, at Christmas, tradition demands that she does. It is, and ever was, mainly about family and food.

Food, glorious food All I knew about the Hungarian Christmas before I came here was that people kept carp in the bath. We have a shower so I was curious to see how that would work.

It turns out that the reason the carp is kept in the bath is because it’s the main

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ingredient in Hungarian fish soup, always eaten at Christmas. When my partner was growing up, families would buy carp from the men who fished the nearby Tisza and keep them alive in the bath in river water.

We buy our fish soup from the wonderful Kiskőrössy Halászcsárda on the banks of the river in Szeged. I can’t imagine any other fish soup ever being as good, even homemade. No carp in the bath for us.

For some Hungarians, especially in this part of the country, fish soup wasn’t enough of a luxury at Christmas. They would eat meat soups made from gyöngytyúk (guinea fowl) or fácán (pheasant). Hunters would prepare a special gulyás (goulash) made from wild boar or venison. In many places they still do.

Another meat luxury was foie gras or, for some, goose liver.

Roast goose or duck would be the main meat attraction, although one Christmas my partner’s family made a point of eating the cockerel that had attacked her earlier in the year. Pork also figured heavily on the massive menu. Back when

countryside families killed one pig a year, this would often happen just before Christmas, or even around three or four on Christmas morning.

Today, some Hungarian country hotels will invite guests to start the coming year with a ritual pig slaughter as part of the festivities. That strikes me as somewhat bizarre, but then I’m not Hungarian.

Every part of the pig was used. Much of the meat was cured and smoked and kept outside throughout the bitter Hungarian winter. At Christmas, kocsonya or pork jelly and smoked sausage were always offered to visitors.

Christmas töltött káposzta, cabbage rolls stuffed with meat and rice and baked in the oven, were also eaten in enormous quantities.

But what about the sweet stuff?

The chocolate challenge For the past month, my partner and I have been conducting a test that could determine the future of our Christmas.

Neil LaBute: Some Girl(s) Translated by Ildikó Ungvári Zrínyi Hungarian premiere

A middle-aged man is about to get married.

He decides to visit his greatest loves – meeting them all in a similar hotel room in different cities (the first is his first love, the second is the erotic, the third one is unique, the fourth is the one) – but finds no piece of mind, the women are worth much more than he does – and he must face a wasted, cowardly life at the end…

It is a highly enjoyable play, where the same actress plays all four characters in a bravado performance!

Cast: Lia Pokorny, Áron Őze

“CHRISTMAS LONG AGO WAS THE MEMORY OF A DREAM THAT SEEMED NEVER TO END. BUT SOMEWHERE IN THE MIDDLE OF THAT DREAM, I ALWAYS DID WAKE UP, JUST IN TIME TO ATTEND THE CHRISTMAS PARTY.” E.T.A. HOFFMANN, THE NUTCRACKER

Corinthia Hotel Budapest awaits you between the 27th of November to the 1st of January every day with something special to make this year’s Festive Season truly unforgettable!

Join us for the various activites during this merry time of the year!

RESERVATIONS AND FURTHER INFORMATION: +36 1 479 4720 · FESTIVE.BUDAPEST@CORINTHIA.COM 1073 BUDAPEST, ERZSÉBET KÖRÚT 43-49. · BRASSERIEANDATRIUM.COM/FESTIVE

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Set designer: Péter Enyvvári Costume designer: Anna Varsányi Dramaturgist: Ildikó Lőkös Director: Kristóf Németh

