Investment Process

Philosophy

Mezzanine Management Central Europe's (MMCE's) philosophy is to be fast, flexible and responsive when approached with new investment opportunities. As a small, independent organisation with short reporting lines it can operate as quickly as private equity funds and faster than most large banks. However, this depends on the information available as MMCE must conduct in depth analysis and due-diligence on every transaction to ensure the thorough, consistent analysis and approval process required.

Timing

The inclusion of mezzanine financing in a transaction will by itself not delay the completion of the deal. A typical process involves:

• Introduction: the potential borrower will likely receive an "in-principle" answer within a week of receipt of the financing invitation.
• Terms: after the review of the information prepared by the borrower or equity sponsor, MMCE would then agree on draft terms, subject to due-diligence, documentation and final approval.
• Due-diligence: external advisors are required to verify the information provided. MMCE will use existing third-party reports where possible and will keep due-diligence focused and relevant.
• Commitment: provided that the due-diligence does not identify material negative issues, MMCE will then seek final approval from its Investment Committee, a process which usually only takes a few days.
• Documentation: loan, security and warrant documents. Completion and funding.

An early involvement of MMCE is advantageous in order for it to feed information requests into the deal process. This eliminates duplication of management meetings, information enquiries and third party due diligence work, enabling management and external advisors to concentrate on their primary business.

A smooth transaction, with full cooperation of all parties and good information available, can typically take 6-8 weeks in total.

Due-Diligence

To get a deeper understanding of the transaction, third-party due-diligence is required to verify the information provided by borrowers and/or equity sponsors.

Where possible, MMCE will utilise appropriate due-diligence commissioned by equity sponsors. However, it is better to involve MMCE early on when drafting the scope to ensure its requirements will also be covered.

In other cases MMCE will undertake a due-diligence of the business, including commercial, financial, tax, legal and environmental due-diligence if applicable. MMCE will seek to keep due-diligence focused and relevant. The process also involves meetings with management and on-site visits.

Ongoing Relationship

Post transaction completion, MMCE strives for an open, cooperative relationship with the equity investors and borrower.

As typically, a major part of the fund's returns come from a small share in the future growth of the business, AMC has aligned interests with the equity investors and the company. MMCE seeks to have a seat on the advisory board of the borrowing company and will seek to add value through its experience and contacts in Central and Eastern Europe.

As any lender, MMCE will also require regular financial and commercial reporting.

Through close ties with investors and a well established connection to banks and financial sponsors active in the region, MMCE can also provide access to senior debt and equity capital.