About Us
Black Sea Fund I
Value Creation
Contact
Black Sea Fund’s mission is to support daring Romanian entrepreneurs in building the next generation of national and regional “champions”
- Black Sea Investment Advisors (BSIA) was founded on the back of BAC, an entrepreneurial, partner-owned investment banking firm with over 20 years track-record in South-East Europe and more than EUR 4bn M&A, ECM and financing transactions completed since inception across the region (of which, over EUR 400mn involved leading Romanian corporate names); BAC was named “Best Boutique Investment Bank” in CEE in 2016 by “Global Finance”
- Black Sea Fund I (the Fund or BSF I), the first private equity fund advised by BSIA, has raised EUR 43mn to invest in Romanian small and mid-size enterprises and aims to provide expansion capital to high-growth companies across a wide range of sectors such as manufacturing, business services, healthcare, information technology;
- The four senior members of the BSIA team co-own the investment manager of the Fund and have committed to invest 2.5% of Fund’s capital to ensure alignment of interest with Fund’s investors and its portfolio companies;
Our mission: assisting entrepreneurs
We assist audacious entrepreneurs determined to build companies which will be leaders in their core domestic or regional markets
Doing what it takes to foster winners
We are in the company-building business. Our value-creation strategy is not to extract a valuation arbirage from business founders but to leverage relationships to build teams,fine-tune strategy, attract partners and then–together–build market-leading businesses. We are active partners who do everything we can to support our companies.
Strategic advice, creative ideas
We opine on and sometimes help refine business plans. We love working together to turn something good into something great. Every business goes through pivotal moments – cave on a term or lose a customer, cancel the product line or keep it in market, make a key hiring decision. We are there to help or find someone who can help you think through what to do.
A direct, straightforward style
We prefer brutal honesty to hypocritical politeness. We seldom vote against management teams in our board roles, but we can have strong opinions. We will challenge you without confronting you, but always having as a goal helping you build the business. We are definitely not about controlling ownership in your business or board room politics.
Who we are
Matei Paun
Founding Partner
- Founder of BAC Romania in 2005;
- Co-founder of HTI Group, a leading broker acquired by Morgan Stanley in 2007;
- CEO during the restructuring and sale of DNT, one of the largest Romanian ISPs;
- Manager of Regent Pacific’s local investment-banking operations;
- Vice President with New York-based Firebird Management, a CIS/Eastern Europe equity hedge fund;
- BA in International Relations from Trinity College, USA;
- Has lived in Germany, Belgium and USA.
Arin Ion
Founding Partner
- Partner of BAC Romania from 2008;
- Co-Owner of Getica OOH (third largest outdoor advertising network in Romania);
- Vice President within the Leveraged Finance group of Credit Suisse, London (2006-2008);
- Responsible for finance and securitization at Wharton Asset Management, a London-based hedge fund specialized in mortgage-backed securities (2005);
- Associate at Barclays Capital (London), specializing in securitization and risk-transfer transactions (2003-2004);
- Senior Investment Analyst with International Equity Partners, GP for the Romania & Moldova Direct Fund (1999-2000);
- Equity research analyst with Regent Pacific and Alpha Finance;
- MBA from London Business School (Class of ‘02); BA in Finance (ASE Bucharest).
Cornel Fumea
Founding Partner
- Director Deals Advisory and Corporate Finance with KPMG Corporate Finance (2008 – 2015);
- Managing Director of BRD Securities Groupe Societe Generale (2006 – 2008), the capital markets unit of SG in Romania;
- Head of Capital Markets & Corporate Finance with Alpha Finance Romania (2004 – 2006);
- Investment Officer with Milestone Merchant Partners/ International Equity Partners, GP for the Romania & Moldova Direct Fund (1999 – 2004);
- Equity Research Analyst for Global Securities Romania (1997 – 1998);
- Member of ANEVAR since 2006 (National Association of Romanian Appraisers);
- BA in Business Administration, Academy of Economic Studies in Bucharest.
