THINK BOLD by Michał Wincewicz
In this edited conversation Dariusz Lewandowski, CEO of ARIA Fund S.A., explores Private Equity sector in Poland.
Let us first explain what Private Equity is.
Private Equity is medium or long-term financing of private companies that are not yet traded on a stock exchange. Such funding can be used to either start a new business or expand its operation; to partially or wholly buy out an existing business, or to revitalize it.
How can one benefit from Private Equity Fund beside the subsidy itself?
The support we offer far exceeds a simple capital investment. We are actively involved in building the success of companies we invest in. Our hands-on approach often means personally appearing on a construction site of a new factory, for instance. Our team consists of experts in various field – law, finance, marketing, strategy or communication, hence we are able to provide support and experience in many areas. It is exactly those experts, who make it possible to understand the potential of a company, trying to find a fix for a long-term success, and, at the same time, minimize the associated risk. One should bare in mind that we often deal with complex stories that cannot be directly read from financial statements. Our priority is to learn and understand both the history and the people behind it.
How does a Private Equity Fund operate?
First of all, it must be said that Private Equity is not shifting money from one pocket to another, as is often the case of funds selling products to one another. The money invested by our company goes directly to companies and funds their development. We are active investors, not leaving the company’s future to fate.
The profit from such investments does not come straight away.
Both in life and in business a good effect takes time. Private Equity investments and returns from such investments are associated with a 3-5-year exit. This makes their valuations more resilient to short-term fluctuations and more often reflect the intrinsic value of the company. Stock exchange investments are much more prone to economic booms and busts.
You mentioned a long-term exit strategy. Is it worth waiting up to 5 or 10 years for a profit?
It is how long it takes for the capital invested to work and translate into value creation, and thus to multiply. The investment horizon is longer than with shares and bonds, but it is rewarded with a higher return on the future resale.
What role in a professional investor’s portfolio can a Private Equity investment make?
First of all, globally, Private Equity is no longer an alternative way of investing money. We forecast that this will soon become reality in Poland too, as such investments are nowadays a mandatory rather than an alternative element in the portfolio of any professional investor. Moreover, such an investment proves also a diversification of risk. Returns from Private Equity are not strongly correlated with stocks and bonds, so when stock prices fall, it is very likely that we will continue to record good results.
Yet, Private Equity market in Poland remains largely unexplored.
We are perfectly aware of this fact and we see an opportunity in this, because we strive to change the perception of this market and give it a completely new quality as a management entity. ARIA is all about absolute transparency – the principles of our work are clear and always openly communicated to our investors.
What type of companies are you interested in?
ARIA selects companies with a strong competitive advantage that are not yet listed in the public market; have high growth potential, clear and credible development strategies, but are in need for a capital surge to assure dynamic growth. We are interested in data, communication, electronics, fintech, e-commerce, as well as construction, biotechnology and pharmaceutical technologies. ARIA follows an “opportunity project” approach, that is to say, we take advantage of opportunities resulting from existing market conditions.
Can unconventional approach guarantee outstanding results?
In my opinion, only by moving beyond the frames can one offer more than others. Unique projects we decide to invest money in, often have a huge competitive advantage, and most importantly, can compete with large players internationally. I also have to add that ARIA does not invest in companies that are just starting out and their success is uncertain. We choose companies that are already thriving in the market, have a stable structure but need support – not only financial one, but often strategic, legal or marketing.
What is your recipe for success in business?
Our philosophy puts relationships first. I firmly believe that without mutual understanding we are unable to build the very much needed trust. We are not simply interested in signing the contract and leaving the rest to fate. We want to know every story, people and their motivations. We try to keep close relationships with our investors, business owners as well as employees, because it gives us the ability to respond to problems and obstacles in a quick, and most importantly, accurate fashion.
Such an approach is very rare on the market.
ARIA generally demonstrates an unconventional approach to business. We focus on clear rules, try to avoid incomprehensible financial jargon, and know all the ins and outs of our investments. We want to show that fund management can be transparent and plain for the participant to grasp.
Still, nothing in business is a given.
Of course there are no guarantees when it comes to investment market, and good intentions are just not enough. Yet, thanks to a rigorous selection process, we are able to single out projects that exhibit the greatest potential for success and thus minimize risk through various types of collateral. Besides, in business, you need courage, which should never be confused with bravado. This is an excellent testimony to the keynote that guides us – “You think. Think bold. “