Pole Position: Innova Capital
Based in Poland, Innova Capital is one of the leading private equity firms in Central Europe. We spoke to Krzysztof Kulig, Managing Partner at Innova Capital, about the company’s unique investment approach and how they are benefiting from Poland’s surge in economic development.
The successful private equity business is strongly dependent on the valuable insights and knowledge regarding various business sectors and companies to invest in. Thus, Innova Capital’s strategy is based on the unique investment approach, which is constituted by sector experience, outstanding management, delivering comprehensive support to our portfolio companies and choosing a right time for what we are willing to do. We seek to change the trajectory of growth through strategic or operational transformation, partnering with management boards and other stakeholders to build value together.
These unique features of our business make Innova Capital a leading mid-market private equity firm in Central Europe and one of the biggest PE firms in Poland, with the longest presence in our local market. While expanding our portfolio, we focus on the selected, most promising sectors. In the next 12 months we are going to particularly seek for consumer and industrial goods companies. Last year we acquired Wirtualna Polska, Bakalland and Delecta and sold Libet. Moreover, the successful sale of Emitel and GTS also contributed to the good results achieved last year. Whatever we do, we are always willing to embrace though leadership and set the highest market standards. You can build better companies in businesses you understand.
Furthermore, in the area of constant changes in the market and numerous industry developments the Fund-Fund relationship in the context of the competitiveness, our cooperation plays an extremely important role in building the attractiveness to our Investors.
Increasingly, local PE funds with a similar strategy do not compete with each other, but rather exchange experiences, or even take joint investment initiatives. Global PE Alliance is great proof of that and includes funds including Innova Capital from Poland, Turkven from Turkey, Capiton from Germany, FSN Capital of Scandinavia, India Value Fund of India, LivingBridge in the UK, China CITIC and Victoria Capital in South America. All of these members share a common database, combine business building expertise with the ability to take a global perspective. Therefore, we are not talking only about the merits support. Together we offer unique Global Reach, broad Sector Expertise, and Leadership in mid-market private equity.
A testament to Innova’s reputation as a leading company are the five investment funds raised which total EUR 900 million. Innova’s strategy is centred on building companies into regional market leaders that can compete with the best in their fields worldwide. Innova funds are primarily invested in financial services, business services (including telecommunication, media and IT) and industrial production. To date Innova has invested over EUR 600 million in over 40 companies across Central Europe, including PolCard (Poland’s dominant transaction processing company), Euronet (independent operator of ATM’s, now listed on NASDAQ), DF QS (Poland’s leading cash loans’ broker), Energis (Poland’s leading business-to-business telecom operator) and Mercor (CEE leader in fire safety, listed on Warsaw Stock Exchange.
We are optimistic about our continued success due to the favourable economic conditions in our region. Poland, with its steady economic growth, is doing very well in business terms. We’re still in a process of massive changes in political and economic transformations, however the Polish market creates perfect conditions for investors and their projects. First of all, Poland is one of the fastest-growing EU economies worldwide pre-crisis and post-crisis Europe (with real GDP to grow by 3.3% in 2015). Our modern and competitive banking sector with reasonable balance sheets support potential investors in opening credits and enabling easy access to debt financing for transactions. Our stable and quick growth of the consumption and economic integration with EU gives instant and safe opportunities for investments in Poland.
To start with, many experts and analysts point out that Poland’s economy is well-placed to maintain or even boost its growth. According to the latest “Poland-Macro Outlook” by Erste Group Research, the economic outlook for Poland should constantly improve. The economy, which is to accelerate to 3.6% in 2015, is entering the mature phase of expansion. For this reason, the next decade seems to be important in terms of determining the path of further strategic growth for Poland.
According to the World Bank, Poland is currently a middle-income country. The key challenge for this market is to avoid being trapped in this position. Last years’ analysis of U.S. Trust Bank of America Wealth Management showed that Poland has high potential to move away from middle-income group of countries to the high-income ones, being assessed positively along with Mexico, Chile, Malaysia, Mauritius and Seychelles.
Similar point of view is also visible in the latest McKinsey & Company report “Poland 2025: Europe’s new growth engine”, in which two various scenarios for our economy are included. The first one is the conservative business-as-usual scenario, while the second is the aspirational one. Opting to stay the course, Poland would remain a regionally focused middle-income economy, growing at a moderate rate of 2.6 percent annually. In this case, our country can expect slightly falling rate of growth of capital investments, demographic shifts in the labour supply and non-accelerated technology and efficiency growth.
On the other hand, opting to execute the aspirational scenario, Poland would become a globally competitive growth engine of Europe, competing successfully on a global market as a significant exporter of goods and services. Under this scheme, “GDP growth moves from good to great, topping 4 percent annually during the next decade and putting Polish per capita GDP at 85 percent of the projected EU-15 average by 2025”.
To make this crucial transition and advance its already developed economy, Poland should meet some challenges. The main concerns are as follows: increasing the competitiveness of Poland’s economy, overcoming regulatory obstacles for doing business and focus on innovation. According to the PwC report “World in 2050”, if the growth pace of the economy is to be maintained, Poland should be able to develop a strong innovation network, supported by investment decision-making, R&D and financial centres located in the country.
Among other challenges which should be met are also maintaining the high level of domestic spending and foreign investments, as well as developing highly skilled workforce and create highly paid jobs. It is especially important in terms of demographic challenges related to low fertility rate, aging society and the changes concerning the implementation of pension system reform. It is also worth mentioning that this challenges are also accompanied by the unstable political situation of neighbouring countries, especially Russian - Ukrainian conflict, as well as ongoing problems of Eurozone economy. Many experts claim that Poland will be eventually forced to adopt the euro, what might influence the financial standing of Polish households and entrepreneurs.
I am convinced that Poland should do it’s best to accelerate further growth, implement necessary reforms and embrace innovation, which will enable us to join the group of most advanced and globally competitive countries.
Company: Innova Capital
Name: Krzysztof Kulig (Managing Partner)
Web Address: www.innovacap.com
Address: RONDO ONZ 1, 00-124 WARSAW, POLAND
Telephone: 48 22 5449400