Neil Labute wrote his play Some Girl(s) in 2005, and it opened in London in May Premiere: December 15, 2016 2005 at the Gielgud Theatre. It premiered Further performances: 17, 28, 31 Off-Broadway at the Lucille Lortel December, 3, 4, 7, 17, 20 January Theatre, starring David Schwimmer. A film adaptation of Some Girl(s) premiered Rózsavölgyi Salon Arts on March 2013, starring Aday Brody. It & Café was played in Hungarian in Tárgu Mures, 1052 Budapest, Stántu Gheorghe and Timisoara. Some Szervita tér 5. • Tel.: Girl(s) premieres in Rózsavölgyi Szalon in +36 1 486 33 38 • Ticket Information: +36 Hungary. The unique feature of the play is 30 463 88 22 • szalon@rozsavolgyi.hu • that the four different female characters www.szalon.rozsavolgyi.hu • facebook.com/ are all played by Lia Pokorny. rozsavolgyiszalon

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Töltött káposzta, cabbage rolls stuffed with meat and rice and baked in the oven, are a staple of a Hungarian countryside Christmas.

Last year, we had the sneaking feeling that we’d selected the wrong kind of chocolates for our tree. This year we weren’t taking any chances.

We started with a bag of Szamos chocolates – called szaloncukor – and worked our way through them, awarding points to each chocolate. Next, we moved on to Stühmer, another good Hungarian

chocolate brand. Unfortunately, we ate so many chocolates and gave most of them the same rating so we’re no closer to making an executive decision as to which graces our tree.

Growing up, szaloncukor played a big part in my partner’s Christmas. They were attached to the tree with wire, unlike in rather more sophisticated Budapest

where they were tied on with cotton.

The trick was to eat the szaloncukor but leave the wrapper tied to the tree, giving the illusion that the chocolate was untampered with.

When families visited other houses, they’d try to spot from which of the szaloncukor on the tree the chocolate had been surreptitiously extracted. Adults would make a game of stealing each other’s szaloncukor. This was especially satisfying if a neighbor had a bigger tree, when it counted as a kind of revenge.

Apart from chocolate, plates piled high with beigli - walnut and poppy seed roll and cakes like Zserbó were always waiting for visitors. Zserbó or Gerbeaud is named after Swiss chocolatier Emil Gerbeaud who moved to Budapest in 1884 and transformed the Kugler patisserie into the world-famous Gerbeaud café.

Families also had – and have – plates of pogácsa and sajtos rúd, which are like cheese straws.

But one of the sweetest offerings, in both senses of the word, was the apple each family shared, cut into slices with one for every member, dipped in honey and eaten with walnuts. This sense of the family coming together through food also extended to members who were absent or had passed.

To give an example, my partner’s grandmother was famous in the family for her jams. For five years after she died, they would light a ceremonial candle, twist the lid off a jar and feel she was still with them.

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Family rituals After a gigantic dinner on Christmas Eve, my partner’s father would ring the bell to announce the arrival of Little Jesus, who brings the presents here, not Santa Claus.

The children would sing Hungarian Christmas carols before they opened their presents. Growing up in the 1970s and early 80s, my partner’s family – like most – had very little money so presents would be simple. A quartz watch, a board game like Gazdálkodj okosan társasjáték (think Hungarian Monopoly), or some Yugoslavian deodorant was enough.

Books were especially prized and every family gave these as presents.

Which maybe explains why so many Hungarians of my partner’s generation are surprisingly widely read.

At some point on Christmas Day, perhaps while the family watched a Tarzan movie starring Johnny Weissmuller – born in Transylvania in 1904 – my partner’s father would sit back in his chair and fold his arms over his impressive stomach. He would survey the plates of pogácsa, sajtos rúd, Gerbeaud cake, beigli, foie gras, kocsonya, töltött káposzta and who knows what else and say “This was a very rich Christmas for us, wasn’t it?”

In my experience, this Hungarian tradition of love and respect for family, food and ritual is alive and well. It’s beautiful, and I feel blessed to be part of it.

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A Champagne Christmas: a tale of two Houses

There’s nothing quite like Champagne for raising festive cheer and bringing in the New Year, and there’s plenty of fine stuff that reflects the breadth and depth of the world’s most highly prized sparkling wine filtering its way through to the Hungarian capital. The two houses featured here offer contrasting but equally mouthwatering takes on Champagne, which is made by the traditional method, whereby the second fermentation takes place in the bottle. The developing wine is left to pick up complexity from the yeasty lees with the yeasty plug later disgorged after a long period of ageing.

