Rebound: Adaptation, growth opportunities and perspectives

Unprecedented. If there is one adjective to describe the global crisis at the start of this year, this must be the one. While above all a health crisis, it is also an economic and financial emergency, as the lockdown measures applied in many countries have slowed companies’ activities and, in some cases, brought them to a standstill.

The common priority for every company is to preserve employment – 100% of company employees received a salary during the lockdown – while also managing costs efficiently. Argos Wityu has the agility and expertise within its teams to help companies adapt and seize the available opportunities. Its presence in several European countries (France, Germany, Italy, Luxembourg, Switzerland and Belgium) coupled with its experience in handling complex situations has enabled the fund to provide localized support to management. Here’s a review of the actions taken so far in pursuit of growth.


Adapting to market demand

The lockdown quickly created new demands which, in turn, have led to new product and service lines.

French company Olinn, a professional equipment management group supported by Argos Wityu since 2018, has increased its refurbishing offer to meet the need for remote working and a greater demand from private individuals via marketplaces. Olinn seized this opportunity by increasing its level of digitalization and continuing to pursue two ‘build-up’ acquisitions that had been initiated a few months earlier. The result for the refurbishing business has been organic growth of 20% since the start of the crisis and a 50% rise in margins in April, compared to the same month in 2019.


Sicura in Italy is also a good example of market adaptation. This supplier of integrated services for employee safety, health and well-being, supported by Argos Wityu since 2020, created a new service to help companies carry out a phased return to work. Sicura’s customers are offered all the services needed for ensuring the safety of staff and the work environment (test kits, disinfectant, remote temperature-taking, installation of physical barriers, etc.), in line with government recommendations. Argos Wityu was able to introduce a series of potential customers, put Sicura executives in touch with one of Italy’s leading virologists, who is an expert in Covid-19, and advise the company about pricing the new offering. The repositioning has raised the prospect of a near-total return of the recurrent sales businesses.


As for new product lines, Maison Berger, a major player in indoor scents, supported by Argos Wityu since 2017, reoriented it manufacturing facilities and produced hydroalcoholic solutions. It was an opportunity to further develop the company’s e-commerce strategy at a time when all their specialist retailers’ shops were shut. Sales through this channel in April this year were twice those of April 2019 also generating cross selling.


Moro, Italy’s leading producer and distributor of fresh cheeses was able to quickly bounce back by focusing on supermarket chains, which were experiencing exceptionally high sales growth as public consumption became concentrated on the home. Introductions to new business contacts, meeting the needs of existing clients and expanding the product range were all part of a strategy that enabled Moro to increase its sales to supermarket chains by 60% in March and April, compared to the same months in 2019. These new customers will also help to sustain growth in the future, while the reopening of restaurants should enable the company to recover sales lost during the lockdown.


Accelerating digital transformation

With the closure of businesses and the general population in lockdown, another growth driver has emerged: digital transformation. Some companies have accelerated their digital transformation, not least La Compagnie des desserts, which Argos Wityu has been supporting since 2016. Faced with the closure of cafes, hotels, ice-cream parlors and restaurants, the company decided to develop its take-away sales and to organize webinars for professionals in the sector. Its online training sessions have since attracted more than 1,000 participants!


Another impressive example is the French company Talentia Software, one of Europe’s largest finance and HR software providers, which has been backed by Argos Wityu since 2016. Despite all employees being switched to remote working, contact with customers was maintained at a time when emergency solutions had to be found, particularly for payrolls. The opportunity was there for Talentia to move its customers to a SaaS model, and at the same time to offer a series of webinars that attracted an average of 100 participants per session – providing a breeding ground for prospect conversion. To date, 31% of marketing opportunities are generated by web and inbound campaigns.


Accelerating growth

For some of the companies Argos Wityu supports, the crisis has proven to be a growth accelerator. This has been the case for Future Groep, a major service provider for local authorities in the Netherlands that has been with Argos Wityu since 2017. The company offers outsourcing, contractors and consultancy in the areas of social affairs, debt management, communication and HR. During the crisis, 1,400 of its employees had to work remotely. However, the decision that management and Argos Wityu took in 2017 to migrate Future Groep’s IT infrastructure to a cloud environment proved to be decisive for its ability to carry out all its usual activities during the lockdown period. This strategic choice enabled Future Groep to seize the growth opportunity that arose from an increased demand from authorities, whose residents are being severely impacted by the crisis.


Lineas, Europe’s largest rail freight operator, experienced a reduction in goods transport volumes in Europe due to the effect of Covid-19.  However, since this sector is considered by both national and European authorities as strategically important for the economy, help has been provided to keep businesses moving. This governmental support, combined with the difficulties experienced in other transport segments, raises the prospect that the expected modal shift of freight transport from road to rail will accelerate. Argos Wityu, which has supported Lineas since 2015, not only shares this view, but also sees new opportunities for consolidation and potential acquisitions in the future.


