Sarona Asset Management is assessing two potential investment opportunities - Agro Capital Management (ACM) of Ukraine and Mobile Transactions Zambia (MTZ). ACM provides financing to smallholder farmers in Ukraine for agricultural packages to improve incomes. It has over 1000 clients today. MTZ provides mobile money transfer and payment services in Zambia's informal economy. While it has an innovative business model, it is still working to become profitable, with net income turning positive projected in 2017. Sarona's due diligence process involves comprehensive analysis of the product, market, operating model, management team, and financials to evaluate business potential and risks.
INDEV308 Class 4 - Identifying Business Potential - Serge LeVert-Chiasson, Sarona
1. Assessing Business Potential
By Serge LeVert-Chiasson, CFA, MSc, IMBA
For the INDEV 308 Class
Presented on May 30, 2011
110 -1B Frobisher Drive, Waterloo ON N2V 2G7, Canada | 1.519.883.7557 | sarona@saronafund.com
This is not a purchase offer, nor the solicitation of a purchase offer. Any such offer or solicitation will be made only by means of a final offering memorandum
and only in those jurisdictions where permitted by law.
2. AGENDA
Assessing Business Potential
INDEV 308 – Monday, May 30th, 2011
1. Introduction to Sarona Asset Management
2. A bit about my role at Sarona
3. How do we assess investment opportunities?
4. Main takeaways for budding entrepreneurs
5. Two case studies:
a) Agro Capital Management of Ukraine
b) Mobile Transactions Zambia of Zambia
2 Answer the questions at the bottom of the deck and you can win a prize! Confidential
3. SARONA ASSET MANAGEMENT
In all we do, we strive for
Excellence – Honesty – Integrity – Creativity
Sarona has a 58 year history of investing in frontier markets around the world.
Sarona is a private equity investor, seeking market rate returns.
Sarona is an impact investor, believing our personal life values inform our
business decisions. We believe that private equity firms that enact progressive
business strategies in their portfolio companies will outperform their peers.
Sarona invests in businesses that:
• treat their suppliers, employees, and customers like their own families;
• are environmental champions in their communities; and
• are known as outstanding ethical leaders in their community and industry.
3 Where does Sarona invest? Confidential
4. SARONA ASSET MANAGEMENT
Adhere to ILPA Investors’ Council
1953 First Impact Investment in Sarona Dairies
Leading to nearly 60 years’ experience principles
1968 First Microfinance Investment
Key signatory Affiliated with:
Strong presence in global industry associations
1995 Launched MEDA Access Fund
Building upon values of Excellence and Integrity
Access to top-tier managers and
1997 Launched Latin America Challenge Investment Fund investing alongside
Strong third party supplier relations ensuring accountability international partners
1999 Launched Sarona Global Investment Fund
Established brand as presenter to frontier PE and impact conferences
2004 Co-founded and Launched MicroVest I LP
Expanding upon values of Honesty and Creativity
2007 Launched Sarona Risk Capital Fund I LP
Known for strong governance and ethics within industry
2008 Launched MicroVest II LP
All Funds under management outperforming targets in all markets
2010 Launched MicroVest Short Duration Fund – MV SDF I LP
Partners have solid PE, investment and frontier market experience
2010 First Global Impact Fund of Funds – SFMF I LP
SFMF I LP performing well since vintage year 2010
4 What is impact investing? Confidential
5. SARONA FRONTIER MARKETS FUND
DIVERSIFICATION
Agribusiness
Portfolio Exposure by Sector ICT Portfolio Exposure by Region
FMCG
1%
4% Clean Energy
2% 14% LAC
5% Financial Services 22%
27%
7% Light Manufacturing Africa
12%
10% Health South Asia
11% Education East Asia
10% 28%
24%
11% 11% Affordable Housing Eastern Europe & CIS
Professional Services
Sustainable Forestry
Water
India
Portfolio Fund's Avg Transaction Size Portfolio Exposure by Country Turkey
Kenya
Peru
23% 26% 23% Mexico
33% Less than US$5M Thailand
US$5 to US$12.5M 3% 13% Indonesia
US$12.5 to US$20M
3%
3% Morocco
44%
4% 10% Philippines
6% 9%
Other (27 Countries)
