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Buyouts September 2009_Panel


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Buyouts September 2009_Panel

  1. 1. AlternativeFinancingTechniques<br />1<br />Nordcap Limited 2009<br />
  2. 2. Capital shortage has driven down the CEE M&A market<br />2<br />Nordcap Limited 2009<br />
  3. 3. Credit will be hard to get in 2009-2010 <br />3<br /><ul><li>Credit expansion in CEE is expected to slow down significantly
  4. 4. Again situation will differ from country to country, the worst hit in EU seem to be Hungary, Ukraine and Baltics</li></ul>Nordcap Limited 2009<br />
  5. 5. But nevertheless the deals are still being done …<br />4<br /><ul><li>The banks, especially leading local LBO financing arrangers, are still willing to do the deals
  6. 6. The LBO team which you approach wants to do the deal as much as you do
  7. 7. But … they have to convince their RISK DEPARTMENT that the deal is a safe bet
  8. 8. Therefore when you approach a bank be sure to:
  9. 9. offer a structure which minimizes the risk – try to eliminate some of the risks, for example consider taking debt in local currency (it is a natural hedge)
  10. 10. putting more equity on the table is inevitable
  11. 11. prepare a financial model with scenario analysis including not only base, best, worst case scenario but also a run down scenario which would show how much the bank would recover if everything goeswrong (Armagedon scenario)
  12. 12. Cooperate, cooperate, cooperate – try to answer all the questions the bankers ask no matter what you think about them …</li></ul>Nordcap Limited 2009<br />
  13. 13. You can also try to bridge the gap with mezzanine … <br />5<br /><ul><li>Historically mezzanine finance was gaining popularity at great pace until 2007 when credit boom accompanied by lose lending policies applied by banks made senior debt more available
  14. 14. This should change from 2009 onwards making mezzanine again an interesting alternative</li></ul>Mezz financing in Europe in bn EUR, source: Fitch<br /><ul><li>PROS:
  15. 15. Typically subordinate debt or equity
  16. 16. Great flexibility in financing structure
  17. 17. Financier typical have vested interest and involved in Board level of the business
  18. 18. Financier shares equity risk of business
  19. 19. CONS:
  20. 20. Deal size is typically small and thus need to be combined with other forms of financing
  21. 21. Financier requires high return & medium term exit strategy
  22. 22. Profit participation (equity kicker)
  23. 23. Could have dilution effect</li></ul>Nordcap Limited 2009<br />
  24. 24. About Nordcap<br /><ul><li>Nordcap is a venture capital firm, established in 2002 to provide equity and equity-related investments in Emerging Europe's growth industries.
  25. 25. In November 2007 Nordcap sold its seed investment DRSA, to an industrial conglomerate listed on the Warsaw Stock Exchange.
  26. 26. Nordcap’s professional team consist of business analysts with expertise in information technology, telecoms, marketing and real estate.
  27. 27. Nordcap provides both:</li></ul>Venture capital<br />Mezzanine capital<br />6<br /><br />Nordcap Limited 2009<br />