Since 2022, the Polish IT consortium Euvic Group has taken over 5 Ukrainian outsourcing companies. The company's Vice President, Łukasz Czarnecki, announces the continuation of this process. This year Euvic plans to finalise 2 more acquisitions. The group's ambition is to place itself in the top 20 companies in terms of the number of employees on the Ukrainian market.
DOU spoke to Łukasz Czarnicki about why Euvic is curious in the Ukrainian marketplace and what happens to the teams after the takeover. We besides discussed the strengths of local specialists and the prospects that Polish investors see in Ukraine.
About the Euvic group: Polish IT consortium founded in 2005. presently it has more than 30 companies and employs more than 6000 specialists. The full turnover of the group is $300 million. Since 2022 Euvic has been developing its presence in Ukraine — taking over the companies Artkai, 7Devs, Lampa, Exoft and WeExpert, as well as finalising 1 transaction, the details of which stay confidential. Euvic presently employs around 450 people in Ukraine.
“Why did you decide to invest in the Ukrainian marketplace during a full-scale war?
And why are you continuing this now when, according to any estimates, the Ukrainian IT sector is not growing? How did it all start?
This intent came before the full - size war. I joined Euvic 5 years ago as a shareholder and vice president, connecting with her your company. Euvic IT Consortium is rather a large organization – it presently includes 30 companies, employing about 6000 people. We managed to accomplish global growth in sales and client acquisition, but we were not so fortunate in creating improvement centres and hiring specialists outside Poland. In the country, we are strong, but we have never been able to scale effectively, even though we have tried to do so in different countries.
Z I besides have a private life in Ukraine. My wife is Ukrainian, half my household is Ukrainian. So I watched this marketplace long before a full-scale invasion. Thanks to my network of contacts, I met the brokerage company Mergewave, specializing in mergers and acquisitions. They helped us realize the specifics of the Ukrainian market, supported negotiations and prepared documents.
Since the first serious conversation in this direction took place on February 24, all subsequent talks were stopped for respective months. The Ukrainian companies then focused on ensuring the safety of their employees, and we – on their support.
For many years we worked with Ukrainian companies as subcontractors, and they lost many of their customers at the time. So we started offering aid – we were ready to cover the costs of maintaining the teams until they found fresh customers. But in practice these companies were not peculiarly curious in specified aid – they preferred to establish commercial cooperation.
Soon we returned to talking about M&A transactions. small has changed in the operation of companies — the sector has gradually adapted. We did not treat war as an excuse to negociate a price or anything like that. Of course, we are aware of the risks, but nowadays they are not the reason to withdraw. In many aspects we can learn from Ukrainian companies and there are surely areas where they are stronger. That's the main reason we made that decision.
We buy companies that make revenue, are profitable, have a good manager and an agreement with the founders.
— What are the advantages of Ukrainian companies in particular?
They're definitely stronger in global sales. All companies in which we have invested mostly have 100% of revenues from outside Ukraine due to the fact that the interior marketplace is not as developed as in Poland. In Poland, about 40–50% of our revenues come from Polish customers and global companies present on the local market. The another 50% is exports. The interior marketplace is strong and significant.
Furthermore, I am impressed that Ukrainian companies can make and get fresh customers during the war.
Our organization grows year by year — partially organic, partially through acquisitions. But the Ukrainian companies we have invested in surely grow much faster.
— How do you see it from your own perspective?
We may have been lucky, but we may have besides been able to invest and cooperate with companies with growth potential. Of course, erstwhile a company becomes part of a larger structure, it can benefit and support. But these companies we invested in don't always benefit from it.
It doesn't work that erstwhile they become part of Euvic, they immediately change their brands. They inactive operate under their own brands and keep independence. Euvic membership is utilized only if it is beneficial for their business.
Besides, erstwhile a smaller organization becomes part of a larger organization, risks are dispersed. frequently you can't see it right distant or you don't appreciate it, but then part of the work disappears from the founder's shoulders. And this sense of safety triggers courage — you can act more aggressively, take greater risks. Otherwise, you gotta control everything yourself.
I wouldn't say we brought anything to these companies or that we could teach them something — it's just a good investment. I think that people working there are very intelligent and motivated. They all operate in a completely transparent Western European style. We can learn each another on equal terms. For companies, this is simply a kind of security: investors do not interfere in their work, but are present in case something happens. It opens up quite a few possibilities.
