Exact Systems exactly knows what to do!Member News
The below interview with Paweł Gos was published in Puls Biznesu (244)/2018 on the 21/12/2018. Source: www.bit.ly/exactsystemswiecorobic
The revenues of PLN 550 million in 2019 and extending an offer to a certification – these are the plans of the founders of this company that controls quality, who conducted the greatest management buy-out in Poland.
On the 1st of November some people visited graveyards, while the others were beginning a new life. This was the case with Lesław Walaszczyk and Paweł Gos, co-founders of the Exact Systems company, who on the day before completed the negotiations and signed the agreement on a buy- out their company from the struggling with a debt Work Service Group that owned 76% of the shares. The managers increased their number of the shares from 24% to a majority stake, while a minority stake belongs one of the funds managed by the CVI Dom Maklerski investment company. The transaction amounted to PLN 155.2 million.
— It is the largest leveraged buy-out in the history of Poland. The transaction was supported with a credit granted by the Pekao bank, which enabled us to build further a strong Polish brand in one of the most important industries, i.e. automotive industry. No foreign bank we had requested, wanted to cooperate with us – says Paweł Gos, President of the Exact Systems. Both managers converted all loans and savings into capital.
— We decided to invest in the Exact Systems, first of all, due to an experienced management board, a great growth dynamic in the recent years and interesting perspectives. We intend to support actively the company in its organic development and acquisitions. We conducted the aforementioned transaction as a purchase of the shares and providing a mezzanine financing. Our investment period is of 3 – 6 years. The Exact Systems company is our seventh private equity investment – says Paweł Jacel, Investment Director in CVI Dom Maklerski.
The CVI co-manages the seven debt and private equity funds with an asset value of approx. EUR1.3 milliard, which invest in the region of Central and East Europe. The Exact System conducted simultaneously one more transaction – a purchase of QLS, its Portuguese counterpart.
— This transaction was commenced by us much earlier, as early as at the stage of the planned IPO, but the Portuguese partners had to wait – and fortunately they agreed to – for financing – says Lesław Walaszczyk, Vice President of the Exact Systems.
A tight corner
The President and the Vice President agree with each other – it was the most difficult period in their professional career.
— We participated in total in five transactions within two years. It was a marathon. It started in 2015 when we wanted to enter the Stock Exchange, but this plan was withheld by the Supervisory Board of the Work Service. One year later, we prepared an offering that was rejected by the market. We got to the point where the effects of synergy with the Work Service exhausted. We could not perceive any perspectives. We wanted to acquire a capital for a development and acquisition. In 2017 we began an open sales process. The Enterprise Fund of the Enterprise Investors occurred and the talks with it lasted until an end of December, 2017. In January, the talks with the Oaktree Capital represented by Cornerstone started. They were finished in May. In the meantime, we purchased the QLS – tells Paweł Gos. Then, a value of the Exact Systems was estimated to PLN 235 million.
— Regrettably, all potential investors made attempts to take advantage of a weakness of our majority shareholder, what caused that a quotation of our company was unacceptable. The funds withdrew from the transaction, because we had failed to reach an agreement. The Work Service struggled with a huge debt, and we started to run out of time. If our greatest shareholder had gone into bankruptcy, and a receiver in bankruptcy had entered the company, the dark clouds would have hanged over the Exact Systems. With this transaction we struggled for a survival – says Lesław Walaszczyk. And then, on our way to Portugal in order to renegotiate a take-over of the QLS, we had a brain wave.
— We stated, that maybe we will try to buy out the shares from the Work Service by ourselves. Our advisor, the Equity Advisors, recommended the CVI to us — recalls Paweł Gos.
Organically, but with an acquisition
Nowadays, the Exact Systems, which will have revenues amounting to more than PLN 450 million, and plans to achieve PLN 550 million, wants to have a primarily organic growth, also thanks to an acquisition of the Portuguese company with 400 employees and serviced two automobile plants.
— We strongly count on strengthening on the markets, on which we operate, in particular in Europe – says Lesław Walaszczyk.
However, the company plans the acquisition, because it has a fancy for another piece of the layer cake.
— Together with our new partner we have aspirations to become a company from the TIC sector, i.e. testing and inspection, which we have already performed, and certification. The latter type of business activity is of high-margin. Including it into the offer would allow for a provision of the comprehensive customer service and provide a rating the certification services for the international database of the clients – considers Paweł Gos.
The Exact Systems would like to join the companies like DNV, SGS, TUV or Dekra involved in certification — of the management or manufacturing systems (in that with regard to the ISO TS 16949, essential standard in the automotive industry). First, however, it wants to buy a company that is a certification body.
— The organic growth is supposed to give us a profit, from which we will be capable to buy a company we are interested in, as we will make attempts not to encumber it with an additional debt. We observe a few companies. We plan the acquisition for the next year. We will search for the targets in the countries, in which we conduct our economic activity, that is in Poland, Great Britain, China, Russia, Belgium, Netherlands, Hungary, Germany, Romania, Turkey, Czech Republic, Spain, Portugal and Slovakia. In 3-5 years, we would like the Exact Systems Cert to be the recognisable certification body on the European manufacturing market – says Lesław Walaszczyk.
To stand on the podium
The President and the Vice President of the Exact Systems believe that the following will be helpful when it comes to the organic development: Quality Academy (trainings conducted in Poland, Czech Republic, Slovakia, Hungary and Romania completed by more than thousand employees of the company), a recruitment platform, on which 28 thousand candidates are registered, as well as the Exact People, a mobile application, which will be launched in January.
— Many of our employees are the students, and the above-mentioned application enables to choose the dates, on which they may work, what will facilitate the work of the coordinator – says Paweł Gos. It is considered that the company has also something that the competition fails to possess: a programme for managing reports and quality control information.
— Extranet360 constitutes our competitive advantage. Such an advanced solution is not used by any of our international competitors, such as Trigo, Formel D or Aktrion – says Lesław Walaszczyk. These three companies from the industry have the revenues higher than the Exact Systems.
Work Service comes back to work
A share price of the employment agency reached a maximum amount of PLN 22.5 in March 2015. When Maciej Witucki, the present President moved on to the company at the end of the last year, together with the main shareholders - Tomasz Misiak and Tomasz Hanczarek – foretold a turnover of EUR 1 milliard and a foreign expansion. Nevertheless, the turnovers in Germany and Hungary failed to benefit as expected. The German HR company from the Fiege Work Service logistics group forecasted the earn-outs for the current shareholders, which costed the Work Service PLN 80 million.
After three quarters of this year the Work Service had the revenues of PLN 1.57 milliard (by 0.6 percent more than one year before) and a loss of PLN 4 million of the EBITDA target. The company was not able to redeem the bond series with a maturity date at the turn of November and December. In December it came to terms with the banks, bondholders and factors – it has time to repay the debts until spring 2020. 104 million from the transactions conducted by the Exact Systems promptly went to the banks, and less than PLN 23 million – to the accounts of the Work Service. The company’s rate rebounded from PLN 0.85 at the beginning of December and it was a little bit over PLN 1.5 yesterday.