What opportunities do JEREMIE funds offer?

February 02, 2011 | 15:22

MBAcademy is organizing a training seminar on “Advanced PEVC” on February 25-27 in Sofia, with the media support of Profit.bg.

In relation to the seminar, we are interviewing the seminar trainer Mr.  Gavin Ryan – a professional with over 25 years of experience in the financial industry working as investment banker for Nomura Securities, HSBC Investment Bank, Price Waterhouse in Italy, Advent International and Soros Investment Management.

He is currently managing partner in an investment holding company Wider Europe Capital Management investing in emerging European markets.

Q: What opportunities for Bulgarian companies do the JEREMIE funds offer?

The JEREMIE funds are the biggest opportunity for PE investments in Bulgaria.  They could be compared with the American development funds, established 10 years ago.  These funds are conducive to new fund managers class’ appearance.  Of great importance for this process is choosing the right fund manager – on the one hand they must be candidates with professional experience and knowledge in general, on the other – managers with experience in the local market.

Q: Among the three JEREMIE funds which one offers the biggest challenge for the fund manager?

All three fund types – venture, expansion, mezzanine – represent a different kind of private equity product.  Venture targets young growth companies in new sectors such as technology; expansion targets companies which have already reached a certain maturity and which require capital to reach a leadership position in the market; mezzanine is a hybrid instrument, combining features of debt and equity.  Managing each of the three different types of funds requires certain different specialist skills.  It can be broadly stated that venture investments are considered the most risky; and mezzanine investments the least.  At the same time the expected return of a venture fund is much higher than that of a mezzanine fund.

Q: Can you please describe in short each of the three JEREMIE funds?

The venture fund will target small early stage companies active in new sectors, such as technology, IT, green energy.  The expansion fund will target larger companies and a wider range of sectors, which would include for example financial services, media, telecom, retail, consumer goods, distribution and logistics, food and beverages.  The mezzanine fund would target the same companies as the expansion fund, but offer these companies a different product, more like debt.  The advantage would be that the company has to give away less ownership than with an expansion fund.  Mezzanine funds also often work together with expansion funds.

Q: How each one could contribute for a country’s development?

All three can provide an alternative source of long term capital.  Each one addresses a different segment of the economy, and so in that sense they are complementary.

Q: What makes a fund manager successful?

The most strong indicator for a private equity fund manager is his track record of previous private equity investments he has made.  If these have mostly been successful, this is a strong indicator of future success, providing the fund manager makes investments which can draw upon his previous experience in some way.

Q: What professional qualities, personal virtues and experience should the successful manager possess?

The required qualities are a strong financial analytical discipline, combined with a good judgement of the value of managers.  A good fund manager must balance his sympathy and understanding of the needs of company management, with a certain skepticism of some of the claims and ideas that they may make in order to attract funding.  A good manager should exercise a strong financial discipline to analyse an investment.

Q: In your opinion how fast the JEREMIE funds will be invested (absorbed, used)?

I think a reasonable objective would be for the funds to be fully invested in a period of some 3-4 years.

Q: How attractive is SEE for venture capital firms?

SEE obviously competes with US, India and other global markets.  SEE needs to position itself as an niche market, for investors who are looking for a venture investment specifically in Europe.

Q: Do you think that there are attractive starting companies in SEE?

There are quite a number.  What needs to be analysed for these is which of these companies have developed a new technology, and which are transplanting an existing technology developed in the West to the East European markets.  The main challenge for many of these is being able to acquire Western customers, rarher than ending up as a captive sub contractor to a Western competitor.

Read the original publication