Mathematician dealmaker who must make the private equity sums add up

Business Profile: Top venture capitalist Marek Gumienny is helping Candover snap up company assets in a weak market
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The Independent Online

For a top venture capitalist, Marek Gumienny has an unusual list of interests: mathematics, a spot of gambling and collecting trees.

The maths is appropriate for someone who is now the premier dealmaker at Candover, the private equity group that has snapped up assets like Gala bingo and BertelsmannSpringer academic publishing. "Pure maths is more an art than a science," he says, in an accent that shows no trace of his Polish ancestry. "And in a job like this it does help a bit to be able to look at a lot of numbers and spot the wrinkles fairly quickly."

The gambling might seem more of a surprise, though it does underline his willingness to back his judgement against the odds. Mr Gumienny used to be a casino regular, favouring blackjack and roulette. But he has been forced to quit his habit. "Now I'm a director of a gaming company [Gala] - you're not allowed to be a member of a casino," he says. He has become the bookies' friend instead. "I do like the horses," he says with a smile.

His love of arboriculture is a more obscure one. "I collect trees," the 44-year-old Candover managing director says. "I have a farm down in Kent and grow them there." Asked why, he replies: "It's something that will endure for hundreds of years, long after I've gone. My children will be able to look after them, and their children after that."

It easy to imagine this maths boffin wandering around the arboretum on his Kent estate, pondering the odds on his next deal.

He is certainly in the right place at the right time. Indeed, the private equity market is the new rock 'n' roll as far as the financial sector goes. With the stock market still weak, and a myriad of stricken companies anxious to offload unwanted divisions, the pickings have never been so rich. Candover has a fund of €2.7bn (£1.93bn), which is only 50 per cent invested, and the deals are coming thick and fast. The latest came only last Friday when it acquired the equity trust division of the Dutch bank Insinger de Beaufort for €182.5m.

But Mr Gumienny claims the surge in buy-out activity has little to do with low stock market valuations. "This is not something that has just been happening in the last year or so," he points out. "It has been happening since the mid-Nineties when the Americans came over and started to generate interest in it. We've only just begun here, and the same is true in continental Europe."

He says the excesses of the stock market boom should deliver a steady stream of buy-out opportunities. "There are still a lot of distressed assets and distressed sellers out there. Lots of companies have too much debt and need to sell."

Despite the rash of deals that have seen private equity firms take over publicly quoted companies, Mr Gumienny claims Candover is not keen on this sort of buyout. "Something is cheap normally for a very good reason. The stock market is right more than 90 per cent of the time. Now and then there's an anomaly you can exploit to create value. But just because something is cheap doesn't mean it's good value. We like to pay up for good assets with good growth prospects."

The record at Candover, which is structured as an investment trust and was floated in 1984, bears him out. The group's annual internal rate of return over its 22 years in existence is 41 per cent. And while some of its investments can hardly be described as glamorous, they do offer promising growth potential. One is Ontex, a maker of disposable private label nappies for supermarkets like Carrefour and Aldi. "In Western Europe, disposables account for 95 per cent of the market," he says. "In Eastern Europe it is just 10 per cent. Major retailers like Carrefour and Aldi are moving east and these economies are growing."

Gala, bought for £1.2bn with CinVen in February, is another favourite. Indeed, the quiet dealmaker had tried to buy it before. "I tried to buy it in 1997 but John Kelly [the chief executive] beat me to it," Mr Gumienny says. He reckons Candover could double its money with Gala over five years even without any de-regulation of the gaming market. With the possibility of more slot machines being allowed, he says, the returns could be even better.

One sector he plans to stay clear of is retailing, currently the subject of buyout mania with Debenhams, Safeway, Somerfield and Selfridges all on the block. "Retailing is a special situation," he says. "Ten years ago, this happened in hotels when there was a fundamental shift away from hotel groups owning the freehold assets of their hotels. The retail sector is precisely the same. They have a lot of freehold assets tried up on the high streets. If the incumbent managements are not prepared to do something about that, other people will."

Candover regards retailing as "too scary". "It's about knowing when to get in and when to get out," Mr Gumienny says. "You can't stay in [retail deals] for too long because fashions change. And you can't try and be good at everything."

One issue for venture capital companies is the limited number of exit routes. With the stock market virtually closed to new issues, financial buyers need to find other ways to realise their investments. Trade sale is the favoured method, and Mr Gumienny says Candover is planning two exits - one by the end of this month and one by the end of July. Two other deals will be refinanced, he says.

However, he believes the stock market will recover. "My instinct tells me that the sheer weight of money out there and the lack of things to invest in means that when confidence returns to the world [we will see a recovery]. Perhaps not this year, possibly the year after."

Mr Gumienny was born in the UK. His parents left Poland during the Second World War. They met in Britain and raised the young Gumienny as a Polish speaker. His English was simply picked up along the way.

After studying Mathematics at Warwick University he travelled for a year before training as a chartered accountant at Price Waterhouse. "I think that was because everyone else in the flat was going to do it," he says.

He quit to join Candover in 1987. "I was fed up with just giving advice," he recalls. "I preferred to be somewhere that would back my judgement." Then, as now, the gambler in him won the day. The mathematically sophisticated gambler, that is.


Position: Managing director, Candover Partners

Age: 44

Pay: undisclosed

Education: Warwick University (Mathematics)

Career: Qualified as a chartered accountant at Price Waterhouse. He left to join Candover in 1987, and was appointed the group's managing director a year later

Hobbies: Collecting trees, supporting Manchester United

Family: Married with three children