Lastly, LoQu, one of Germany’s leading optical and hearing aid chains, benefited from anticipating the inevitable supply shortages as early as February. The company, which has been backed by Argos Wityu since 2018, built up a stock of 8,000 of its best-selling products as the health situation worsened in Asia. LoQu also took measures for preserving the health of employees and made plans for short-time work. All the standard procedures for supporting and conserving cash flow were deployed to offset the fall in sales, ensuring liquidity until the end of 2020 and beyond. As a result, the company is now in a position to acquire competitors that have been hard hit by the pandemic, while at the same time pursuing its pre-crisis plans for expansion. These include a new concept for the company’s points of sale, which is due to be revealed during the second half of 2020.


What they said

CEO of Gantrex

Maarten Impens

Argos Wityu is offering crisis management to the CEOs of all portfolio companies, without distinction. Maarten Impens, CEO of Gantrex, the world leader in the market for rails for high-capacity cranes, has welcomed this support, which Argos has been providing since 2015: “Very early on in the Covid-19 crisis, Argos made us consciously reflect on the impact this could have on our people, our customers, our partners and our financial performance. Thanks to this early reaction, we have been able to take the necessary steps to keep our people safe and healthy, as well as limit the financial damage to the company. While management was focused on business continuity and developing multiple financial scenarios, Argos took a hands-on approach in dealing with our lenders. They helped us to restructure debt repayments, which gave us additional breathing room in getting through an extraordinary period. Finally, thanks to Argos’ investment in upgrading our IT systems over the past four years, our people made a smooth transition to home working and are able to serve our customers without business interruption.”

CEO of Henri Selmer Paris

Geoffroy Soler

An opinion shared by Geoffroy Soler, CEO of Henri Selmer Paris, a musical instrument manufacturer backed by the fund since 2018: “In this crisis, Argos is once again demonstrating its ability to adapt and support on all fronts by being able to bridge the big gap. For example, by becoming a supplier of masks or hand sanitizer, while at the same time being able to support funding negotiations”.

CEO of Juratoys

Ludovic Martin

Finally, according to Ludovic Martin, CEO of Juratoys: “The Argos teams were ultra-available. They were very supportive on two key points: the safety of people and the financial security of the company, notably salaries. I salute their commitment at all times.”


Interview with the Managing Partners: “A local presence is an advantage: we are close to companies and connected to the right decision circles”

At the beginning of the crisis, the first country to take strict lockdown measures, and where the fund’s teams are active, was Italy. Germany, France, the Netherlands, Switzerland, Belgium and Luxembourg followed. How did you react to these announcements?

Jean-Pierre Di Benedetto: In the Italian office, as early as the 23rd of February we changed our set up radically, cancelling all physical meetings and travel. On the 8th of March, we shut the office completely, moving to 100% remote working.

Frank Hermann: What happened in Italy made us aware of what could happen in other European countries: we had 3 weeks to prepare, and we did!

Deciding factor to get through the crisis

Close communication between the offices to anticipate the measures to be taken in each country within a very short time frame.

Which measures were decisive for your portfolio companies?

Louis Godron:  We thought very early on that it was an exponential phenomenon. Our motto was to watch and anticipate.

Jean-Pierre Di Benedetto: In the first few weeks we established a daily videoconference with the management of our portfolio companies. Our priorities were employees’ health followed by cash, cash and cash! This was done by drawing down all available unused banking lines and immediately obtaining extra banking lines. All companies were extremely responsive to this. Then, we scrutinized receivables and payables in order to balance our payments once the situation would be clearer. Together with management, we analysed every large payable. Fortunately, the cash cycle was not too bad in our three companies in Italy. Within Argos, we also created a Covid-knowledge team to gather all relevant information on health and safety measures as well as the (rapidly evolving) government directives and recommendations affecting business.

Frank Herman: Our first reaction was to secure stocks and supply chains. In Germany, we back two companies: Wibit and LoQu. The first supply chain alert arose around the end of January from Wibit, as they produce in China. Consequently, we advised LoQu to immediately order 8,000 of their best-selling frames from China. Both companies took measures before the crisis reached Europe and were fully prepared when the lockdown started in Germany.

Then, we helped portfolio companies take advantage of state aid programmes. Our companies were quickly connected with specialist lawyers and advisers. LoQu shops were closed on a Monday, and the next day we already had 600 employees on a partial, government-financed unemployment scheme. Anticipation and preparation were key.

Finally, synergy between our portfolio companies was crucial. For example, when LoQu could open again, we couldn’t find the correct protective equipment to open safely. I asked the CEO of Wibit if he could help with his Chinese sources, and he did, so LoQu shops were able to reopen. In the same way, in France, Olinn received the necessary quantities of hand sanitizer from Maison Berger.

Deciding factors for getting through the crisis

– Daily support to management, help with applications for state aid
– Precise control of cash, stocks and supply chain
– Rigorous internal monitoring of current events
– Synergies between our portfolio companies

Do the consequences of lockdown differ from country to country?

