Abris Capital 'confident' about new fundraise in 2023

Jurek Maczynski
31 October 2022

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Abris Capital Partners, a Central Europe-focused mid-cap growth equity firm, is pitching itself as an ESG transformation specialist as it deploys the remaining dry powder from its third fund and gears up for a fundraise next year, partner Wojciech Jezierski said.

While facing headwinds from global macroeconomic trends and geopolitical events, the Warsaw-based GP remains confident of its ability to launch its Fund IV in 2023.

Abris, which has raised EUR 1.3bn across three funds to date, has a base of regular investors who understand the nuances of investing in the CEE region, Jezierski said. Moreover, the prospects for a reconstruction boom once the war in Ukraine ends will make the region a more attractive investment location, he said.

The firm still has "tens of millions of euros" left to spend in the EUR 500m CEE Mid-Market Fund III launched in 2016. Most of it will likely be invested in add-ons for the ten portfolio companies it already has, Jezierski said, pointing to the recent bolt-on deals for Polish courier services broker Alsendo as an example. However, Abris remains open to making other investments and, if necessary, could team up with a co-investor for a potential deal.

ESG focus
According to Jezierski, one distinguishing feature of Abris' strategy over the past five years has been its strong emphasis on ESG angles throughout the investment cycle. Responsible investing is "important for a PE firm as a way of value creation, generating tangible benefits for investors," he said.

Potential buyers are already starting to ask if their prospective targets are ESG-ready, he said. In a few years, "companies that ignore aspects such as climate neutrality, restricting CO2 emissions or diversity and inclusion risk becoming non-tradable," Jezierski said.

Abris begins the implementation of ESG standards on portfolio companies early on, with a separate due diligence stream at pre-transaction stage to analyse climate risks and opportunities, labour relations, corruption, human rights and corporate governance-related risks, he said.

Throughout the investment period it uses an internal scoring tool – a proprietary software application – to measure and report on a range of areas such as HR, production technology or cybersecurity, in addition to the more typical environmental aspects. The findings are presented during board or investment committee reviews of portfolio companies, Jezierski said.

One of Abris' specific goals is to reach a net-zero greenhouse gas emissions status for the entire portfolio by 2025, Jezierski said. Its commitment to carbon neutrality begins with a precise measurement of portfolio companies' carbon footprint, followed by the development of emissions reduction plans and a catalogue of validated offset initiatives. In order to ensure the program is focused on actual reduction of emissions rather than offsets, each year Abris will invest in further emission-reduction projects, he said. It has also required each portfolio company to adapt its strategy and operating model to climate change, a development that could have a destabilizing impact for some of them.

Investments
The firm has grown more selective with new investments since 2020 but its portfolio has weathered the recent developments well and is sticking to its strategy, Jezierski said. With an equity ticket of EUR 30m to EUR 70m, Abris targets majority stakes in companies that are market leaders in their respective sectors and can be scaled up further, either through organic growth or through M&A, he said. It has a conservative approach towards debt as its portfolio companies often pursue capex-intensive growth strategies and need the room for extra leverage, he said. It typically partners with founders considering succession or looking for growth options, and with management teams who retain minority stakes, he added.

Preferred sectors include healthcare, technology and digitization, e-commerce and modern logistics, circular economy and specialty manufacturing, Jezierski said.

Poland and Romania account for the majority of the current EUR 1.3bn in assets under management, but the firm has a CEE-wide mandate and some portfolio companies have a physical presence elsewhere, Jezierski said. For example, aesthetic medicine products maker Matexlab started out in Warsaw but is now headquartered in Switzerland, with a production site in Italy and a commercial team in North Carolina.

Organic growth continues to play a key role in portfolio development, with Abris assisting its companies in areas such as financial reporting, business excellence, operational improvements and pricing management, Jezierski said. It also helps out with buy-and-build strategy using the consulting and investment banking background of its team, he said.

Overall, Abris has made 30 investments and 43 add-ons to date. It has exited all the investments from its EUR 320m debut fund and retains four companies from the EUR 450m, Abris CEE Mid-Market Fund II, all dating back to the 2014-2016 period along with nine more recent ones from Fund III, he said.