Tim Gosling in Prague -

The rise of the emerging markets has signalled a growing trend of M&A and expansion by companies from these countries, yet those from Central and Eastern Europe appear unenamoured with growing in their immediate neighbourhood, preferring to target developed markets or those emerging economies further afield.

An (entirely unscientific) straw poll at a panel at EBCG's CFO Forum 2012 held in Prague in October revealed just one company present that is currently working with joint venture partners in another CEE country.

"Why are so few companies pushing into new CEE markets?" asked Sven Kirepkup, chief financial officer of Central Europe at Ceva Logistics and compere for the Emerging Markets panel. "Russia, for instance, is a huge market. Is it really so scary?" By way of contrast, examples of entrances to markets further afield in Latin America and Asia appeared rife among the delegates.

The barriers to entering such markets will be familiar to anyone in CEE. Walter Neuhauser, CFO at GE Gas Engines - an Austrian subsidiary of the US giant selling power units for construction machinery that has entered Indonesia, Bangladesh, Argentina and Columbia as well as Russia in the last five years - discussed the need for a strong, trustworthy local partner, the challenges of legal and cultural issues for a Western corporation, and of course corruption.

However, alongside most other delegates, he also noted that those countries that have made less progress down the development track than most CEE countries tend to offer additional bonuses, and sometimes easier access.

The dominance of Gazprom has caused problems in Russia, for instance. The size of the country means GE Gas Engines needs several local distributors, but the Austrian-based company has been faced with chronic fighting amongst them as they tussle over access to the centre of gravity that is the state-controlled behemoth. The legal system is another major issue holding back sales he says. "We can't sell in Russia without 100% payment up front. Try going to a Russian energy field and reclaiming your engine."

"To be honest, we're not really sure how to proceed in Russia right now," he admited in summing up. By way of contrast, he appeared hugely upbeat about progress in Indonesia and Bangladesh, where competition is far less severe.

One CFO said that's an issue that helped tempt his Swiss-based civil engineering company to plump for the wilder west rather than its eastern doorstep. "Guatemala and Ecuador are great markets for us now," he said. "They essentially have no competence at all in our segment, and there's no competition because these countries are so dangerous that no one else will go."

Other CEE companies are looking to developed markets for expansion. Maciej Mikucki, CFO of the Polish arm of Israeli generic drug maker Teva, was heavily involved in its acquisition of US drug maker Cephalon in late 2011. While he pointed out that any overseas acquisition needs careful consideration of the challenges presented by language, culture and market, he said that "after just one year, growth at the new unit is among the highest Teva has."

He pointed at the acquisition of Canada's Quadra by copper miner KGHM as another example of the growing trend that is seeing the direction of M&A changing to one in which emerging market firms are the purchasers rather than the targets, as they head to developed and other emerging markets. He also mentioned Sberbank's acquisition of Denizbank in Turkey and the growing wave of Chinese investors targeting the EU.

He agreed, however, that political barriers amongst close neighbours can also present obstacles. For instance, recent reports suggest Warsaw has been busy this year warding off Russian interest, with state-controlled banking giant Sberbank and chemicals company Acron having both failed to gain control of mooted targets. "Russian interest in CEE is bringing political tension, but that's just the way it goes," he shruged.

A more immediate problem, he suggested, is for CEE to attract the massive liquidity washing around the globe right now. "Companies have lots of cash, but confidence is low. We began to see private equity bump up deal volume in quarter three of 2011, but CEE has yet to see that."

Neuhauser summed up the situation facing CEE states still struggling to attract that attention. "You have to be realistic where the growth is coming from," he stated. "It's not going to be coming from the EU - you have to look at the BRICS, Turkey, Africa. If you want to be a successful business, you need to find a way of entering these markets."