“The New Normal” in Private Equity

Mihai Cristea 18/08/2020 | 14:31

From food to pharma, there are industries which feed the needs of the population and on which the investors are still keeping an eye, even during a pandemic. What used to be efficiency, now it is resilience. Industries are adapting all around and “nearshoring” seems to be the trend at least for the following two years from now. Suppliers lists from abroad are now updating with contacts from “home”.

By Romanita Oprea

 

The COVID-19 crisis impacted not only the economy, but the society as a whole. The private equity funds are one of the most important factors in the dynamic of a national and regional economy, as they invest in the most robust companies, to accelerate their growth. With extensive expertise on CE market, Abris Capital Partners, a private equity fund with offices in Warsaw and Bucharest, is well-positioned to have insights about the post-COVID market and its challenges.

“The new normal” is one of the concepts that emerged even from within the lockdown. How will it be defined in private equity? “No doubt there will be some opportunities to buy businesses cheaper but to be honest, it is not something we will be really focusing on. What we are trying to focus on is companies that are performing very well in this crisis, which are potentially more expensive now. The important thing is that they have proven themselves through these challenging times in terms of daily resilience and management capabilities.” says Pawel Gierynski, Abris Capital’s Managing Partner.

Nevertheless, in private equity, long-term commitment is decisive, and technology was one of the main pillars that supported the continued implementation of the plans that the companies had. Apart from the repositioning strategies and possibilities that this new challenge brought, with the application of the digitization on a daily basis, all companies in Abris’ portfolio have reached to an outstanding point: transformation.

It is difficult to draw precise conclusions when the situation of the market is very dynamic, therefore staying open is the best option. As Pawel Gierynski says, “We see some interesting opportunities and we want to stay close to them, not only to analyse the financial consequences of the pandemic, but also to witness how strong companies’ organisational culture is. There is no better moment for testing this than during a crisis.”

Despite being still early for any conclusion to be drawn, what is to be observed in Abris’ portfolio is that the companies guide themselves upon their initial fundamentals, which remain strong even during crisis moments. Business innovation has been always encouraged; therefore, adoption of digital tools has only been accelerated by the crisis. Probably the business targets will be delayed with one year, but the strength is still there, as all the health security measures have been deployed and most of the companies have resumed working. 2021 is a year which might bring a cautiously optimistic perspective.

“It is not new what I am going to say, but we strongly believe in that and it is part of Abris’ business philosophy for so long: when we decide to invest in a company, we do it long-term, having in mind the big picture – which implies facing the dynamics of an emerging market and being prepared to deal with the fluctuations that are usually happening during market ups and downs. We exit a company when we know for sure that it is ready for that, when it has a solid structure and the required capabilities to succeed even further. We are working together with the management to make sure of that and staying close to the team for several years, no matter what happens “outside”. It is exactly what we are doing now”, says Adrian Stănculescu, Partner and Head of Abris Romania.

These unprecedented times bring enormous challenges for both businesses and society as a whole. After adapting to this new way of living and dealing with the needs of the immediate term, many companies have come to realize they need to adjust agilely to the current constraints whilst building a plan to capture the new growth opportunities. These are the companies that will emerge on the other side. And they will be stronger.

“Abris mission is to provide support to these ambitious companies. We have had the privilege of partnering with many companies to accelerate their growth over more than a decade. While we acknowledge the uniqueness of this situation, we have the experience and proven growth methods that were tested in a wide range of sectors. And having raised over EUR 500 million three years ago we are well founded to invest into these ambitious businesses”, states Adrian Stănculescu.

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