Target Company Overview

Avallon MBO FUND has completed a management buyout of Good Food Sp. z o.o., a leading producer and distributor of healthy food products in Poland, specializing primarily in rice cakes. The transaction involved the acquisition of 100% of the shares from the previous owners, Polish-Australian entrepreneurs Magdalena and Janusz Dals. Good Food is now co-owned by Avallon MBO FUND and its current CEO Robert Czajkowski.

In the previous year, Good Food generated revenues exceeding PLN 30 million, with a net profit of over PLN 3.5 million. Its performance in the first half of this year indicates dynamic growth, with sales surpassing PLN 23.5 million and a net profit exceeding PLN 5 million. Employing over 180 staff, Good Food is among the top producers of rice cakes in Poland, holding nearly 40% of the market share in hypermarkets (25% overall market share) and is recognized as a leader in product quality. The company is also a significant exporter, with products available in markets such as Denmark, Spain, France, the UK, Italy, Germany, Sweden, Lithuania, South Africa, the USA, and Australia.

Industry Overview in Poland

The healthy food sector in Poland has been experiencing significant growth in recent years, driven by increasing consumer awareness of health and nutrition. The demand for organic and natural products has surged as Polish consumers are becoming more health-conscious, leading to a notable rise in the market for healthy snacks, including baked goods like rice cakes. This shift in consumer preferences presents ample opportunities for companies like Good Food to capture market share.

Moreover, Poland's health food industry benefits from strong logistical networks and proximity to various European markets. The retail environment has evolved, with major supermarket chains actively seeking to expand their offerings of health-oriented products. Good Food's foray into these western European markets aligns well with this trend, allowing it to leverage its strong brand and quality certifications to attract a broader customer base.

In terms of challenges, companies must navigate stringent regulatory standards concerning food safety and quality. However, Good Food's compliance with ISO 9001:2000 and IFS standards positions it favorably within the market, demonstrating its commitment to quality and safety in food production. The company’s established export channels and existing certifications further bolster its competitive advantage.

Lastly, the Polish market still has considerable growth potential, as Polish consumers currently consume healthy food products at rates significantly lower than the average in older EU member states. This indicates considerable room for growth as the market continues to mature and consumer habits evolve.

Rationale Behind the Deal

The rationale for Avallon MBO FUND's investment in Good Food stems from the company’s promising growth trajectory and strong market positioning within the healthy food sector. With an increasing focus on health and well-being, Good Food is well-positioned to capitalize on the growing demand for healthy food options both domestically and internationally. The company’s robust sales and profit margins further support the decision, indicating a sound investment opportunity.

Furthermore, the established leadership under CEO Robert Czajkowski, coupled with a skilled management team, provides a reliable foundation for implementing future growth strategies. Avallon's intention to enhance product lines and expand into new markets aligns perfectly with Good Food’s existing capabilities and aspirations.

Investor Information

Avallon MBO FUND B.V. is an investment fund established in August 2007, specializing in management buyouts (MBOs) within the Polish market. With a capitalization of EUR 50 million, it is the only fund in Poland focusing exclusively on this type of investment. The fund is managed by a team of Polish experts who have been involved in over 70 MBO/LBO transactions since 2001.

Notably, among the fund’s investors are the European Bank for Reconstruction and Development (EBRD) and a fund associated with the Swiss investment bank LODH. Avallon MBO FUND targets small and medium-sized enterprises, committing an average investment size of EUR 3-7 million with plans to undertake larger MBOs in conjunction with its investors. To date, the fund has executed notable investments in the medical and energy sectors.

View of Dealert

The acquisition of Good Food by Avallon MBO FUND is seen as a strategic and promising investment in a blossoming sector. The healthy food industry in Poland is poised for significant growth, and Good Food's strong market share and commitment to quality place it in an advantageous position. The firm’s innovative product development capabilities are essential as consumer demands shift toward healthier options.

Moreover, the experienced management team led by Robert Czajkowski provides confidence in the company's operational capabilities post-investment. Their strategic vision of expanding product ranges and targeting new market segments supports the fund’s long-term growth potential. Avallon’s backing is likely to enhance Good Food’s competitive edge as it scales its operations.

However, it is crucial to maintain focus on sustaining quality throughout expansion efforts. The food industry is heavily regulated, and any missteps could hinder growth or lead to reputational damage. Fortunately, Good Food's established certifications suggest that it is well-prepared to meet regulatory scrutiny according to high global food safety standards.

Overall, this deal appears to be a sound investment given the current trends favoring healthy eating and Good Food's solid foundation. Continued attention to innovation and responsiveness to market changes will be critical for capitalizing on the growth opportunities that lie ahead.

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