5 What are the advantages of diversification? Confidential
6. AGENDA
Assessing Business Potential
INDEV 308 – Monday, May 30th, 2011
1. Introduction to Sarona Asset Management
2. A bit about my role at Sarona
3. How do we assess investment opportunities?
4. Main takeaways for budding entrepreneurs
5. Two case studies:
a) Agro Capital Management of Ukraine
b) Mobile Transactions Zambia of Zambia
6 Confidential
7. CHIEF INVESTMENT OFFICER
Serge LeVert-Chiasson, CFA, MSc, IMBA
Background:
• CFA Charterholder, Masters of Science in Accounting / Finance
from LSE, International MBA from Schulich Business School
• Experience in private banking, international business, private
equity, international lending and international a/r insurance
• Travelled to over 50 countries / French, English, Spanish
My role at Sarona:
• Conduct due diligence and present investment proposals to board for funds
under management
• Monitor, add value and exit investments in portfolio
• Create new funds and assist in capital raising
• Participate in general office management as well as employee supervision,
motivation and training
• Develop processes, policies and procedures for improved productivity
7 What does CFA and LSE stand for? Confidential
8. AGENDA
Assessing Business Potential
INDEV 308 – Monday, May 30th, 2011
1. Introduction to Sarona Asset Management
2. A bit about my role at Sarona
3. How do we assess investment opportunities?
4. Main takeaways for budding entrepreneurs
5. Two case studies:
a) Agro Capital Management of Ukraine
b) Mobile Transactions Zambia of Zambia
8 Confidential
9. OUR INVESTMENT PROCESS
Entire process can take four to eight weeks
Review Assess Review First
Desk Research Investment Impact Marketing Conference
Thesis Strategy Material Call
Minimum Focus on Deal size
Investment Minimum Impact
Terms and Sector or between $2-
criteria IRR Target Strategy
Conditions Geography 25M
Review
Legal and Track Review Fund Review GP Review GP Due Diligence
Legal
Record Model Financials Track record Form
Documents
Information Executive SWOT Risks & Identify Red
Memo Summary Analysis Mitigants Flags
Review of Meeting all Partners, Local IC
On Site Due 2-5 day visit 2-8 pipeline
Process and Managers HQ, offices members
Diligence w/ 2 people visits
Procedures and Staff visited visited
Call 3-5 Call Call major Call industry Contact
Third Party Reference Call Inter. IC
committed auditors/ service / geography competitors
References checks members
investors lawyers providers experts if possible
Terms and Country/ Major risks
Investment Executive SWOT Manager Legal
Conditions Sector and
Memo Summary Analysis Review Review
Review Analysis Mitigants
Present the Key risks
Make the Motion to
Board Approval Investment and
case approve
Memo mitigants
Implement Identify LP
Side letter if
Negotiations Board friendly
necessary
motion terms
Use legal Sign Wire
Legal, Execution &
firm if subscription transfer
Disbursement
necessary agreement funds
Quarterly & Attend Access
Monitoring & Risk Contact with Visit local Share best- Report back
Annual annual LP Sarona
Mgmt team offices practices to our LPs
reports meetings network
9 How many major steps are there in the due diligence process? Confidential
10. AGENDA
Assessing Business Potential
INDEV 308 – Monday, May 30th, 2011
1. Introduction to Sarona Asset Management
2. A bit about my role at Sarona
3. How do we assess investment opportunities?
4. Main takeaways for budding entrepreneurs
5. Two case studies:
a) Agro Capital Management of Ukraine
b) Mobile Transactions Zambia of Zambia
10 Confidential
11. ASSESSING BUSINESS POTENTIAL
Product, Market, Process, People, Financials
1. Product: Clearly define the need / gap your product or
service seeks to fill. Focus and Consult
2. Market: What market are you after? What competition do
you face? Bowling Pin / Niche
3. Operating Model: What is your business model? What
partners do you need? Draw it and figure the problems
4. People: Who do you need to successfully execute the
business model? What skills are you missing? Hire
5. Financials: Is the business sustainable? What are your
assumptions? What financing will you need? Count
11 Which of these categories is most important? Confidential
12. INVESTORS INVEST IN PEOPLE NOT IDEAS
Lessons we’ve learned the hard way
1. Great ideas + bad implementers = failure
2. Poor ideas + great implementers = probable success
3. Numbers do matter… Do the math. Is your business
sustainable? Are your assumptions credible?
4. Consult, consult, consult. Seek feedback from as many
different points of view as possible. Listen to your critics.
5. Pilot your idea and seek to learn from your early, lower risk
mistakes. Seek realistic milestones and meet them.
