Client Background and Objective
IMAP's role in the process of consolidation, was sell-side advisory with Alarm West Group (AWG). Following successful transactions of the companies within AWG, the IMAP team started to advise other companies who also recognized the trend and the opportunity. This was a critical moment for the entire process. On one side, there was Securitas AB, a Swedish multinational company and one of the largest security companies in the world; an investor interested in expanding in the region and with sufficient funding to do so. On the other side, there were a number of local companies interested in the sale and an experienced advisor who prepared them for the demanding M&A process and led them through it all the way. For a successful consolidation, all of the three factors mentioned above are needed.
In Croatia, before Securitas’ acquisitions, the market was divided between one large company (market leader), a few state-owned companies - who served mostly state-owned companies and institutions and a number of small security companies that were mostly concentrated in a limited geographic area. Even before the foreign investor showed an interest in consolidating the market, smaller companies in Croatia recognized the need to merge or connect through a holding company in order to be able to compete with the market leader. However, these attempts were unsuccessful. The main reason was that in these attempts there was no “equity element”. It was extremely hard to consolidate or merge companies without cash-outs, especially in markets where the local entrepreneurs were unfamiliar with investment banking and M&A industry and nor had they witnessed successful examples of such consolidations. This was beneficial to a foreign investor, because the negotiating power of each smaller company was much lower than it would be if these companies merged before a foreign investor decided to enter the market.
IMAP Advantage & Approach
IMAP has completed 13 transactions in the security sector in Southeast Europe since 2010. Nine were part of the AWG group in Bosnia and Herzegovina, 3 separate transactions were completed in Croatia and 1 in Serbia. This was a classic example of successful sector consolidation in the region. It’s to note, that the investor had different approaches to Croatia and Bosnia and Herzegovina. In Bosnia and Herzegovina, the investor acquired the largest Group on the market and it became a market leader immediately. In Croatia, the investor opted to acquire smaller companies and work their way up to becoming the second largest security company in the country. There are a number of reasons why this was the case, which for the most part come down to the characteristics of each market, such as size, number of companies and management of those companies.
Another element which permeates any M&A activity is the clash of cultures, which although it can appear on a symbolic level and be easy to overcome, still has to be recognized and dealt with.
Outcome & Impact
Today, Croatian and Bosnian and Herzegovinian security markets are consolidated. That does not mean that further transactions will not happen in the future, but such reshaping of the market described here, in such a short period, is hardly going to happen in the foreseeable future. In the case described here, it was as big as it gets. On one side, a Swedish multi-national company listed on Stockholm and New York stock exchange, on the other side, family owned entrepreneurial companies.
Mirsad Čatić, Founder and former owner of Alarm West Group (AWG):
"Selling your company is not an easy task. It is very charged emotionally. You are, after all, selling your creation to an outsider. Most people will only get one chance to get it right. IMAP and my team worked together on two levels. First of all, I was keen to try and bring a financial investor such as a private equity fund into the company. IMAP brought one of the largest funds with a strong presence in the private security sector and the biggest company in the sector.
We were successful because we had a team that really understood the process of merger and acquisition – the art of selling companies. This is a very specific form of advisory work and IMAP operate on a very different basis to ordinary consultants. Finally don’t fight conventional wisdom. You must get your finances in order and they must be believable… Remember that the big companies have seen a lot of similar operations and you need to look sharp and smell good."
Damir Funčić, Ivan Funčić, Luka Funčić, Owners and Management Board of Protect d.o.o.:
"Selling a majority stake in a real family-owned company like ours was a complicated challenge (as it is for any other owner in this situation). The challenge was even more complicated because of the fact that our ownership structure covered different generations which resulted in very different opinions on each challenge posed by the sale process!
Throughout the engagement we have received great support from the IMAP team, who committed its knowledge, time and energy into the entire process and ultimately greatly contributed to finalizing the transaction to the satisfaction of both parties.
We worked on this project for two whole years. At first, our objective was to merge four firms, our company with 3 other independent companies, and then to find a strategic partner together.
Apart from the obvious aspects, like professionalism, flexibility and knowledge, it is essential that you can quickly develop an easy and dynamic relationship between you and your adviser. Jurgis and Slaven are tremendous characters and were generous with their time and energy, whether for the formal events or the impromptu get-togethers to take us through challenges.
We thank you Slaven and Jurgis and the whole IMAP team for the energy you have invested in closing this transaction in a short, but very intense, process.
We will not forget your impeccable suggestion for legal counsel, who is a true professional and who succeeded to win the trust of my family when negotiating with the counterparty, such a large multinational corporation. Dražen (Partner at law office Porobija & Porobija) has also been an important member of the team and we want to thank him as well for his great commitment in the process.
We look forward to working on other projects in the future."
Hrvoje Novosel, CFO of Tehnomobil d.o.o.:
"Finding the right strategic partner to further expand and develop your business is risky and hard. Having the right advisors to get you to your final destination and help you navigate through this, usually, one-time only process of selling your company is crucial. Tehnomobil found such a partner in IMAP. Our transaction was a complex one. It included divesting in the region by selling our branches, disconnecting our SPV sister companies from our core business, cleaning our balance sheet of non-core items and resolving interconnections between Tehnomobil Group companies and commercial banks. The IMAP team was professional, knowledgeable and has done several M&A deals in the security industry in the region and very well versed in industry specifics. But more than anything, they were fully dedicated to finding the best match for our company and to closing the deal to our owner’s satisfaction.
From the beginning, we got full support every step of the way, be it approaching potential investors, the sales strategy, or financial and legal aspects of the process. Throughout, Jurgis, Slaven and Marko acted not just as advisors to the process but as full time team members immersed in activities down to operational tasks. Our cooperation was a full success. When it comes to acquisitions, IMAP has the right stuff."