Target Company Overview

ZABERD S.A., based in Wrocław, employs over 250 personnel and specializes in a variety of services, primarily focusing on road safety and the comprehensive maintenance of national roads. The company undertakes various projects, including traffic signage, lighting, energy-absorbing barriers, traffic signaling systems, the development of Intelligent Transport Systems (ITS), and organizing alternative traffic routes. With several regional offices across Poland and a dedicated fleet of machinery, ZABERD is well-equipped to execute service contracts nationwide.

Since Avallon MBO invested in ZABERD in 2015 through the Avallon MBO Fund II, the company has experienced significant growth, doubling the value of the investment and increasing its revenue by 60%. During this period, ZABERD expanded its market share from 10% to 15%, achieving an operating profit (EBITDA) of 15.5 million PLN in 2020. The recent exit allowed Avallon to realize a return on investment of 2x the initial capital.

Industry Overview in Poland

The road construction and maintenance industry in Poland has seen considerable growth over the past decade, driven by increased public funding and European Union investments. This sector plays a crucial role in the country’s infrastructure development, making it an attractive area for investors looking for stable returns. With an emphasis on modernizing transport systems, numerous infrastructure projects have been initialized, creating a demand for specialized services within road maintenance and safety.

The Polish government's commitment to improving national infrastructure aligns with EU funding programs, which provide significant financial resources for road construction and maintenance initiatives. Such investments are expected to pave the way for continuous growth in the industry, offering opportunities for companies offering related services.

Additionally, the ongoing focus on enhancing road safety standards ensures that companies like ZABERD will continue to find growth opportunities. With increasing traffic volumes and rising awareness about road safety, the demand for comprehensive maintenance and innovative solutions will likely escalate in the coming years.

However, the industry is also subject to regulatory challenges and requires adherence to specific legislative conditions. Companies must stay abreast of these regulations to successfully navigate the evolving market landscape. Overall, Poland's road construction and maintenance sector is poised for sustained growth, attracting continued interest from investors.

Rationale Behind the Deal

The decision to exit ZABERD S.A. was strategic for Avallon, as it marked the realization of their initial operational goals set at the onset of their investment. The growth and success of ZABERD during Avallon's tenure demonstrate the effectiveness of the fund's investment strategy in leveraging the extensive expertise of the company's management team. This partnership proved beneficial in scaling operations and enhancing market positioning.

Going forward, Avallon plans to utilize the insights gained from this investment while focusing on additional investment opportunities within their current Fund Avallon MBO III. The growth trajectory achieved by ZABERD reinforces Avallon's confidence in pursuing similar investments in the future.

Investor Information

Avallon MBO is a private equity fund specializing in management buyouts and growth investments across various sectors in Poland. Founded with the objective to foster growth in mid-sized enterprises, Avallon focuses on partnering with management teams to unlock the potential of their companies and facilitate strategic expansions.

By investing in ZABERD S.A., Avallon not only provided financial backing but also offered valuable operational support, understanding the intricacies of managing a service-oriented business. This multifaceted approach contributed to the company’s robust performance and stability during Avallon’s investment period.

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The exit from ZABERD S.A. appears to be a favorable milestone for Avallon MBO, reflecting their strategic investment philosophy. The successful doubling of ZABERD's value under Avallon's guidance showcases their ability to identify promising opportunities in a growth-driven sector. Maintaining strong managerial collaboration has been pivotal to achieving operational and market expansion goals.

Furthermore, the ongoing demand for services provided by ZABERD in the Polish market, bolstered by EU funding and a focus on infrastructural improvements, offers a promising outlook for the company’s future growth. Thus, exiting at this juncture appears to have been a judicious decision, providing Avallon with substantial returns while positioning ZABERD for continued development.

Despite the positive outcomes, potential challenges in the regulatory landscape for the road maintenance industry should not be overlooked, as they could impact future growth trajectories. However, with a solid management team in place, ZABERD is well-positioned to navigate these complexities.

Overall, Avallon’s strategic exit aligns with their investment principles and further highlights the viability of investing in Poland's infrastructural development sector. The transaction results not only validate their approach but also set the groundwork for forthcoming ventures within their expanding investment framework.

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