Pawel Gierynski, managing partner at Abris Capital Partners, reveals how the firm maintained deal activity in 2020, attractive sectors in CEE and the firm's decarbonisation ambitions.

Despite the pandemic, Abris completed two new investments last year. How did these opportunities come about?

Despite the uncertainty of the pandemic, 2020 was a very successful year for Abris. Of course, the beginning was difficult because no one knew what would happen next with the pandemic.

However, we were able to successfully acquire two new businesses during this period and we are very happy about it. The first investment was in a company called Apaczka, a technical platform that provides logistics services for e-commerce players. Clearly the e-commerce industry has exploded since the pandemic, but another crucial element at play here is the impulse for technological change. We were able to secure exclusivity at a very early stage, which gave us the time to build an ambitious business plan with the founder and management.

The second investment was in Scanmed, the largest healthcare network operator in Poland. We are seeing many healthcare businesses coming of age in Central Europe and we’ve been looking for potential targets in this space for some time as a way to consolidate the market. There has been a huge shift in consumer awareness around health in Central Europe and this has created opportunities in the sector. What’s more, healthcare themes are broadly present in sustainable global trends and the UN SDGs, which are part of the foundation of our strategy to invest responsibly. 

Abris also exited Cargounit last year. How did you find this exit process in the uncertain economic environment?

It’s an interesting question. We were asking ourselves for some time if it was the right decision to sell during the pandemic.

Cargounit is the largest provider of locomotives in Poland. When we first invested, it was very small, but we were quickly able to consolidate the market to become a dominant player. In this time, we transformed the business from being a provider of assets to being a provider of solutions. The business became an infrastructure business with long-term contracts, providing the owners with long-term cash flows. We came to the view that on one hand it is a complicated business, but on the other hand, if we provide a wellstructured due diligence package, most potential buyers would feel comfortable making an offer.

The sale process was much more competitive than we expected. If anything, that really surprised us. We were also impressed with how disciplined and professional all the bidders were, despite the very challenging environment. Because of that we were able to run on a tight timetable and complete the transaction quickly.

What is the investment appetite like in CEE right now?

Now is a fantastic time to be investing in Central Europe.It's not just the number of opportunities that are increasing, but the quality of the businesses too. The majority of these opportunities continue to come from local entrepreneurs who started their businesses some time after the Iron Curtain fell, have built them to a good size and are now looking to sell.

Trade buyers, who are very acquisitive in the region, often have trouble understanding these businesses because they were not built to be sold. Quite often they are run by a charismatic founder, but they don’t have professional management or clear reporting and controls in place. At Abris, we have the advantage of a local presence and a deep familiarity with local markets so we are able to identify interesting businesses that founders want to sell and help to professionalise them so that they can then be sold to trade buyers four or five years later.

What sectors is Abris looking at, and have these areas evolved or changed since the pandemic?

We’ve been actively involved in a number of transactions in food manufacturing. This is an area that is experiencing rapid change, so we anticipate there will be some interesting opportunities here. Another exciting sector for us is recycling. This theme of wanting to live on a better planet is drastically changing local economies. We run a Romanian company, Green Group, that is the largest recycling company in Europe. Benefiting from the global trends of circular economy, this is a dynamically changing and fast-growing market, and we are deepening our involvement in this area.

Lastly, while we have always been interested in logistics, we have recently refocused our attention on the technological side of this industry. We are seeing a number of very interesting Central European tech companies that are quickly becoming global.

In addition, our portfolio companies require a depth of understanding on the tech side that they have not had in the past, so for this reason we hired a technology director last year, which will allow us to operate effectively in this area. This approach results from our philosophy of building portfolio value through improving access to professional know-how and best practice.

In CEE, Poland was the standout market in terms of deal numbers and values last year. What is it about Poland that is attractive?

Size is important and with a market as large as Poland, for some businesses you don’t have to become internationally competitive early on.

If you are running a business in a smaller market, you must expand overseas almost immediately because there will not be enough customers in your domestic market. At that point you are then faced with much stronger competition from regional businesses that are doing exactly the same thing.

Operating in a larger market like Poland gives you a safety net for expanding locally and developing the muscle needed before international expansion. This is certainly an advantage that Polish businesses have. Poland, as well as most of the region, is also very entrepreneurial and a visible drive to build and run business is generating hundreds of new companies every year. With easy access to professional resources, consulting and financial services, as well as generally high standard of business infrastructure, these companies are maturing much faster and their owners are more willing to partner with financial investors to accelerate this growth. 

What are the firm’s priorities and goals for the rest of 2021 and beyond?

At Abris, we see ourselves as a navigator. We guide businesses and entrepreneurs towards success, discover opportunities for our investors and act as an expert within the wide ecosystem we operate in. One of our key priorities this year is further developing our ESG practice. We are now very seriously preparing all of our portfolio companies for the decarbonisation process and we want to achieve a net-zero portfolio balancing model by 2025, making us the first private equity house in the region to commit to this goal. Also, it is not just about putting policies in place, it is about measuring our actions, so we can demonstrate that change is taking place.

As part of this initiative, we launched our proprietary ESG Scoring Application in 2020, which includes more than 500 inputs that evaluate specific risks and help measure value created within each portfolio company.