ROB SMYTH

Despite being the oldest Champagne house of all, dating back to 1729 and replete with UNESCO-listed cavernous crayères dug out of the chalk by the Romans, Ruinart is thoroughly modern in its winemaking methods. Winemaker Frédéric Panaiotis totally eschews the use of oak barrels for carrying out the first fermentation. Despite barrel fermentation becoming increasingly popular, or rather

coming back into fashion, he totally rules it out in future as his aim is to make Champagne of “aromatic freshness in a gently reductive style” and steel tanks will forever remain his vessel of choice.

Ruinart is famous for its Blanc de Blancs style of Champagne, which is only made from Chardonnay grapes that also give probably the zestiest and crispiest Champagne – before 1946 the red grapes of Pinot Noir and Pinot Meunier dominated the house blend. Like most big

houses, Ruinart buys in most of its grapes – 90% in Ruinart’s case.

The making of non-vintage (NV) Champagne involves adding a certain percentage of so-called reserve wines for the sake of consistency in house style, which is rendered necessary in such an extreme northern climate as Champagne.

To further emphasize the freshness of the wine, Panaiotis uses young reserve wines that are used up within two years – so a finished Ruinart NV is effectively a blend of three vintages. Ruinart Blanc de Blancs is suitably vibrant with aromas and flavors of lemon curd, lemon, pineapple, peach and a touch of struck match. It has dosage of 8g/l, which is the sugar added to counterbalance the high acidity of the cool-climate Champagne region. It is just the stuff to kick-start Christmas and to pick you up from a festive lull. It costs HUF 19,900 at Bortársaság, which stocks a robust range of Champagnes from a number of the leading houses. This is the same price at Ruinart rosé, which is a style I don’t really care for due to having tasted too many flat wines, but Ruinart’s one strikes a fine balance between fruitiness, freshness and depth.

A smaller fish in the sea of Champagne, but one of the most exciting I’ve tried lately that can be found here is Jacquesson. It has been 28 years since Jean-Hervé Chiquet and his brother Laurent received the green light from their

Late harvesting the Pinot Noir. father to take Dizy-based Jacquesson in a more quality-oriented direction, which centers around the concept of yielding less fruit, but riper. Jacquesson was one of a small number of growers with grapes still out at the beginning of October and the risk of leaving some Pinot Noir out on the vine paid off as the weather obliged and the Pinot managed to get that extra ripeness in the Indian summer of this otherwise troublesome vintage.

The brothers sold five hectares as they restructured and now own 28 hectares and buy in from an additional seven.

Christmas at the Corinthia In addition to the usual mix of Christmas and New Year dinners, Corinthia Hotel Budapest is running a series of brunches in its Brasserie & Atrium restaurant run from noon to 4 p.m., between now and New Year, each with its own theme. Its an ideal way to allow yourself a little down time. The costs is HUF 11,500 (EUR 36) per person and includes unlimited house wine, beer, soft drinks and hot beverages.

Advent Brunch (December 11) has salon music by the Csicsó Band and offers saffron-scented lobster broth, Advent suckling pig, a taco station, bread and butter cinnamon pudding and traditional Hungarian festive sweets. Home for Christmas Brunch (December 18) has music by actor and singer Dénes

Kocsis, and offers shepherd’s pie, roasted duck, an Asian live-cooking station and homemade pralines.

The Christmas Day Brunch (December 25) again has the Csicsó Band and you will be greeted by a charming ballerina and the Nutcracker Prince himself. Traditional dishes on offer, such as halászlé (fish soup), and töltött káposzta (stuffed cabbage).

