Enterprise Investors’ Acquisition of a Majority Stake in Software Mind
Private equity fund Polish Enterprise Fund VIII managed by Enterprise Investors acquired a majority stake in Polish software company Software Mind from Ailleron.
Enterprise Investors will invest PLN111 million in Software Mind by buying 26.7% of existing shares in Software Mind for PLN40 million from Ailleron and will subsequently inject the company with PLN 71 million of fresh capital, which will increase the fund’s shares to 50.2%.
Software Mind is a part of Ailleron’s group, a company listed on the Warsaw Stock Exchange. As part of the transaction, and subject to approval at Ailleron’s shareholders’ meeting, a division of Ailleron – Enterprise Services will be carved-out from the parent company to Software Mind. Software Mind develops comprehensive (end-to-end) software solutions for clients from financial and telecommunication industries from all over the world as well as Silicon Valley unicorns. The company supports four largest mobile operators in Poland and a few that are based abroad. Software Mind operates out of four development centres across Poland.
An Interview With Konieczny, Wierzbicki Kancelaria Radców Prawnych Spółka Partnerska
What should companies bear in mind when selling a majority stake?
Giving away ownership of the company requires establishing strict rules of executing control and agreeing on managerial rights. The majority investor will not necessarily be interested in managing the company by themselves, but they will most definitely measure the company’s results and execute their powers if they are not accomplished. Therefore, it is crucial to establish clear and measurable financial goals for the company and a reliable mechanism of verifying if the board is achieving them. On the other hand, the minor shareholder should preserve crucial rights regarding the company’s operations in order to ensure that the takeover does not harm the company in the long run.
What is the biggest challenge for a legal adviser involved in M&A transactions during the company’s expansion stage?
Combining legal advice with financial knowledge and a good understanding of a company’s business is key. Agreements defining the transaction cannot be abstract and detached from business. A company in the established or expansion stage focuses on growth and reaching ambitious economic goals. It measures its success in numbers while juggling multiple challenges related to the demand for its products, taxes, personnel, insolvent contractors, or even a global crisis. A legal adviser needs to feel confident with the concepts such as normalised EBITDA, working capital, CFDF etc., and later be able to implement them into the terms and conditions of the M&A transaction. That is why we always strive to be close to the business world and understand its singularities. Our legal work should complement the business, not complicate it.
What distinguishes your work from other law firms advising in M&A and investment transactions?
We maintain focus on the companies involved in IT, Fintech and new technologies. This is a dynamically developing market that continues to push boundaries and come up with products and solutions that revolutionise other branches of the economy. By staying up-to-date with our clients and their business, we manage both to understand and foresee challenges that need to be addressed in M&A transactions, either on the side of the company or the investor. As specialists in this sector, we can recommend and implement solutions that are truly relevant to our clients and answer the challenges that they face in their business. As a boutique law firm we also maintain close, personal relations with our clients, and therefore provide security and confidentiality that these types of transactions require.