6. Finance yourself with people who will help you succeed
7. Understand your risks and find ways to mitigate them
8. Stop talking. Start doing.
12 What distinguishes a social business from a regular business? Confidential
13. AGENDA
Assessing Business Potential
INDEV 308 – Monday, May 30th, 2011
1. Introduction to Sarona Asset Management
2. A bit about my role at Sarona
3. How do we assess investment opportunities?
4. Main takeaways for budding entrepreneurs
5. Two case studies:
a) Agro Capital Management of Ukraine
b) Mobile Transactions Zambia of Zambia
13 Confidential
14. AGRO CAPITAL MANAGEMENT (ACM)
ACM provides asset financing of agricultural packages to Ukrainian smallholder
farmers to improve their farm incomes and works in partnership with technical
assistance providers to ensure success
ACM Sales
leads model
International
MF CF +
Qualitative Greenhouses Table Grape
board Assessment
of clients (GH) Packages
(TGP)
Target
Partnering
Clients:
Experienced
ACM staff
Small-holder
with local
suppliers Cold Storage Agricultural
farmers and
Agri SME
Units (CSU) Equipment &
Machinery
(AME)
Innovative Partnering
use of SMS with farming
technology groups
Flexible
Strawberry
Payments Package (SP)
14 Why did we start a new company in Ukraine? Confidential
15. ACM CLIENTS
Mr. Dilyaver Seythalilov purchased greenhouses and refrigeration
equipment from ACM to grow his agribusiness. He was able to employ
additional workers to work in the cold storage unit over the winter as well
as grow his greenhouse space by 3,000 square meters.
Mrs. Marina Kuzmenok is a local accountant in the village council of Saki,
Crimea. She heard about ACM from the regional tax administrator and
received a 0.1 hectare table grape package supplied by Agro Yukos, one of
ACM’s suppliers. She has since convinced four of her neighbours to grow
ACM table grapes
Mr. Edem Mamutov is a local Tatar from the Prudovoe village near
Simferopol. He was thinking about growing table grapes for a long time but
did not have the financing. When he heard about ACM, he jumped at the
opportunity. “The technical assistance I received from ACM was great as
well as the speed and quality of service.”
Mr. Aleksandr Sinenko lives in Kherson and manages a medium scale
agribusiness that employs 80 permanent employees and 100 seasonal
workers. With ACM’s financing for cold storage units and greenhouses, he
was able to hire 3 more permanent employees and 30 more seasonal
employees.
15 Where in Ukraine is ACM active? Confidential
16. WHAT DID WE LEARN FROM ACM?
► ACM Sales Agent Model – First experience with fraud
► Death of the CEO had major effect on business
► Never underestimate time for greenfields
► The power of aligning interests with clear goals / cash
► Partnerships are built on trust, not contracts
► The importance boards with aligned interests
► Focusing on profitability too quickly may reduce your ability to
mitigate certain risks
► Using old technologies in new ways reduces costs and improves
business performance (SMS)
► The importance of excellent customer service in building a business -
Word of mouth works!
16 How many clients does ACM have today? Confidential
17. AGENDA
Assessing Business Potential
INDEV 308 – Monday, May 30th, 2011
1. Introduction to Sarona Asset Management
2. A bit about my role at Sarona
3. How do we assess investment opportunities?
4. Main takeaways for budding entrepreneurs
5. Two case studies:
a) Agro Capital Management of Ukraine
b) Mobile Transactions Zambia of Zambia
17 Confidential
18. MOBILE TRANSACTIONS ZAMBIA (MTZ)
Mobile Transactions Zambia provides low cost, safe, easy and convenient money
transfer services to base of the pyramid clients in Zambia. It also offers innovative
mobile payment solutions to corporations, governments and non profits who deal
with clients in the informal economy.
18 Is Zambia in East, South, West or North Africa? Confidential
19. MTZ – BUSINESS MODEL
Sources Consumers Channels Sinks
Corporations BC Banks
Government
UC Suppliers
MFIs Cash Agents Utilities
Donors UC
MFIs
NGOs Electronic
UU Agents
Value Creation: Legend:
Mobile Transactions BC = Banked & Connected
Mobile Networks UC = Unbanked & Connected
Banks UU = Unbanked & Unconnected
19 What does MTZ do differently from other mobile payment providers? Confidential
20. MTZ – IS THIS A SUSTAINABLE B-MODEL?
Financial Summary
$35,000,000
$30,000,000
$25,000,000
$20,000,000 TOTAL REVENUE
$15,000,000 TOTAL GROSS PROFIT
$10,000,000 TOTAL OPERATING EXPENSES
$5,000,000 EBITDA EXCLUDING GRANTS
$- NET INCOME
$(5,000,000) 2010 2011 2012 2013 2014 2015 2016 2017 2018
$(10,000,000)
$(15,000,000)
Cash Flow
40000000
30000000
20000000 Total Change in Cash Position
10000000 CLOSING CASH BALANCE
0
-10000000 2010 2011 2012 2013 2014 2015 2016 2017 2018
20 In what year will MTZ start generating a positive net income? Confidential
21. WHO WINS THE PRIZE?
Thanks for your attention!
Question and Answers
21 Confidential
22. 1.519.883.7557
110 -1B Frobisher Drive, Waterloo, ON, N2V 2G7, Canada
saronafund.com
sarona@saronafund.com
This is not an offering or the solicitation of an offer to purchase. Any such offer or solicitation will be made only by means of a
final offering memorandum and only in those jurisdictions where permitted by law.