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October 7th, 2008
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10 Questions

with Steven Buckley
10 Questions | Search restaurants | Archives

March 5th, 2008 issue

COURTESY PHOTO
Buckley says all companies, no matter the region, must be constantly changing and improving.
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THE BUCKLEY FILE

Job title: Managing partner, Innova Capital
Age: 52
Nationality: American
Previous position: Founder, Company Assistance Ltd.
Education: B.A., Stanford University; MBA, Harvard Business School

The Poland-based private equity fund Innova Capital, together with two U.S. partners, is in the process of acquiring the Czech alternative telecom GTS Central Europe, with the deal expected to be finalized this quarter. Private equity funds, which purchase controlling stakes in promising firms with an eye on improving their value through restructuring, are increasingly influential in Central Europe. Steven Buckley, Innova’s managing partner, talks to The Prague Post about the decision-making behind the deal and the constancy of change.
? What was the decision-making behind your acquisition of GTS?
One of our partners, Krzysztof Krawczyk, has been searching for additional telecom opportunities for us in Central Europe. Innova has invested in six different countries’ telecom markets, so we are always interested in seeing the “latest and greatest.”
In the case of GTS, Krzysztof worked with two American partners — Columbia Capital and M/C Ventures — who had been searching for sizable targets, worth more than 100 million euros, since mid-2006. Our focus was on carriers with regionwide infrastructure and substantial sales of data transmission services. Our attempts nicely coincided with the decision by GTS’ owners to sell the business.
? What types of investments and developments do you have planned for GTS?
It’s too early to provide details of the company’s future strategy. However, we are certain that there are substantial opportunities for increasing the volume of business among the five partner companies that comprise GTS, in Poland, Romania, Slovakia, Hungary and the Czech Republic. Innova and our partners have significant experience in growing business-to-business models, an area we want to develop at GTS.
? Do you project much growth in Central Europe’s broadband use?
The region as a whole is still underdeveloped vis-a-vis Western Europe. Its broadband usage will grow faster. We expect this to be the case not only in wired broadband, but also in wireless data sevices. We project major growth in Romania due to its size and the relative lack of penetration.
? Do you support the European Commission’s recently proposed telecom package, which seeks to liberalize the telecom market?
We welcome any and all attempts by regulatory bodies to enhance fair and balanced competition in Central Europe’s telecom industry — a strong regulatory regimen is good for consumers and for the industry.
? Beyond the GTS deal, do you see a lot of investment between the Czech Republic and Poland?
We do see a lot of investment activity across borders. In fact, one other Innova deal, Mercor, has a 100 percent interest in Hasil, a Czech-based manufacturer in the same business. There is a solid rationale for stronger capital links between both countries: Poland has the largest domestic market in Central and Eastern Europe, while the Czech Republic has traditionally been focused on development of export sales.
? Where are most of your investors from?
We’ve always raised our funds from blue-chip international investors, which typically operate out of the U.S. and UK. Over time, we have diversified our sources of funding, adding major institutions from Switzerland and Scandinavia.
? What role do private equity funds play in Central Europe?
Private equity plays a pivotal role in the Central European economies — much greater than in Western Europe. According to the European Bank for Reconstruction and Development, the Czech Republic has the fifth-highest ratio of private equity to gross domestic product [GDP] in the European Union, more than double Poland’s ratio. At 0.5 percent of GDP, it may sound small, but that rate compares favorably to the 1.4 percent ratio in the UK — Europe’s leading private equity market.
? Are many Central European companies in need of the improvement that can be had through acquisition?
Companies don’t need to be acquired, but they must improve. That’s true for companies around the globe, not simply in Central Europe. Change is a constant and presents new challenges to every company. With the new European markets, competition from China and India, increasing wages and spiraling energy costs, what businessperson wouldn’t feel they must improve their operations?
So the question is how best to achieve improvement. At Innova, we can contribute talent, pan-European market know-how, patient capital and a strong orientation on results to help our partners.
? Do you have a particular management philosophy you apply to companies you acquire?
Innova invests in companies. We don’t run them. We seek first and foremost partners with excellent managers, either in the company or outside of it, to be sure that our team can use the assets of each company as well as or better than its competitors.
We then focus attention on those few things, called value drivers, which create real value for a customer. This means we talk a lot with customers. We set goals to improve on key dimensions, like reliability at a manufacturer or uptime at a service provider. And then we press to get better in those measures.
? Are employees at companies you invest in ever resistant to new ownership?
It varies by company and situation. Innova doesn’t seek to enter adversarial situations, so typically we explore this prior to investment. Our general experience has been that thoughtful leadership on the strategy of our companies wins the support of motivated employees, because it helps to grow the company and create employment opportunities. Innova’s companies have created many more jobs than they have eliminated.
Want your manager to answer our 10 Questions? Contact Paul Voosen at pvoosen@praguepost.com


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