Adrian Vasile
Founding Partner
- Founder of BAC Romania in 2005;
- Co-founder of HTI Group, a leading broker acquired by Morgan Stanley in 2007;
- CEO during the restructuring and sale of DNT, one of the largest Romanian ISPs;
- Manager of Regent Pacific’s local investment-banking operations;
- Vice President with New York-based Firebird Management, a CIS/Eastern Europe equity hedge fund;
- BA in International Relations from Trinity College, USA;
- Has lived in Germany, Belgium and USA.
Jacek Korpala
Independent Investment Committee Member (Non-executive)
- Founder of BAC Romania in 2005;
- Co-founder of HTI Group, a leading broker acquired by Morgan Stanley in 2007;
- CEO during the restructuring and sale of DNT, one of the largest Romanian ISPs;
- Manager of Regent Pacific’s local investment-banking operations;
- Vice President with New York-based Firebird Management, a CIS/Eastern Europe equity hedge fund;
- BA in International Relations from Trinity College, USA;
- Has lived in Germany, Belgium and USA.
Why we are different
Regional PE
Organizations
Target larger companies typically with EUR 15mn+ investments per company
SME Focus
Target a wide universe of SMEs with the goal to generally allocate minimum EUR 4mn investment per company
Control
Business Philosophy
We favour partnership with entrepreneurs over control
Low flexibility
Flexibility
Target
More commonly looking at buy-out and leveraged buy-out situations
Value Creation
We provide growth capital and work with the entrepreneurs to build the business
Small or no local team at all
Large and very seasoned local team to support you in building the business
Large local team with broad skill-set in PE, M&A/corporate finance, financial management etc
Typically very low or no co-investment of the local teams
Alignment of Interest with the local management team
The investment manager is owned by four local partners who have significant co-investment in the Fund
Experience transacting in Romania limited to a handful of project for each PE organization (or even less)
Outstanding local experience = ability to execute
Our partners have worked on around 200 M&A, PE and corporate finance projects over two decades and closed dozens of transactions
All major decisions taken abroad by foreign decision makers
Swift and transparent decision making; local decision-making
Investment and business decisions are driven by the four local partners
Local network typically limited to the relationships of one senior professional responsible for Romanian coverage
Superior local network
Unparalleled local network (professional advisors, managers, industry and functional experts) built over two decades of business experience
Black Sea Fund I, our maiden fund, targets Romanian companies with a sound business model, sustainable competitive advantages and management teams with impeccable reputations
We aim to invest in up to eight Romanian mid-sized companies through acquisition of minority and/or majority equity participations. The minimum equity ticket per portfolio company will usually start at EUR 4mn.
Our potential targets will have typically minimum EUR 5mn in annual revenues (with a ceiling at EUR 50mn annual revenues) and minimum EBITDA of EUR 1mn
We focus on transactions which involve a blend of capital increase/direct investments to support growth, combined with partial buy-out of original founders/shareholders (minimum 50% of the invested capital would be allocated to the business).
We have the ability to invest in significant minority stakes of minimum 25% of potential target’s voting shares, as a means to achieve investees’ optimal scale and market position needed to realize a successful exit. For minority investments we will aim that certain strict criteria are met (including indeed backing a top-notch management team in their industry, achieving full alignment on strategy and exit, a very protective and robust shareholders’ agreement etc.)
The Fund would target an annual IRR of 25% on invested capital, before management fees and administrative costs
The Fund has raised EUR 43mn of long-term capital to accelerate growth of Romanian small and mid-sized companies
Black Sea Fund I has secured a EUR 43mn funding commitment at its initial closing held in December 2018. Fund’s main investor is the European Investment Fund, with resources from the Regional Operational Programme, co-financed through the European Regional Development Fund, while its second largest investor is the European Investment Bank.
European Investment Fund (EIF) is part of the European Investment Bank Group and is a key provider of venture and private equity capital to SMEs across Europe, through investments in venture capital and private equity funds, guarantees, and microfinance. In Romania, the EIF implements financial instruments funded through European Structural and Investment Funds (ESIF) such as JEREMIE 2007-2013, Regional Operational Programme, Competitiveness Operational Programme and the National Rural Development Programme.
