Launching of an investment company (fund)

Investment concept
Launching of an investment company / fund in Ukraine with the purpose of leveraging and developing undervalued SME companies; and exit to strategic investors within 3 years.
Proposed investment portfolio (fund size):
1st round USD 5.8 million
2nd round USD 10 million

Invested as USD 0.5 million per SME, invested incrementally.
Timing of fund raising: December 31, 2021.

Main investment (target market) highlights:
- Investment companies / funds that operate in the real economy of Ukraine are concentrated on large corporate clients, where investment transactions start from USD 10 million.
- Companies in the SME segment in Ukraine have difficulties in attracting bank loans for their aggressive development (due to opaque ownership structures and un-presentable financial reporting). Additionally these owners are keen to attract reliable and reputable international partners who will help them access international markets, which are generally closed to the SME segment due to low production volume. Associating with international partners will help to scale their businesses.
- The value of the acquired company can be significantly increased after introducing a series of changes, such as: optimization of the ownership structure, expenses, HR, accounting and tax, market expansion, scalability and so on.
- The working capital requirements of the acquired company can be financed by local branches of international banks at the following prevailing rates: USD/EUR at 5-6%, and local currency of UAH at 10-12% p.a.

INVESTMENT STRATEGY
- Investments funds of USD 5 million (1st round) will be split between 10 SME Ukrainian companies.
- Investment company / Fund will control 50%+ equity in each SME company + cash-flow control.
- Management of the investment company / fund will be included in the Supervisory Board of each SME company.
- EBITDA margin of the investment company / fund is expected to attain a level of 55% min in 2-3 years.
- After 2-3 years the investment company / fund will attract long-term loans from IFIs for future acquisitions and development.

Launching of the investment company (fund) in Ukraine with the purpose of leveraging & developing undervalued SME companies; and exit to strategic investors within 3 years.