The grand finale will be a French-style chocolate fountain and Royal sweets. Lucky New Year Brunch (January 1) promises authentic Latin music by the Patricio Baeza Band, and a combination of special breakfast dishes, omelettes, Hungarian lentil soup and pancetta, culminating with a selection of Royal desserts.

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New Year’s Eve

&

PARTY DINNER at Spoon!

H - 1052 Budapest, Tel: +36.1.411.09.33, +36.1.411.09.34 Vigadó tér 3. kikötő E - mail: spoon@spoonrestaurants.hu www.spoonrestaurants.hu

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A selection of some of Jacquesson’s Champagne vintages.

Jacquesson owns vineyards in two main areas: the Grande Vallée de la Marne and in the Côte des Blancs. Its production of around 260,000 bottles today is some 40% lower than in 1988. Jacquesson cultivates grapes and makes the wine in an “almost organic” manner, according to Jean-Hervé, who says they remain wary of “replacing a few chemicals with heavy metals, such a copper sulfate”.

Nevertheless, one-third of the domain is organically certified. In the vineyard there are devices attached to the vines

to cause “sexual confusion” to prevent butterflies mating. “It sure is frustrating for the butterflies,” he quipped. (For full on biodynamic wines check out the structured waxy Champagnes of Fleury which comes from the Côtes de Bars in the southern part of the Champagne region and is available in Budapest from the Terroir Club). Jacquesson favors vertical pressing in a Coquard press due to there being less movement of fruit. “We don’t want to spoil the fruit and the stems are never ripe,” explained Jean-Hervé.

In the cellar, the first fermentation is carried out in used oak casks, allowing the wine to breathe. Jean-Hervé and Laurent disagree with the notion that wine will age better if malolactic fermentation is inhibited, which prevents the conversion of the razor sharp malic acid (for some a trademark quality of Champagne) to softer, milky lactic acid.

“We favor malolactic fermentation most of the time, it depends on the wine. This is my 39th vintage and I’m still waiting for a non-acid vintage,” said Jean-Hervé.

Jacquesson neither fines nor filters, instead allowing clarification to happen naturally.

The great attention to detail comes across in Jacquesson’s Champagnes that strike an impressive balance between freshness and complexity with very low dosage that makes the wine taught and focused. Each bottling of Jacquesson’s main Champagne has a number that changes every year with the vintage mentioned on the back label. Cuvée 738, for example, is predominantly based on the 2010 vintage, while Cuvée 739 is mainly from 2011. A certain amount of each cuvée is kept on the lees and held back from the market and re-released years later as Degorgement Tardif i.e. late disgorged – which refers to the process of ejecting the lees from the bottle.

Jacquesson Champagnes are available at the recently opened Carpe Diem wine bar at Zoltán u. 9, in District V and from Finewines.hu. Carpe Diem has a tasting of Jacquesson wines on December 14 for HUF 19,900, featuring nine wines.

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Somló sparkler continues to shine While Hungary has a long tradition of sparkling winemaking, Hungarian traditional method sparkling is still very much a work in progress. While so many sparkling wines seek to impersonate Champagne, few get anywhere close but Kreinbacher’s traditional method offerings at least conjure up the Champagne experience, with the local Furmint providing that über crispy, structure-building acidity you’d expect from Champagne and indeed all high quality sparkling wine, but also local Somló flavor, for the reasonable prices of HUF 4,100 for the focused Brut Classic and HUF 5,300 for the fuller Prestige Brut.

They are made with the help of consultant Christian Forget, who is the cellar master of noted Champagne house Paul Bara, with the technology such as the Coquard presses and yeast also coming from Champagne.

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WHAT’S

ON

Fun things to d o in Budapest for the nex t t wo weeks.

PAYING HOMAGE TO ADELE It is short notice, but if you are lucky you might just get tickets for a slimmed down tour party of one of the great Gospel choirs: the Harlem Gospel Choir. Regular visitors to Hungary, this year the tour line up of nine singers will pay homage to Adele and perform a selection of her songs, including “Hello”, “Skyfall” and “When We Were Young”. The four shows will also feature two Hungarian talents, Linda Király and Noémi Arnóczky. The Harlem Gospel choir was founded by Allen Bailey in 1986 for a celebration of the anniversary of Martin Luther King’s birth.