The Romanian Regional Operational Programme (ROP) aims to promote smart, sustainable and inclusive growth in all regions of Romania, making them more attractive places in which to live and work. The Programme addresses major development challenges for Romania, such as regional competitiveness, sustainable urban development, the low-carbon economy, and economic and social infrastructure at regional and local level. The ROP benefits from EUR 6.8 billion in co-financing from the European Regional Development Fund.
Core principle of Fund’s strategy: invest in companies which could emerge as leading players in their sectors at national or regional level
SMEs are inherently risky, but the fund will aim to protect its down-side risk through efficient structuring: (aligning interests through earn-out structures, financial incentives for founders and management to perform, efficient corporate governance etc.)
Focus on industry verticals/market segments with scope for consolidation, where Fund’s investee companies could emerge as a top 3 player, achieve critical mass (EBITDA over EUR 2.5mn) and generate interest from regional PE funds and strategic investors
The Fund management team would look to add value to the investee companies by providing hands-on support on strategy, business development initiatives (through add-on local and/or regional acquisitions), capital raising (debt, new equity rounds), guidance/advice on improving cost management and reporting systems, leveraging IT/technology, streamlining operational processes, helping to address senior recruitment issues
Prudent deployment of non-recourse acquisition finance, which in any case shall not exceed 50% of the transaction value and 3x pro-forma NFD/EBITDA
Four to five years target holding period to give our investees the time to achieve an optimal scale/development phase and position for exit
We look to leverage our investment teams’ extensive local professional networks and build a strong pool of industry experts to access and consult throughout the Fund’s life
Achieve a balanced portfolio across industries/companies, which should give economic exposure to both export markets and local demand/consumption.
Common Challenges for Romanian Mid-sized Companies
Discounted valuations:
- A major valuation differential is observed between transactions involving market leading players and small/mid-sized companies (eg. Enterprise Investors exited leading FMCG discounter Profi to Mid Europa Partners at 12x EV/EBITDA in a EUR 533mn equity value transaction, while most of the M&A transactions in the fast consolidating FMCG retail sector were executed at 4-6x EV/EBITDA)
- Advent exited second largest private healthcare operator, Regina Maria, at 12x EV/EBITDA and Value4Capital exited the largest private healthcare operator
- SGAM and IFC exited Medlife through local IPO at 11x EV/EBITDA, while most of the local/smaller transactions in the healthcare sector were executed by the two market leaders (Medlife and Regina Maria) at 5-7x EV/EBITDA.
Investment Opportunity
Add value through extensive exit preparation (corporate governance procedures and solid management teams in place, “Big 4” audited financials, risk identification and mitigation reviews, detailed business plans and financial models).
Build leading players in their market segments or secure strong strategic positions with the potential to generate valuation multiples expansion for the business owners and Fund’s investors
Turning challenges faced by Romanian mid-sized companies into opportunities
Since 1999 our investment team has worked on over 150 mid-market M&A and corporate finance assignments in Romania and had exploratory discussions with hundreds of founders/MDs of Romanian SMEs. Here are some of the challenges and the lessons learned and how they can be turned into opportunities:
Common Challenges for Romanian Mid-sized Companies
Romanian SMEs are a highly illiquid asset class: Exiting Romanian mid-sized companies is very difficult in Romania/SEE region for various reasons:
- limited universe of PE funds
- most of existing funds look at companies with EUR 2.5mn+ EBITDA
- strategic buyers looking at cross-border deals have size limitations as well
- there is little M&A culture among local entrepreneurs
- low level of national consolidation activity through M&A except a few industry verticals (e.g. healthcare services sector, pharmacy chains, FMCG retail)
- companies are often unprepared for exit (owner is a “one-man show” without a proper management team, poor corporate governance, opaque reporting and operations, no business plan and financial projections etc.).
Investment Opportunity
Focus on industry verticals/market segments with scope for consolidation and work with entrepreneurs to build businesses, which could emerge as a top 3 player in their core markets, command a very compelling strategic position and allow multiple exit routes (secondary trades, trade sale to strategic buyers, IPO).
