Symfonia

A complex carve-out unleashed pent-up ambition, which propelled Symfonia to more than triple its revenues in just four years since the original carve-out was completed by MidEuropa.

 

Taking a strong but underloved unit out of a corporate can really invigorate a team. The journey of the premium software business Symfonia post-independence illustrates the positive impact a focused private equity backer can have: seven bolt-on acquisitions completed and more than tripling of revenues.

 

The carve-out and subsequent success of Symfonia exemplifies the adage of fortune favouring the brave, with the Polish software specialist thriving under the stewardship of an experienced backer.

Established over 25 years ago, Symfonia is an important and longstanding part of the Polish IT landscape, providing around 50,000 Polish SMEs with FMS/ERP/payroll software. It had been part of Sage Group plc since 2005, but like many corporates post-pandemic, Sage was looking to focus on its core markets. As the owner of Symfonia for so long, Sage was eager to secure a supportive steward for its growth, and so price was not the only consideration. Symfonia had been resilient during COVID, with strong recurring revenues driven largely by subscriptions and low churn, so there was a lot of interest in the business.

Symfonia’s CEO, Piotr Ciski, felt the MidEuropa team stood out. “They asked the right questions and we spent a lot of time building a relationship with them since it was important to me that they understood the real challenges and opportunities. I met with a lot of investors and had numerous discussions, but I really appreciated the clarity and mutual trust we developed with MidEuropa.”

Indeed, this trust helped ensure the deal was seamless. “The relationship we built meant we could approach Sage with the ability to deliver a clean deal very swiftly,” explains Marek Rodak, Partner at MidEuropa involved in the transaction.

After acquiring Symfonia in March 2021, the team spent just over two years executing on an operational and digital transformation which allowed it to enhance its cloud and SaaS (Software as a Service) capabilities and to upgrade its organic growth profile. It was the opposite of a cost-cutting exercise – in fact a tripling of revenues (mostly organic) was achieved with prioritization of platform and product investment by MidEuropa and the management team. This also led to a substantial increase in headcount, from c.300 at the time of investment to c.540 at the time of the majority stake sale in summer 2023 to the global technology investor.

 

The carve-out

The standout results within a compressed timeframe belie the hard work that made it happen. Typically in a carve-out, agreements are signed and attention swiftly shifts to establishing standalone systems and extricating IT, typically completed within a year during which systems and processes are transitioned and transformed.

Having started the process at the beginning of March 2021, Symfonia’s management embarked on a three-pronged approach to the journey ahead: the carve-out and separation from Sage, involving myriad systems and agreements; the day-to-day running of the business; and planning and investing for the future.

Each of these was a full-on role, with management drawing on MidEuropa’s support to drive the strategy for growth. Ultimately the collaboration led to a full transition from a corporate subsidiary to an independent premium software business with a resilient recurring revenue model. Crucially, customers were not impacted during the process, a testament to management’s ability to keep up the operations in spite of the demanding transition period.

 

M&A

As the separation was underway, MidEuropa and management set about progressing an ambitious M&A pipeline, with MidEuropa’s extensive pre-deal diligence into the sector affording it thorough understanding of the market drivers, as well as a list of numerous add-on targets.

The efforts led to seven strategic add-on acquisitions since the start of the partnership in 2021: HRTec, Reset2, Cloud Planet, eDokumenty, moreBIT, Romania-based Softeh – Symfonia’s first international acquisition, and Nefeni. These enabled Symfonia to acquire new technology, consolidate existing market segments and also expand into new ones.

 

Investing in people

Symfonia and MidEuropa’s time together saw an experienced independent board created and the senior management team augmented, including the appointments of an experienced Chair and a CTO with global blue-chip technology experience. A robust finance function was organised headed up by a new world-class CFO, and Symfonia’s development team, which had previously been underprioritised, was substantially enhanced and improved. “Our new set-up and re-energised mission, as a private equity-backed business, allowed us to attract top-tier talent, and it really helped us to build the business,” Piotr recalls.

This fresh talent combined with the existing team worked together to drive success, and in summer 2023 Accel-KKR, a global technology investor focused on software and tech-enabled companies, agreed to acquire a majority stake in Symfonia. MidEuropa, convinced the business has further to go, retained a significant minority stake to continue contributing to and benefiting from future value creation.