Euvic delegations and representatives of Ukrainian companies forming part of its structure plant trees in Lviv
In fresh years, the full IT sector has undergone major changes — not only in Ukraine. 2 years ago, hiring an IT specialist was almost impossible. Now the situation has completely turned around. In Poland, for example, many specialists search work.
The challenges associated with recruitment were besides addressed by sales. There are major technological changes, so customers make decisions more carefully. It's seen all over the world. It is clear that any change, crisis or boom leads to marketplace restructuring. I think that's what we're going through.
I believe that in future larger organisations will be safer due to the fact that they will be more diversified. Our group is about 30 companies and all are presently profitable (although that is not always the case). We are present in the USA, United arabian Emirates, Finland, Sweden, Norway, Austria, Germany and we have individual projects in South Africa.
— What are the results of the acquired companies?
They all grow on average by 20 and any by up to 30 percent per year. Like Artkai and Exoft. Both companies are increasing dynamically. And without the “magic pill” on our part, they did it themselves.
In Poland, we see an average increase of 15 percent per year (this is more than the marketplace average). But we're bigger there, so the management challenges are bigger.
In Ukrainian teams, I noticed quite a few focus on work, possibly helping to cope with hard times. It is clear that motivation and work translate into advanced results.
When we started our presence in Ukraine, we assumed that after 4–5 companies we would halt investing. But after our experience, we feel much more confident. In many respects, Ukrainian companies are more transparent and open to us than those we have been working with for many years. We besides like traveling and gathering together.
We decided to proceed our investments. In support of our activities, the Polish improvement Fund (PFR) donated $2.5 million through the FEZ 2 fund. This allowed Euvic to increase participation in Ukrainian companies and opened up more prospects for the future.
— What approach do you take erstwhile negotiating with companies?
We do not impose close integration into our processes. We truly believe in the entrepreneurship of the founders. erstwhile we start talking to the company, we look for a mechanics to keep the founders in their positions as long as possible. We don't want to replace them due to the fact that we don't think we know better how to manage their company.
On the another hand, we are an industrial and long-term investor. Therefore, we are always striving for 50 plus 1 — more for reasons of financial consolidation than power.
We're not a financial investor, we don't run an intense due diligence for 2 or 3 months. After a fewer meetings and reviewing the portfolio, we are able to measure whether the company fits us. We're discussing how long the transaction will last and erstwhile we can start cooperating. If everything's okay, we decision on. If either side is dissatisfied, there are mechanisms that let for withdrawal. But we do not want to spend 3 to six months analyzing papers (not due to deficiency of responsibility, just experience). There aren't that many things to check.
Just ask a fewer questions to see if the founders are open, motivated and whether they see in us the value (and vice versa — if it works for us too). The human origin is far more crucial to us than the numbers. Of course, we look at results — that is the business. But the results are a consequence of the relation between people, their motivation and their communication.
In the case of M&A transactions, a cool and distant approach is usually expected from large organisations: due diligence, numbers, KPIs. That's not who we are. We invest in healthy companies — we don't gotta save them. Of course, we do business, but isn't it better to do it in comfortable conditions? That doesn't mean we always agree and we're good to each other. But it's so much nicer not to agree with individual you trust and who you want to work with. In the long term, it besides pays more.
The transaction usually takes about a year and is divided into 3 stages. We are not a corp with a ready M&A procedure. We meet with the companies together with the Group's CEO and make a decision together. Then I discuss the transaction with the founders and lawyers. It's a very simple, short process.
— What companies are you curious in and how do you make contact with them?
We have 2 types of activity. We created Euvic Ukraine, which I run. Its nonsubjective is to proceed the acquisitions over the next 2 years. presently we have 5 companies in our portfolio (Artkai, 7Devs, Lampa, Exoft and 1 that we are not yet revealing). In total, about 450 people work there. We have an ambition to make to be in the top 10 or at least 12 Ukrainian companies. It's about our long-term plan. We besides have a company of about 2,000 people that manages investment funds.
We are curious in creating software, expanding teams and partially infrastructure services. This is where we are strong in Poland and in the planet – we service customers well and carry out complex projects. We are 1 of the largest integrators in Poland.
