“We signed the exclusivity agreement in November last year and actually started working on the deal in January. Considering the complexity, it was an extremely fast deal. Four months from starting the due diligence, we signed the acquisition. It is now pending approval from the Competition Council,” Cezar Scarlat told ZF in an interview.
Abris Capital Partners is a private equity firm focusing on investments in Central and Eastern Europe. It was established in 2006 and has three offices in Warsaw, Bucharest and Kiev. Cezar Scarlat runs the office in Bucharest, after having previously worked for Bridgeport Capital, where he was part of the investment team in charge of the region and for Nomura Investment Bank in London, where he was a member of the M&A department covering Central and Eastern Europe.
Abris buying into the group developed by businessman Ioan Tecar is its sixth deal in Romania after the acquisition of courier service company Cargus, which it strengthened by successive deals such as the takeover of TCE Logistica, CRX, Urgent Curier and Otto. Abris bought into Cargus in March 2013 and the seller was DHL.
Abris buys only majority stakes into a company.
“Time is limited and a small or big deal takes as much time.”
Abris is now working on three deals, on which it has made significant progress and Cezar Scarlat says he hopes to see one more completed by the end of the year.
After being barely alive for a number of years, the mergers and acquisitions market started to thaw up last year and in the first few months of this year and the most active sectors were banking and real estate. Sales of banks or portfolios are expected to be the most important deals on this market in 2015, again, with medical services expected to see to high value deals, as well.
“There are deals on the market, but they are quite complex. Most private equity firms have many investors behind them, who may be from America, from the Middle East, from everywhere in the world,” Cezar Scarlat says.
“To them Romania is not necessarily the best market and if they could buy an asset for the same price in Western Europe, which they are much more familiar with, they would choose to go where the risk is lower. Our role is to explain that risk in Romania is not the worst there is, that the region is good and we understand it well and believe in its development.“
Local entrepreneurs have developed businesses with limited resources in an environment that was not among the friendliest in Europe, Cezar Scarlat says.
After courier services, paper production is the second market Abris opens in Romania and it does not rule out further acquisitions. The deal involved four companies of Ioan Tecar’s MG-Tec group: Pehart Tec, Metalicplas Distribution, Metalicplas Impex and Samus Constructii. The latter three posted more than 313 million lei (EUR70 million) revenue together last year, according to Finance Ministry website. Pehart Tec, the main company of the group posted RON243 million revenue in 2013, according to the same source.
“We liked the sector (tissue paper i.e.), and then we wanted to see who the main actors are. This is how we decided to start talks with Ioan Tecar, whom we liked from the beginning. To us the management or the entrepreneur with whom we can partner is important. We understood the basics of the business, how we can financially and strategically support the group. Our plan is to create the largest tissue paper group in SE Europe.”
The group has a production capacity of 75,000 tons, which will increase 33% by the end of the year. The group will make a new investment in a new tissue paper machine, in a EUR25 million project. This will be the group’s fourth such machine.
“First of all, it was about the field. Tissue paper consumption in Romania stands at up to 6 kilos per head. The average in Central and Eastern Europe is almost 9 to 10 kilos, while in Germany and Western Europe it is close to 20 kilos. The trend is clear. Second, the Pehart group is an interesting and strategic player in the region.”
Cezar Scarlat says the important thing now is to consolidate the domestic market and then the international market, because there are companies abroad that can be acquired.
Ioan Tecar will remain chairman of the group and Gabriel Stanciu, its chief executive officer, will keep his position. Abris plans to strengthen the management team with a new chief financial officer and other experts who have been in the industry for 20 to 30 years and know it well, Cezar Scarlat said.
(English version by Loredana Fratila-Cristescu)