BKS Positioning

 

BKS seeks to generate significant capital appreciation on its invested capital by acquiring controlling interests in mid-market private companies in CEE in “dynamic growth” industries including TMT, financial services, pharmaceuticals, automotive, and commercial manufacturing.

 

Targeted investments are in the range of €3-15m (average equity) in expansion-capital/buyout/pre-IPO opportunities :

 

BKS aims at securing controlling positions with the ability to leverage influence for mid-course corrections if necessary;

 

A defined pathway to exit with negotiated terms including tag along, drag along etc. is incorporated into any shareholders agreements and deal documentation;

 

Targets are cash-flow generative companies holding market dominating capability or position, with high barriers to entry and benefiting from sector or geographic trends with a clear pathway to exit. The Fund does not invest in early stage and start-up companies;

 

BKS employs the prudent use of debt in order to leverage equity investments and to supplement the returns of the Fund. CEE banks are conservative issuers of acquisition finance, which moderates leverage influenced valuations in comparison to Western Europe;

 

BKS seeks investments that have expected holding periods of three to five years with the flexibility for earlier or later liquidations if warranted by market conditions or strategic interest;

 

Focusing on the “Accession 4 Countries”, Czech Republic, Slovak Republic, Hungary, Poland & the “New-Accession 2 countries”, Romania and Bulgaria;

 

Disciplined approach to value creation–active hands on approach applying sector knowledge and operating experience of the BKS Partners to enhance the performance of the portfolio companies.

 

BKS applies an active ownership style working with an industrial mindset to enhance the financial performance of private companies in the CEE region. BKS is actively engaged in the hands-on implementation of strategy, close monitoring/benchmarking of performance, and in key operating decisions, including the preparation of budgets and financing decisions, management recruitment and retention schemes, and cost reduction and acquisition programmes. An important characteristic in all of the Fund investments is full or joint control over the exit decision/timing.

 

The CEE Region

 

BKS focuses on the prime countries in the CEE namely, Poland, Czech Republic, Romania, Slovak Republic, Hungary, and Bulgaria. It is a region of high growth, political and currency stability and there is a large amount of investment opportunity within the individual countries.

 

Poised geographically between Western Europe and the newly emerging economies of Russia, the CIS and the Balkans, CEE has become a staging post for investors looking to venture east and south.

 

With wage costs significantly below those of Western Europe, flexible labour laws and a well-educated workforce, CEE is emerging as a credible alternative destination for production sites and service centres.

 

CEE GDP growth outstrips the EU 15 with a continued annual growth effect from EU entry of 1.3% to 2.1% for 4 years following accession in 2005. In Q1 06 Czech Rep grew at 6.1%.

 

The Mid-Market Competitive Landscape

 

The mid market offers a compelling opportunity for BKS in light of identified deal opportunities in the BKS pipeline and the supply and demand of capital for deals in the EUR 3 – 12m equity range. This gap in the financing market has been facilitated by the emergence of larger funds in the CEE region over the past 3 years. Funds that have emigrated to the larger deal opportunity in the CEE region were previously successful players in the mid market. The mid market has driven much of the success in CEE private equity returns to date and BKS will continue to exploit this fertile deal segment. With significant pools of capital in the larger deal segment, BKS has a natural pool of financial buyers to sell portfolio companies to in addition to the vibrant IPO and trade buyer activity in the CEE region.