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Doing private equity in RussiaMarch 2008
2
Long track record
in Russia
Entirely
independent
Bi-culturalbusinessapproach
Natural progress incapital under
management to meetchanging local mid-sized opportunities
AttractiveScandinavianinvestor base
Small and mid-sized focus
Mint Capital at-a-glance
3
An established local private equity investor in Russia
After seven or eight years of easy growth, Ulf Perssonbelieves that the corporate environment in Russia isbecoming much more competitive and that for companiesto be successful they will have to be able to distinguishthemselves through the quality of the products andservices they offer. «We want to be part of that process,»he says, adding that increasingly the fund is looking toidentify companies that are market leaders and havewell-established brands.
Euromoney, May 2007
Investing $2 million in Elecsnet, Benchmark Capital hasstarted its activity in Russia. Elecsnet admits that“friendship” between partners of Mint and Benchmark wascrucial in attracting such an well-known investor.“Benchmark is typically cautious. They might have looked atthe market for some time to finally chose a practically non-risk variant – a rapidly growing business with a clear modeland due diligence made by Mint Capital”, says Director ofAurora Russia Oleg Bystranov.
Vedomosti, October 2006
Russia's health and beauty industry is attracting foreigninvestors, with the country’s second-largest beauty salonchain recently selling a major stake to Mint Capital. «Up tillnow we grew organically. Now we expect revolutionarygrowth, planning to have 100 salons in various regions of thecountry within two years», — Aleksandr Glushkov, beautysalon chain owner. As disposable incomes rise, the healthand beauty sector promises to become not only the mostglamorous, but also one of the fastest-growing in Russia.
Russia Today, July 2007
Verysell has got financing from Deutsche Bank and HillsideApex Fund SPC. Combined with the capital raised earlier in2007 from Mint Capital, RP Explorer Fund, Renaissancepre-IPO and Steep Rock Capital, the IT holding has nowmore than $65 million for further development. “We are gladto have such a strong pool of investors”, says Verysell’sPresident Mikhail Krasnov. “The Board has beenstrengthened with “experienced financiers” including UlfPersson, Paul Swigart and Zafar Zokhidov”, he adds.
Vedomosti, January 2008
4
Investment team Advisory committee
Ulf PerssonManaging Partner
Co-Founder
Fredrik EkmanManaging Partner
Co-Founder
Gleb DavidyukPartner
Ben WilkeningPartner
Kirill VesselovInvestment Manager
Vladimir ZaluzhskyPR and IR Manager
Vitaly VinogradovCorporate Governance
Ahmadishin EvgenyInvestment Manager
Dmitry FedoseevInvestment Manager
Tatiana GerastovskayaFinancial Controller
Sven HirdmanEx- Ambassador
of Sweden to Russia
Jonas af JochnickFounder of Oriflameand Oresa Ventures
Jan AnkarcronaInvestment Adviser
to major Scandinavianfamily offices
Maxim BoykoIndependent Investor,
Ex-Deputy PrimeMinister of the Russian
Government
5
Drivers of demand for capital & skills in the region
§ Balance sheet management§ LT value vs. ST cash flow§ Corporate governance§ M&A Capitalization
Private equity
§ Working capital§ Capex & marketing§ Net margins§ Non-$$ value Competition
§ Tax compliance§ Net margins§ Corporate governance§ Transparency Compliance
Value addedtax (18%)
Company profittax (24%)
Personal incometax (13%)
Unified socialtax (26-2%)
40%
10%30% 30%
“Grey” company
Volume of tax paid by “grey” and compliant companies
§ The “value-added” factor iscrucial – entrepreneurs arelooking for “wise” money
§ The Government is severelycombating “grey” businesses
§ Being “grey” means exposure to“predatory” state officials
§ Competition and compliance areputting pressure on EBITDAmargin of companies boostingthe need for external capital
6
Capitalizing on Russia’s strong growth
$798 $814
$1 119
$1 450
$519
$897
$1 181
$1 496
$0
$200
$400
$600
$800
$1 000
$1 200
$1 400
$1 600
Poland2006
Hungary2006
ChezhRepublic
2006
Portugal2006
Russia2007E
Russia2010E
Russia2012E
Russia2014E
($ p
er m
onth
)
Retail
Telecoms
2 4 6 8 10 12
Construction
Food processing
European level
EBITDA multiples
Entry valuation, 2006
Source: KPMG.
Sector growth forecasts 2007E - 2011E CAGR
§ Positive investment climate, characterized byrapid economic growth and a stable, predicablepolitical and legal environment
§ Multiples are still lower than in EU
Source: BP, US Mining data,Troika Dialog estimates..
