DEAL TALKS: Priit Veering of BPM Capital talks about the acquisition of Eskaro by Flügger
EstVCA member BPM Capital announced its second exit as portfolio company Eskaro group is acquired by Flügger group. EstVCA DEAL TALKS had a chat with Priit Veering, Partner at BPM Capital, to learn more about the exit.
1. What makes Eskaro unique?
Eskaro is unique in many ways. The company pays a lot of attention to its impact on the environment. Eskaro became the first paint production plant in Estonia to be awarded the EU Eco-label Flower. This flower label is a symbol that informs customers that a product is safe for the environment and for the people who use it. Secondly, Eskaro has established strong footholds in growing markets in Eastern Europe what made it interesting to Flügger group, a strategic investor from Denmark, seeking growth from other regions. Thirdly, Eskaro is a company that is already 28 years of age. It is quite a remarkable achievement putting into context of the Baltics. Founded just two years after Estonia’s restoration of independence, it has been continuously in operation under the same ownership and weathering two economic downturns.
2. How did BPM Capital help to develop the business before exit?
BPM is a financial investor. We seek experienced management teams who run companies with significant positive cash flows and are in need of financing for faster growth either through acquisition or working capital financing. We also finance management teams to acquire a majority stake in the businesses they run. Entrepreneurs highly value the freedom and flexibility provided by a mezzanine lender. BPM team has helped Eskaro three times in the past. We invested first time in 2003 and exited in 2006. The company needed working capital financing to generate faster growth in exports but banks were unwilling to increase their borrowing limits. The company grew nearly 2 times in three years and was able to prepay with the help of bank financing. The second time, BPM team helped Eskaro to grow via acquiring another paint producer abroad in 2007. The loan was repaid in 2011. The third time we invested in Eskaro in 2016.
3. What outcomes were achieved by mezzanine financing?
- Revenues increased from €30 million to €50+ million with ca 10% EBITDA margin
- The number of employees increased from 478 to 1,000+
- Stable operations of six factories as well as 15 distribution centres across the globe
- Litres produced increased from 20 to 30 million
Key advisors of the deal
The financial and tax due diligence on behalf of BPM was done by Ernst & Young. Legal due diligence was done by Cobalt. In exit documentation, BPM was advised by Peeter Kutman of Cobalt and Eskaro by Veikko Toomere of Njord.
>> Read more about the transaction HERE