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Interview with Mr. Gavin Ryan
Having over 25 years experience in the financial industry working for Nomura Securities, HSBC Investment Bank, Price Waterhouse Italy, Advent International, Soros Investment Management and presently managing Wider Europe Capital Management. Gavin has made and managed private equity investments in Croatia, Serbia, Bulgaria, Romania, Moldova and Ukraine. He has a Masters Degree from Cambridge University and a Masters in Business Administration from McGill University, Canada. Recently Gavin was elected as President of the Serbian Private Equity Association. Mr. Ryan is an instructor at the seminars of MBAcademy – Management and Banking Academy. MBAcademy organises the regular Private Equity and Ventura Capital seminars in Sofia, Bulgaria.
Mr. Ryan, this is the second PE&VC seminar in Sofia led by you in only 4 months. How appealing for the business are the alternative ways for financing the firm’s activities?
Historically in SEE, the only form of long term finance was bank lending. Given the obvious problems in the banking system at the moment, the appeal of private equity should increase. We have seen over the years an increasing evolution in private equity and related products, such as mezzanine. This means the companies have an ever wider range of instruments on offer, from more and more private equity funds.
Do you think that private equity now is more expensive than the pre-crisis times? If yes, how much in comparison with bank financing?
Private equity is based upon the concept of absolute returns; in other words the private equity fund has a target return expressed as a fixed annual percentage. This tends not to change during the economic cycle. On the other hands, the cost of bank financing will vary with interest rates. At the moment bank finance is scarce and interest rates for medium sized companies are very high.
Besides the JEREMIE funds that are targeting to finance starting and developing companies, what the other options for the companies to finance their business?
There are quite a number of already existing funds in the market, both in Bulgaria and South East European regional funds. These are actively looking for investments. Apart from them, there are also many developmental financial institutions active on the Bulgarian market, such as IFC, EBRD, Black Sea Trade and Development Bank, as well as a number of Western European national developmental entities such as Simest of Italy, FMO of Holland and others.
Is there a correlation between the stock market stage of development and the private equity? Because if there is such, why the Bulgarian stock market is still remains undeveloped?
I cannot say that there is a strong correlation. The development of a stock market can provide private equity investors with an opportunity to exit from their investment once they are ready, but there are also other exit routes, such as selling the company to a strategic investor or another, larger, private equity fund. An example of this in Bulgaria was cable TV company Eurocom, which was sold by Soros Fund to Warburg Pincus, a larger PE fund. Having a developed stock market is not a necessary condition for private equity to prosper.
What is the venture capital’s role when using it to finance Bulgarian companies (business)?
It provides young companies with a source of equity capital, which they might otherwise not have access to. The private equity partner can also provide the company with a new source of know how and a new network of contacts. This can help the company raise more money in the future, provide access to international markets. Having a strong venture capital partner also serves as a signal to the market that the company is a good company, and will be able to attract better employees and customers.
Is there a potential investors’ interest towards venture capital projects in Bulgaria? What industry sectors are most interesting for VC?
The main industry sectors which are of interest are technology, where Bulgaria has the advantage of a pool of scientific talent; and energy related projects, including green energy.
How do you see the investment banking role in Bulgaria?
Investment banks act as promotors and facilitators between sources of capital and companies seeking to raise finance, be this private equity, public equity, mezzanine, or debt. They help to bring the parties together, and help to make sure a transaction goes through.
In your opinion, is there a competition between investment banking, private equity and venture capital? If yes, in what way?
I cannot say that there is really any competition between investment banking and private equity. Investment banks work with private equity firms, to help them find investment opportunities on the one side, and to assist them in selling their investments on the other side. Therefore their roles are really complementary.
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