When performing at home the full choir has 65 members spanning three different generations from ages 17 to 65. The choir has performed in the Vatican for Pope John Paul II and Pope Benedict XVI. Their cultural mission also carries a political message, which consists of empathy for

everyone, understanding and accepting in the names of faith, hope, peace and love.

HARLEM GOSPEL CHOIR: AN HOMAGE TO ADELE December 9, 3 p.m. and 7 p.m. at the Millenáris Teátrum December 10, 3 p.m. and 7 p.m. at the Hotel Boscolo Ballroom ACROBATIC BALLET A unique family show will be presented at the László Papp Budapest Sports Arena, with Tchaikovsky’s classical ballet, the Nutracker given a makeover. The Cirque De Monte Carlo and popular Hungarian violinist Edvin Marton have recreated this Christmas classic as a sensational acrobatic ballet show in which the world of circus and ballet are set in a new dimension. The Nutcracker’s music may be well known, but the organizers say Cirque

They also claim this will be the first time Ravel’s “Bolero” has been performed on three organs together.

RHODA SCOTT & XAVÉR VARNUS December 19, 7:30 p.m.

László Papp Budapest Sports Arena

Champion exhibition. de Monte Carlo and Edvin Marton’s adaptation promises an unforgettable experience.

THE NUTCRACKER December 20, 7:30 p.m.

László Papp Budapest Sports Arena THREE ORGANS AND A BOLERO U.S.-born, Paris-based African-American soul jazz organist Rhoda Scott (sometimes known as the “barefooted countess” from her habit of playing without shoes) will join forces with established Hungarian organist Xavér Varnus and up and coming local organ talent Balázs Bärnkopf, and the Art Anzix chamber orchestra. Combined, the organizers promise a concert that will “spice up the holiday spirit with deep emotions, dynamics, and a thrilling and uniquely sounding musical performance”, including classical and Christmas hits.

CHAMPION EXHIBITION An interactive exhibition featuring the most cutting edge technologies, impressive images taken from unusual perspectives and playful tests and building on the themes of sports, motion and becoming a champion opens in Budapest’s Millenáris on January 13.

“The January introduction will be the world premiere of the exhibition, followed by an international tour; however, as the technology is completely a Hungarian development, naturally we wished to introduce it to the Hungarian public first,” said main organizer Illés Gabriella. The “experience-expo” will introduce the general public to the world of sports with high definition pictures, slow motion recordings and visual solutions applied from exciting perspectives. The system is capable of monitoring the performance of the actively participating public by – playfully – monitoring the capabilities of each visitor, helping parents in choosing a sport discipline for their children, or even predicting their chances of becoming a champion.

THE CHAMPION January 13-mid-April, 2017 Millenáris, Pavilion D

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Walking the path of constant culinary evolution

Glamour and style: this is what awaits in terms of the design at the Arany Kaviár Restaurant, which although primarily known for its Russian signature dishes, keeps developing culinary excitement of such high quality that has brought a Michelin star within reach.

Statistically, nine out of ten restaurants go bust within the first five years of operation. So if a place like Arany Kaviár has been around since 1990, itʼs got to mean something. And it does. As co-owner Attila Molnár says, success relies heavily on constant reinvention in terms of the interior as well as the gastronomy. The latest development is a beautiful champagne garden facing the quiet backyard which can be opened at summer time.

a huge plus if you happen to be well- the original from Russia. Arany Kaviár known, like a politician, musician or film actually sells a gourmet selection of it on maker. its separate webshop. “Beyond caviar, every key Russian dish is on the menu, However, without the cuisine, this effort but they undergo constant evolution would be but a half-measure. The under the supervision of executive chef establishment is known as a Russian and co-owner Szása Nyíri,” Molnár restaurant, but that is only part of the says. Arany Kaviár has been among deal. “Signature dishes feature a great the recommended restaurants of the number of Russian specialties. But the Michelin Guide since 2009, and it was menu also contains a lot of items that ranked by Dining Guide among the top rather resemble French-inspired cuisine,” ten in Hungary eight times between 2005 and 2014. “Our target cannot be Molnár says.

