Agista: investing in growth-driven entrepreneurial ventures

Reinforcing its commitment to pursue growth in the IT&C sector and making its entrance on the local healthcare market were two of Agista’s major accomplishments in 2023. CEO Nicolae Kovacs talked to Business Review about the company’s plans for the years to come.

By Anda Sebesi

What were the biggest challenges Agista faced in 2023?

Since we were in the deployment stage this year, our main challenge was finding the proper businesses in which to invest. By proper I mean entrepreneurs looking to accelerate their growing businesses, those that operate in niche fragmented markets with high growth potential in the coming years, but most importantly, those who had the right vision, skills, team, and mindset and were looking for a partner to accelerate their growth and gain significant market share in their sector. We held talks with over 150 companies in various industries, which resulted in a strong strategic pipeline going forward, but also in valuable insights into the industries we target.

What were the most important projects the company carried out in 2023?

Consolidating our position in Bittnet Systems in early spring reinforced our commitment to pursue growth in the IT&C sector. Even though Romania has one of the fastest internet connections worldwide, we are ranked last in Europe in digitalization, and we understand the dire need to catch up. Therefore, we forecast that this market will grow significantly in the next 7-10 years, with Bittnet becoming one of the top players in Romania.

In late summer we also acquired a minority position in CentroKinetic, the market leader in the orthopedic medical rehabilitation segment, marking our entry into healthcare. CentroKinetic originally had three clinics in Bucharest, a fourth was opened in Cluj-Napoca in late November, and we are looking to boost the venture to 15 clinics nationwide within the next 3 years. Our ambitions also include establishing a regional presence.

We are also in advanced negotiations for two more transactions to be concluded in 2024, which would fully deploy our initial capital and trigger a further capital raise.

What’s the current state of private equity in Romania and what changes should we expect to see in the coming years?

To put it into perspective, the share of total GDP held by private equity (PE) investments in Romania is 5 times lower than that of the CEE region and 25 times lower than the European average. On the one hand, this can be explained by the lack of diversification of funding providers. Romania-based PE players are highly dependent on international financial institutions such as the EIF or the EBRD, which accounted for 2/3 of the total fundraising in recent years, followed by private individuals and family offices. The local Pension Funds’ investments in local PEs are close to non-existent, as compared to 1/3 accounted for in Western Europe.

How important are ESG and sustainability criteria for Agista?

We acknowledge the fact that ESG has become a crucial component in today’s PE landscape, capturing the attention of our investors. This is why we have taken proactive measures in this direction, with one of our current focal points being the recycling industry. Amid increasing pressure from both policy makers and our stakeholders, we consider that emphasising ESG considerations in our internal policies is the correct approach. Our aim is to enhance our corporate governance practices and include ESG criteria into our investment policy.

What were 2023’s main challenges from a management point of view?

The confluence of higher interest rates, inflation, and changing fiscal policies presented formidable challenges for management in 2023, requiring strategic adaptation and agile decision-making to mitigate the impact of the above factors, while safeguarding and boosting the financial health and profitability of our portfolio. We have learned a lot and will continue in the same manner in the years to come.

What is the outlook for the private equity industry in 2024?

The prospects for growth funds in the private equity industry in 2024 appear optimistic, driven by continued investor interest, but also due to the array of opportunities in the industries we target, which are favourable to high growth and consolidation via M&A. However, economic, regulatory, and geopolitical factors could pose challenges that we will need to address through strategic planning and risk management.

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