Our criterion is that these companies should number between 50 and 100 people and be financially stable.
We appreciate the fact that most of the revenues come from abroad — we ourselves do not have that much experience in acquiring external customers. We request results and founders who want to stay with us (although there are exceptions) who love their companies and want to have a shareholder.
During the investment in Poland, we never changed the management of any company. In Ukraine all the more so — if something goes wrong, I will not be able to come and pretend that I know how to manage the company in this country.
As for the late acquired company, we decided to invest even though the founder wanted to leave. In this situation, a local management squad from erstwhile investments was available, and we considered it a good time to make a decision. In the long term, we're likely to take over the management, which is why we took it as an exception.
In addition, I personally run a tiny venture capital accelerator for IT technology — Edulab, which is part of Euvic's business social work activities. We besides have a program for start-ups who want to operate in Poland.
So far, I had no uncertainty about the transactions (even exceeded the first expectations), but if something goes wrong, we have the mechanisms for termination of the agreement and flexibility in its structure.
—What happens to companies?
Like I said, there is no point in destroying something that works well. But that doesn't mean we never made decisions that changed things in the company.
The founders at meetings tell us what they want, make their proposals. We all meet at least erstwhile a 4th and share information. It was a completely fresh experience for managers of these companies due to the fact that they were previously competitors on the market, and now they are part of a larger, independent group.
This usually takes the form of a seminar that I conduct personally. I tell you what is happening in fresh York, in the world: what are the financial results, customers, challenges, successes, trends and so on.
Every company shares information they want to share. We besides have a platform to ask for or aid someone, specified as sharing a customer, a contract, or solving a problem. We have introduced a culture of cognition sharing to this group. And during these seminars, we usually initiate joint business management activities.
Leaders are liable for their companies and they are telling me what they request from me and what the future will be best for their companies.
— You besides mentioned plans to make an ecosystem from the companies you have invested in. What does it look like?
Like the 1 we created in Poland and which has been operating there for many years. Each company belonging to the group has the same access to our resources: marketing teams, abroad offices, common financial envelopes, method capabilities. If there is simply a solution in the group that the Ukrainian company can use, just rise your hand, contact the right individual and use. The ecosystem is my communication.
Two years ago, erstwhile we started organizing weekly meetings and conversations, everyone felt a small uncomfortable — among fresh faces, inactive competitors. But after 2 years, we've built trust, and everyone knows what situations we can number on. It became much more natural. Of course, it takes time, but business is based on people, their common trust and their readiness to help.
— Do you in any case have a controlling stake?
Currently, no, but that is our goal in all investments in Ukraine. any investment processes are inactive ongoing. We have been very transparent about this from the very beginning.
Not all deal immediately assumes taking over a majority package. It is frequently about buying a number package at the beginning. Sometimes we decide: we don't take 50 plus 1 now, we halt at 20 and see what happens. We don't have 1 instruction to follow. We are always trying to find a mutually beneficial solution.
We are presently in talks with a fresh list of companies, and we openly say that our intention is to accomplish 50 plus one.
— Given the war and its challenges, what difficulties do you face in working in Ukraine?
Of course, war, stress, mobilization — all of this affects companies. But there's not much you can do about it, but accept the situation.
There are restrictions on money transfers from Ukraine, but this besides needs to be accepted. We're a long-term investor, so we're not besides worried about it.
For more individual reasons, concerning doing business in Ukraine, I would say that the biggest difficulty is spending time at the border erstwhile entering the country. If individual opened the border, I'd be much happier.
I would not say that there are circumstantial legal obstacles to the operation in Ukraine. But due to the martial law, the first anti-monopoly issues are likely to arise soon. This is simply a fresh legal challenge — and in a fewer months we will see how we deal with it.
— What are your plans for the Ukrainian marketplace and possibly another abroad markets?
We're inactive looking for companies who would like to join us. As I mentioned, our goal is to be among the top 20 Ukrainian companies by 2030 in terms of the number of employees.
From a corporate point of view, Euvic will go public this year. This is simply a large step for us.
In addition, we are preparing for a major global takeover — a company of about a 1000 people. I can't tell you the details yet. Our biggest acquisition so far was Senetic, 1 of the largest e-commerce companies in the network equipment trade (we invested in it last year). If everything works out, the next deal will be even bigger.
