How did the Zago Capital I fund come about?
Nadahl Shocair: I met Piotr in 2014 when his company, Noble Health, needed help to improve revenue and enterprise value to be better positioned in the Polish market. At that time, we prepared a two-step strategy. First, we tackled the repositioning of Noble Health against many competitors in the Polish market as a “Premium Wellness” brand; and second, we aligned the products by creating new lines and their categories, brand names, packaging, etc. to begin their new positioning.
In 2019. Peter contacted me again and visited me in Berlin where I run my M&A, transformation and private equity advisory firm, Bull Gemini.
After several strategic and intensive discussions, we finally decided to establish Zago Capital I as an investment fund licensed by the Polish Financial Supervision Authority to leverage my extensive experience in M&A and private equity transactions worth $1.4 billion and Piotr’s success and experience in the health, wellness, cosmetics and supplements sector to take advantage of the excellent opportunities in Poland and the entire CEE region.
Noble Health was the first project for me that helped me to get to know the specificity of Poland, where I met amazing, intelligent and successful people. It also helped me see the high value and growth potential of many niches and investment opportunities in Poland and the CEE region.
Among other things, you invest in makers of dietary supplements – an area known for various abuses. How do you vet startups for their investments?
Since we focus mainly on the e-commerce sector of the beauty, wellness, cosmetics and dietary supplements industry, we can only operate and succeed based on the trust that our valuable customers place in our brands. This is the foundation for continued success and growth.
On the one hand, it goes without saying that all our companies operate in total compliance with EU and Polish regulations, which is supported by an internal and external team of compliance experts that monitor and control all products within the framework of these regulations.
On the other hand, because we are professional and ethical investors, we examine a company as thoroughly as possible before deciding to invest, starting with a thorough and accurate due diligence. We take into account all necessary factors such as financial health, equity structure, net debt, taxes, operations, intellectual property, technology, legal issues, EU/Poland compliance, customer base, operational synergies, social media, marketing, sales systems and of course any customer claims.
Once the investment is made, we always act as an “active investor”, bringing the acquired company together operationally and aligning it with our requirements of quality, transparency, trust, honesty and integrity.
We then focus on immediate value creation with a high level of strategic management and financial support, as we are able to apply numerous operational synergies between our entities, which ultimately results in improved operational and financial performance and increases the overall value of the business, giving a return on investment. We also work closely with our partners, such as Casberg, for example in marketing.
Your focus area is mainly Poland. Why this decision? Isn’t it restrictive?
On the investment side, as I mentioned earlier, we see very strong growth potential in the CEE region, especially in Poland. We are also looking for some specialized niche opportunities across the EU, UK, Switzerland and Norway. We see a lot of acquisition opportunities in Poland and CEE because those markets are not as developed as in Western Europe.
From a business perspective, I believe in Poland. It is the best base of operations in Europe because geographically it is in the center of Europe, it has a favorable private and public capital market, a fair corporate tax environment, many highly skilled, hard-working, multilingual professionals with the knowledge to run our business, world-class legal and tax experts, many software engineers to meet our e-commerce requirements, air, rail, road and sea networks and connections to Europe and the world, and a strong base of high-quality manufacturers.
What are your plans for the near future?
We plan to invest EUR 100 million in 30 companies, allocating between PLN 4 and 40 million for each project. We want to acquire entire companies or majority shares. We may also consider co-investments, provided that we retain operational and tax control over the activities of the company we invest in.
What has been interesting for you over the last few months?
Our fund is at the very beginning of its activity. We recently acquired 100 percent of Niemchem, an e-commerce company with strong foundations. It is Poland’s largest online store selling German household chemicals for cleaning and hygiene in the Direct to Consumer sales model to 800,000 households in Poland. Poles trust the well-known brands of German cleaning products, they are considered high quality products and are preferred to other substitutes available on the market.
How do you assess the wellness industry in Poland compared to the West?
Poland is a dynamically developing market with great growth opportunities. The health and beauty segment alone is about 8 billion PLN at the moment and is estimated to reach 14 billion PLN by 2026.
Unlike some other European markets, our large customer base is made up of people who are very interested in their well-being, health, beauty and fashion focused on a healthy, happy and attractive lifestyle.
The companies in our portfolio and those in which we want to invest care about a happy, healthy and attractive lifestyle for their customers by offering a high quality and wide range of all kinds of supplements, probiotics, cosmetics, etc. Through our actions, we strive to positively influence people’s lives and to develop together with the Polish market, contributing to its growth. We will continue to invest in companies that meet our requirements and operational and investment criteria.