“Guests love it since sitting out there less than earning a Michelin star. Our gives them exceptional intimacy: they The name of the restaurant, which guests keep asking why we haven’t got are in the Buda castle area, and yet they translates as “Golden Caviar”, rightly one yet.” can dine fully undisturbed,” notes Molnár. hints that there is plenty of that fish-egg Indeed, one of the ultimate strengths of delicacy. In fact, it is supplied from a The reason why cuisine has reached the place is that it provides full privacy. Hungarian fish farm producing premium such heights may have to do with the That is how the interior is also structured, quality that rivals or even outshines fact that Russian dishes prepared in

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their traditional form have moved to the menu of a bistro called Moszkvatér set up by the owners in the Hold utca marketplace, which gathers the trendiest street food in town. At Arany Kaviár, in turn, preparation is based on stringent fine-dining rules, stateof-the-art cooking processes and the finest ingredients. “Customers are often surprised by the results, since they get their favorites made in a special way, but they all love it,” Molnár highlights.

Ingredients come from highly controlled sources with fish and sea food flown in directly from the celebrated French marketplace of Rungis.

Such elevated quality has generated a robust local repeat customer base making up half of total guests, an unusually high ratio. That, together with word-of-mouth, guarantees a constantly full occupancy of up to 60 people at a time. And guests keep coming as they have all realized one thing by now: if they need a quiet, fancy spot and excellent food on their plate, they are in the right place.

Arany Kaviár Restaurant 1015 Budapest, Ostrom u. 19. +36 1 201 6737, +36 1 225 7370 www.aranykaviar.hu

2016. 12. 07. 22:39

4 Socialite

www.bbj.hu

Budapest Business Journal | December 9, 2016 – January 12, 2017

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PROMOTION

High-fiving dolphins near Singapore

Aren’t long-haul flights meant to be grueling by definition?

Your travel experience can be taken to a previously unknown level just by picking the right airline. So there is a fair chance that flying to Singapore, for instance, with Qatar Airways can become a lifetime experience; topping it with a Royal Caribbean cruise makes that a near certainty.

the world, either, which amazes on 1.2 hectares with a volume as big as 75 Olympic-sized swimming pools.

Skyscrapers make up the bulk of the Singapore skyline and one of the best ways to enjoy a breathtaking view of it all is to ride the Singapore Flyer, Asia’s largest, 165-meter high giant observation wheel. Only Marina Bay Sands beats that. The iconic hotel and casino building hosts, among other things, tennis courtsized suites as well as a 150-meter infinity pool and a cool rooftop bar at a height of 194 meters. People with height phobia had better think twice before they go, though, especially into the pool that stretches all the way to rim. Once you have overcome your fear, the area is perfect for ship spotting as every three minutes yet another cargo ship drops anchor at the local port.

Walking the streets gives the impression of unparalleled cleanliness, not least thanks to heavy sanctions for littering. Throwing away a cigarette butt, for instance, will leave you short of 300 dollars. But when your legs get tired from too much strolling, it is time to go on a boat trip. Best have it after dark, when the jaw-dropping view of the gorgeously lit skyline will burn into your memory for good.

LEVENTE HÖRÖMPÖLI-TÓTH

Nearly 13 hours of pure flight time. That is how long it takes from Budapest to Singapore. One way. Just the thought of sitting tight for that long makes your legs cramp up, despite the knowledge there will be some time waiting in Doha for the connecting flight. A likely lengthy recovery from the trip could well fuel your pre-travel anger further, no matter how hot a destination the Asian metropolis might be. Unless you choose the right airline, that is, which can make or break your entire experience.