Retail
Russian income to reach European levels
0% 10% 20% 30% 40% 50%
Mobile
Fixed line
Non-food retail
Pharmaceuticals
Media
Construction
Autumobiles
Organized food retail
Banking loans
IT integration
Broadband
(% of annual growth)
7
Russia’s living standard will keep going up
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E
Real GDP growth (YoY, %) Industrial production growth (YoY, %) Retail trade growth (YoY %)
Source: Federal Statistics Service, Central Bank of Russia, Ministry of Finance of Russia, Central Bank of Kazakhstan, National Bank of Ukraine, Renaissance Capital estimates.
§ Growing wages accelerate personalspending
§ Big opportunities for consolidation infragmented consumer-facingindustries, in particular retail,healthcare and financial services
Wages and disposable income Private consumption and GDP
§ Private consumption drives GDPgrowth
§ Regional cities are developing andstart offering investmentsopportunities
2,3792,996
4,125
5,354
6,939
8,869
10,837
12,609
14,31615,8%
13,6%
11,0%
12,5% 11,9%
9,7%
0,000
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2002 2003 2004 2005 2006 2007 2008E 2009E 2010E
($ p
er y
ear)
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
16,0%
18,0%
GDP per capita ($) CPI (annual average, %)
8
Russian private equity market
300635
2213
3241
5465
21 302055002600
1000
2000
3000
4000
5000
6000
1994 1995 1996 2000 2001 2002 2004 2005 2006 2007*
($ m
illio
n)
§ PE is still in its infancy in the region. Accordingto various estimates, capital under managementof PE teams in Russia ranges from $8bn to$10bn
§ PE investments in 2006 totaled $1,4bn or 0,14%of Russia’s annual GDP
§ Most deals are cash deals. Leveraged buyoutsare rare
§ Most PE in the region is growth capital
§ Exits are becoming easier – strategic investorscontinue entering the market
Raising dynamics (volume of new PE capital)
* Including funds that are being currently raised.
PE investments as % of GDP, 2006
1,44
1,26
1,05
0,61 0,60 0,57
0,45 0,450,39 0,37 0,34 0,33 0,31 0,28 0,26 0,23 0,21
0,12 0,11 0,100,03
0,14
0,000
0,200
0,400
0,600
0,800
1,000
1,200
1,400
1,600
Swed
en UK
Net
herla
nds
Fran
ce
Hun
gary
Eur
ope
Cze
ch R
epub
lic
Belg
ium
Irela
nd
Spai
n
Den
mar
k
Italy
Ger
man
y
Sw
itzer
land
Nor
way
Finl
and
Pola
nd
Rus
sia
Por
tuga
l
Rom
ania
Aust
ria
Gre
ece
(% o
f GD
P)
Source: EVCA/ Thomson Financial / PwC, 2006.
SectorTargetBuyerDate
ConfectionaryKorkunovWrigley21-Jan-08
PharmaceuticalsAkrihinPolpharma22-May-07
BankingAbsolut BankKBC19-Apr-07
ConfectionaryRuzannaNestle27-Nov-08
ConfectionaryUnited BakersKellogg18-Jan-08
Ice-cream productionInmarkoUnilever5-Feb-08
Notable recent transactions
Source: Media reports.
9
Mint Capital’s portfolio – both small and largecompanies with revenues from $10M to $600M
Total invested to date >$70M
10
Competitive strength ProspectsCurrent statusCompany
§ >$20M of estimatedrevenue in 2008
§ >20 salons in majorRussian cities
§ The owner (graduate of theStockholm School ofEconomics) is a repeatentrepreneur with strongexperience in real estate whichis crucial for securing bestlocations for salons
§ Own branded cosmetics line
§ Strategy to capitalize on theearly stage of beauty salonssegment development andgrowing domestic consumerexpenditures: chain playerscontrol only 1% of the beautymarket
§ 1st national beautychain with 100salons by 2010
§ Sale to strategicinvestor
Competitive strength ProspectsCurrent statusCompany
§ >$40M of estimatedrevenue in 2008
§ >2,500 own terminalsacross Russia
§ Strong M&A strategy
§ Financials are auditedto comply with IFRS
§ Founded in 2000 by professionalswith more than 20 years of bankexperience, Elecsnet created thelocal market of payment terminals
§ The major legitimate player fullycomplying with the Russianlegislation, enabling to work withthe widest list of corporate clients
§ Balderton (Benchmark) Capital isa shareholder
§ Self-sufficiency: own processing,manufacturing of terminals,software development, marketing
§ A leading providerof instant cashpayments in Russia& CIS
§ IPO on a Europeanstock exchange orsale to strategicinvestor
Case study: Selected Mint II portfolio companies
11
5th Floor, 18b
Lva Tolstogo street,
Moscow, Russia
t +7 (495) 780 0424
f +7 (495) 780 0425www.mintcap.ru