Private Equity fund for Romania
Just wanted some clarification from professionals on this platform.
I have returned recently back in my native country, Romania. I saw on the market many companies with great balance sheets that sell for a fraction of the real price.
The PE market is also very fragmented in Romania, so the room to establish one as the market leading vehicle is palpable. There are around 6 players at the moment.
A couple of examples from my research on what companies are available to purchase:
A chain of 10 grocery stores with yearly net profits of 500k euros on a 3 million euro turnover, asking price of 1.2 million euros. All leases for the premises are very cheap per sqm, low overheads, and established business links. Business has been running for over 15 years with consistent yearly profits.
Logistics company with exclusive distribution rights
Net profits 250k
Asking price 250k
And the list goes on.
I wanted to know what steps should I take and what people I would need to connect in order to establish a private equity fund over here. How do I raise the capital to do it?
Most of the opportunities I found will deliver a full ROI in approx 2 years.
I think from an investment perspective this market is very lucrative.
Kind regards
Laurentiu
I am at one of the local PEs. If you want, PM me.
I just did,
Thank you
Issues you’ll face is illiquidity. If there is no real buyer it can be tough, but for sure there is money to be made in EMs if you are from there/know the ropes (know someone who had to be flown out in military heli of a country by a private military but he makes a fuck ton).
The same possibility exists here, I just need one interested investor and I can show him the proposition.
Kind regards
Sounds like it could be an interesting market for one of those listed funds that never exit their investments.
Yes you might be right, but some exist are possible but if you achieve a complete ROI in 2-3 years, the business is also in a good place there is no point selling it just growing it.
I come from that part of Europe myself and am somewhat familiar with the Romanian PE market.
Firstly, making money in the region as an outsider is very hard. A lot of politics involved, some corruption, sometimes a very relationship based way of doing business. You should have that covered by being a Romanian. However, are you well connected in the market there? Do you have access to opportunities that others may not see?
Secondly, if an offer is too good to be true, it probably is. If a company is making 250k net profit every year, why would someone sell it for 1 year profit? If any of these nice sounding opportunities come from owner-managers wanting to retire or leave the business, who's going to manage them going forward. Do you have experience in this or do you need to find a strong (probably local) CEO to keep making the same profits or grow the business.
Thirdly, the devil is often in the details once to get to drill into financials in these markets. Sometime, the low lease rates could be because the landlord is a relative of the owner, or the accounting is not up to scratch (ie. there may be some payments not property characterized or skipping the accounts all together)
Fourthly, you could look for capita at some international institutions, such as EBRD and EIF, which support the VC and PE markets in Eastern Europe, and they seem to be a key investor in a lot of the new funds I see being raised. But you need a strong background for this and it helps if you know someone there. You haven't mentioned what you did before moving back to Romania. Are you more of a business operator or transaction specialist? I hope you're not just posting this as a student...
Hello and thank you for the reply,
I am not a student, I have worked for some large companies mainly in strategic commercial roles, and had some business knowledge myself as had some in the past, I am 27, so there is plenty of time to do something big. To address your reply, yes you are right, for outsiders it will be hard, I know people in politics over here, in the legal field, etc. In terms of connections, I have good connections but not the ones that can raise capital, since I do not have a pure financial background, for me it is more business oriented, I just know what works, and have a really good feel of how a business should be operated. I can assure you the opportunities to acquire these businesses are real, especially in the 0-5million target range. This sector is heavily overlooked, and that is what makes it great. In terms of financials, all accounts can be audited, so it is easy to spot any irregularities.
The idea that motivates me is for me to run the and develop them so they become more streamlined, more profitable and be able to bring them to a point where a great exit can happen. I can tell you over here, from a management perspective, they are so poorly run and they miss out so much opportunity to improve their bottom line it is out of this world. But in order to do this, it is a bit more complicated for me, if I had an investor, or more come over, I am sure they would like the idea of investing here. Without someone here locally it is impossible to make it work in the long term as employees here and bad management are a big issue plus some political problems. From that political level I have all the links, it is just the investment side that I do not have covered, and I need to figure out a way to make it work.
I hope that covered some of your points.
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