Matei Paun, Black Sea Fund: Suspending transactions due to an economic crisis or pandemic is not the mark of an experienced professional

Suspending transactions due to an economic crisis or pandemic is not the mark of an experienced professional. In 2020, in the midst of a pandemic and economic crisis, the Black Sea Fund completed two transactions with DigiRay and Theta using a structure that would not benefit entrepreneurs, but would allow them to recover from possible valuation losses. suffered as a result of the crisis, said Matei Păun, co-founder of the investment fund.

Matei Păun: “A good fund manager finds fair solutions around the possible risks in the event of a crisis. Stopping and waiting for a particularly difficult time to pass is not only a disservice for the entrepreneur but also for his investors. Doing nothing robs everyone of potentially great opportunities. “

The recent pandemic is clearly a temporary and finished phenomenon, unlike the 2008 crisis, which did not necessarily have a clear time horizon. In 2008, when he started, no one knew if it would last six months, six years, or 20 years. Instead, when it came to this pandemic, there was sufficient scientific consensus that indicated from the start that it would be unlikely to drag on for more than two years. The pandemic therefore had this critical quality of having a palpable end. Although initially difficult, we maintained our idea that even in the midst of a crisis, there are opportunities.

A structure that allows entrepreneurs to regain the value eroded by the pandemic

Thus, we carried out two transactions on the basis of 2020 figures but with a structure that would allow these companies to catch up with the value eroded by the pandemic. We have found ways not to “penalize” entrepreneurs for the bottom line affected by the crisis. Perhaps many would have expected us to take advantage of the context, to squeeze entrepreneurs; some of them perhaps thought that 2020 would be the perfect time for investment funds to take advantage of entrepreneurs in crisis. But we didn’t look at 2020 that way and we didn’t act that way. Instead, we have strived to create a win-win transaction for all, ensuring long-term alignment and a lasting balance between entrepreneurs and investors. Only this would allow us to both seize opportunities and aim for success.

Discussions with DigiRay started just before the pandemic, in January-February 2020. The founders of DigiRay are a very serious and hardworking young couple from Zalău, who have managed to develop this business across Transylvania. Additionally, we have been attracted and comfortable with the dental industry due to our sister company (BAC) ‘s experience in brokering the sale of DentEstet to MedLife and Dentotal to Abris Capital.

Dentistry – one of the most fragmented economic sectors

In contrast, dentistry is one of the most fragmented economic sectors, with around 17,000 dentists and around 12,000 dental clinics. We had considered several opportunities in the dental clinic segment, but in the end, we thought it would make more sense to approach the sector through imaging. This niche is less fragmented and it is much easier to take 30% of the imaging market than to achieve the same percentage through clinics. To take 30% of these, it would be necessary to make transactions with hundreds or even thousands of clinics, which is totally unrealistic.

Two key moments marked the transaction with DigiRay, as with each transaction: reaching a consensus on the value of the company and the amount of money necessary for its development. To achieve this, we created a structure that allowed us and the entrepreneurs to look beyond the immediate negative impact of the crisis. The alternative would have been to wait for the pandemic to pass, but that would have meant wasting enormous opportunities and precious time.

Businesses will need fit-out services even in difficult times

In the transaction with Theta, we used the same adjustment mechanism that allowed us and the entrepreneur to move forward in this difficult context. We considered that even in these difficult times, businesses would need fit-out services, but maybe for different reasons. Most have reorganized, for example, on the model of work sharing. This is true for any business. Some companies are moving or changing the way they work. The only real problem for Theta would be that everything suddenly freezes. But as long as there is momentum in the commercial real estate industry, leadership is less important.

Black Sea Fund, as a company, adapted quickly and easily to foreclosure and the new way of doing business. I had a strong digital approach for a long time, with many online conferences and emails. Obviously, a first physical contact is necessary and helps a lot in the development of the relationship, but, overall, we managed to carry out two transactions in a very virtual context ”.


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Robert Young

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