Karel Kroupa: Throughout Europe, all countries have reacted in the same way with a strong emphasis on health and safety, probably inspired by the Italian example, and have supported the economy with unprecedented measures. Companies were also confronted with a magma of information to be digested, and a lack of clarity from one day to the next. A local presence is clearly an advantage: we are close to companies and connected to the right decision circles to help them make the right decisions. We had the advantage of being able to help a country entering a new phase with the experience of another country which had already passed through it.

Deciding factors for getting through the crisis

– Local presence to help companies take the right decisions
– Communication with offices which had already passed through the beginning of the crisis

Have you seen problems emerge by country? By sector?

Karel Kroupa: As the phases were not simultaneous, we had the advantage of being able to help a country with the experience of another. Agility was key. For example, as Italy started a phase of customer non-payment risk, we were able to anticipate this issue and protect other companies.

Agility also applies to sectors. For example, LoQu was one of our first BtC portfolio companies to reopen. Their experience was inspiring for other companies. Cross experiences in digital also allowed our companies to have faster access to information and allowed them to anticipate.

Deciding factor for getting through the crisis

Agility thanks to cross-experiences between companies and sectors

How have you organised yourself in the field to be as close as possible to the companies you support?

Gilles Lorang: Of course, management are and remain in total control of their company. Our role is to support them. In such an exceptional environment, we had to be able to quickly change the way we work with our CEOs and their teams. This required both setting up the right communication tools and helping management to identify the right levers, actions or experts. Availability and support to managers are the keys to success.

Deciding factor for getting through the crisis

Availability and support to set up the right communication tools and to identify the right levers, actions and experts.

Why is the positioning of Argos’s expertise an asset in the current crisis?

Gilles Mougenot: For two main reasons. First, because the Covid crisis made almost all divestment processes complex (short- or medium-term financial impact, adaptation of the business model, etc.), and handling complex situations is clearly our renowned expertise. Secondly, because the leverage faucet is turning off. We have always favoured growth strategies relying on low leverage. This capacity has clearly become a particularly precious asset.

Deciding factor for getting through the crisis

An investment strategy in line with the consequences of the crisis

What was the one mistake that had to be avoided at all costs?

Gilles Lorang: Not anticipating enough, not taking necessary measures, and not adapting quickly. Time management was key. We had to be able to carry out analyses and diagnostics quickly and determine priorities. Management are alone when faced with major decisions and we were at their side to support them. Similarly, once the protective measures and safeguards had been launched, we had to continue to anticipate. What would be the profound changes on the industry and the company’s activity? How should the business model be adapted? What strategic initiatives should be launched? In short, good management is associated with the company’s ability to anticipate. It is up to us to ensure that the company does not deviate from its best practices even though the crisis may cause it to lose all its bearings.

Deciding factors for getting through the crisis

Watch, anticipate, adapt, to ensure that the company does not deviate from its best practices

What main lines of the rebound strategy will you deploy in the near future for portfolio companies?

Karel Kroupa: We will clearly accelerate digital transformation, work on business model agility and focus on employee engagement.

Frank Herman:  One main focus for BtC portfolio companies is how to get customers and employees back into the shops. Companies are putting in place strategies in this regard.

Deciding factors for getting through the crisis:

– Accelerate digital transformation
– Work on business model agility
– Support team cohesion initiatives
– Get customers and employees back into the shops

In which recovery scenario do you position Argos?

Louis Godron: In this very peculiar situation, economics are driven by medicine. What will prevail is not the classic macro-economic playbook of a recovery, but how fast a medical solution to the epidemic can – and we all hope will – be found. Not to mention the ever-possible scenario of a worsening, via a mutation or a second wave.

Since February, we have spent a lot of time talking to infectologists and consulting epidemiology literature to understand the stakes. Our view has been  ̶  and remains  ̶  that the likelihood of a V-shaped recovery is low, given the impact of the outbreak on society worldwide, and instead that we should base our reasonings on two scenarios.

The best case is that a cure is found before summer that reduces the infection rate very materially or totally. In this case, the ethical and political acceptability of releasing social constraints will accelerate and come back to normal with what will have become a controlled virus. We could then expect the economy to recover rather strongly during Q1 and Q2 2021.

All the other cases lead to a similar second scenario: whether a vaccine is found (not before Q4 in all likelihood) or a cure is found later in the year, or no solution is found, we are likely to see an economy that will struggle out of the doldrums, with permanent risk of further waves weighing on the recovery forces until the end of the year.

In each case we believe that the comparisons drawn with the 2008-09 global financial crisis are mostly invalid, because that crisis was triggered by a massive financing freeze-up, whereas in the current crisis, there has been an unprecedented monetary injection to an already very cash-rich economy. Additionally, governments are reacting fast with massive budgetary support. These very strong anti-recessionary forces lead us to believe that the recovery, when the medical issue is resolved, will be stronger than the one experienced between 2010 and 2014.

Deciding factor for getting through the crisis
Anticipate the different recovery scenarios by talking to infectologists and consulting epidemiology literature to understand the stakes.

Newsletter subscription

* required fields