Pawel Gierynski Q&A with the Korea Economic Daily

Abris’ Managing Partner speaks to the Korea Economic Daily, discussing the investment landscape in Europe, the attractiveness of the CEE region for global investors, and how ESG transformation is driving value creation.

Mr. Gierynski, you have worked for Abris Capital Partners for sixteen years and managed the organization for four years. Tell us about your firm.

Abris Capital Partners is the leading private equity fund manager and ESG transformation specialist focused on mid-market opportunities in the major EU-11 countries. The firm was established in 2007 by two founding partners – George Swirski and Neil Milne – and the Harvard Management Company. Over the years, the shareholding evolved; today, the company is owned by the founders, Steven Richmond and me.
We seek to identify and partner with the most successful and dynamic mid-market businesses in Central Europe, which can benefit from an input of capital and management expertise at both strategic and operational levels while strengthening growth through ESG transformation. Over the four years of our investment period, on average, we see those companies transforming from simple local businesses into regional business gems. These companies become especially attractive for potential investors thanks to the strong professionalisation our teams bring to the table.
With almost €1.3 billion of assets under management, Abris has obtained financial backing from leading global investment institutions, including corporate and public pension plans, financial institutions, funds of funds, and US university endowments.

How do you evaluate the investment landscape in Europe at present?

Over the past six months, the EU economy has performed better than expected. As the disruptions caused by the war in Ukraine and the energy crisis clouded the outlook for the EU economy and authorities globally embarked on tightening monetary conditions, a winter recession in the EU seemed inevitable. However, we saw positive growth in Q1 2023, lifting the outlook for the EU economy instead.
Despite the modest level of appetite globally from institutional investors, there are several exciting investment opportunities in Europe at present, particularly around sustainable investing, where Europe has assumed global leadership, and also in specific regions such as Central Europe (CE), where economic growth remains stronger than in other EU countries.

Why is the CE region so attractive to potential investors?

Central Europe occupies a strategic position at the crossroads of Western Europe and Asia, providing access to a large market of over 100 million consumers and serving as a gateway to other European markets. The region’s consistent outperformance of Western Europe in economic growth will continue – Poland and Romania are forecast to see GDP growth of 2.7% and 3.5% in 2024, versus 1.7% for the EU. At the same time, GDP per capita in CE sits at just €14k versus €43k in Western Europe, offering significant headroom for convergence. The region also boasts a highly educated and skilled workforce, with a strong tradition of technical and engineering expertise and a focus on innovation and R&D. Therefore, Central Europe is home to industry clusters in various sectors, including automotive, manufacturing, IT, biotech, and finance.
Central European countries have also made significant strides in creating favourable business environments in recent years, implementing economic reforms, simplifying regulations, and improving infrastructure. This ease of doing business and efficient legal systems contribute to the overall investment attractiveness.
Despite this, investment penetration has not yet reached levels seen further west, with private equity investment in CE averaging just 0.2% of GDP, compared with 0.8% in Western Europe. Such a business landscape presents an enormous opportunity for experienced investors who know the region well, are deeply plugged into local networks and markets, and can deploy capital and support regional businesses with international expansion and M&A.
CE combines this attractive growth profile with developed economy-like stability, differentiating it from other emerging economies, and while the recent geopolitical and macroeconomic turbulence is affecting CE, the magnitude of the impact on economies and businesses has not differed substantially from Western Europe – nor is it likely to in the future. Finally, the CE region benefits from a continuous inflow of EU funding supporting a further infrastructure catch-up, with €210bn of cohesion funding arriving between 2021-27.

Why should South Korean investors invest in CE?

Let me start by saying that South Korea and the countries of the CE region share a similar history, typified by the struggle for independence and the proximity of historically aggressive neighbors. It indeed developed several cultural similarities.
Businesswise, Poland is the largest country in the region, accounting for around 40% of the population, and in 2021, Korea reached the status of the largest foreign investor in Poland. Therefore, not surprisingly, more than 500 companies have a Korean shareholding registered in Poland. Over the last 20 years, Korean companies have invested more than €6 billion in Poland. For example, within the scope of strategic governmental cooperation, the Korea Hydro and Nuclear Power (KHNC) company will build the first nuclear plant in Poland, and the Incheon International Airport Corporation will assist in building the new Polish central airport. These investments will contribute to the stable growth in foreign exchange between Korea and Poland, reaching almost $6.5 billion in Korean exports in 2021. I believe this long-lasting record of respectful cooperation makes our countries trustworthy and reliable business partners and should encourage future streams of investments.

There are several private equity players in the region. What makes Abris different from other investors?

What makes us truly different is our focus on building the value of investments through ESG transformation. Our portfolio companies are leaders in ESG integration in the region and have a clear climate change strategy, helping to spearhead the transition to net zero. These companies are fit for the future and are more able to adapt to a changing world, readily complying with regulatory and societal demands. I am convinced they will deliver better long-term returns for our investors and us. They will be the winners and the game-changers.

Pawel Gierynski is Managing Partner of Abris Capital Partners