SAVOR THOSE AWARD WINNING BUSINESS CLASS MOMENTS Deciding which airline to travel with becomes simpler when you considering that Qatar Airways has been awarded, among other things, the World’s Best Business Class by Skytrax every year since 2013, including 2016. The only exception was 2015 when Skytrax jurors couldn’t help directing the lime light specifically to Qatar Airways’ business class seats instead of the business class itself. And we are talking about killer seats that recline into 2-meter long, fully flat beds at the push of a button, as a result of which sleeping in the skies takes on a whole new meaning. The state-ofthe-art Oryx One in-flight entertainment system with up to 3,000 options, HD 17-inch touch screens and surround sound audio further enhance your time onboard. Prepare for the surreal: you will savor every second of your long-haul flight. Wasn’t it supposed to be grueling by definition?

The royal treatment reaches its peak with the meals, though. Any item from the menu put together by star chef Nobu Matsuhisa will inevitably have a long-term impact, even on taste buds that are very much used to gourmet selections. In such an environment work is surely the last thing that pops into your mind; however, workaholics are not abandoned, either, thanks to the Wi-Fi network. The wow

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effect is maximized when flying the brand new A350 aircraft on the Doha-Singapore route due to its extra wide seats, superlow engine noise levels and full LED mood lighting.

Changing planes can add to the hassle, so it makes a huge difference how you spend that time between your flights. And your short stay at Hamad International Airport in Doha is the icing on the cake. The official Qatari airline’s premium passengers can enjoy the high-end services of the Oryx Lounge, offering all-you-can-eat premium food and drinks, a quiet zone and much more to get you ready to fly on. Even economy passengers can access this island of peace for just USD 55. What is more, next door an airport spa awaits where a 25-meter pool and hydrotherapy tubs will make you feel reborn.

FROM JUNGLE BREAKFAST TO THE ROOFTOP INFINITY POOL The above-mentioned services are bound to reinterpret your whole perception of long-haul flights. But why go to Singapore in the first place when Qatar Airways offers more than 150 destinations? The Asian city-state of 5.5 million inhabitants is ranked globally among the top ten strongest city brands with reason. For starters, it is a financial and logistics hub, but tourists won’t be bored, either. Although its area barely exceeds that of Budapest, they have still managed to squeeze in a Legoland and a Universal Studios theme park into it.

For those into classic tours, the jungle breakfast in Singapore Zoo is a must where orangutans jump around while you fill your belly. Don’t miss the Flower Dome, the largest glass greenhouse in

A CRUISE TRIP UPGRADE WILL NEVER HURT Singapore is a great starting point to explore neighboring beauties too by boarding a cruise ship. Royal Caribbean offers great four-night trips allowing you to check out Kuala Lumpur, Malaysia’s capital, and Phuket, Thailand. The latter is particularly special as you can ride elephants, chill out on beaches or go scuba diving. And don’t forget to order a green curry followed by banana-filled pancakes!

The stop-overs add to the fun, but just hanging out on Royal Caribbean’s cruiser, Mariner of the Sea is an experience in itself. The ship has the capacity to hold some 3,100 passengers who are served by 1,100 crew members and spoilt by 10 pools and whirlpools as well as 17 bars, clubs and lounges. Fancy restaurants serving excellent Asian and world cuisine signature dishes complement the luxury.

The kitchen prepares 15,000 meals per day!

Boredom onboard? Please! The gym offering a 180-degree sea view makes you forget about the miles ahead on the treadmill, the spa treatments keep calling next door, and night time entertainment is guaranteed by Broadway-style dance performances and ice-skating shows.

And when you spot dolphins racing alongside, all you can think of is highfiving them and wishing this trip would never end.

2016. 12. 07. 22:39

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2016. 12. 07. 22:39