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Deal 5: Operating Partner at EMPower Capital Stanislav Nikolaev on Acquisition in Bulgaria

Deal 5: Operating Partner at EMPower Capital Stanislav Nikolaev on Acquisition in Bulgaria

Deal 5
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On May 3, 2017, CEE Legal Matters reported that facility management company Mundus Services – a joint venture of EMPower Capital and KJK Capital – had acquired engineering solutions and services company VM Automation from VM Finance Group in Bulgaria. Stanislav Nikolaev, Operating Partner for EMPower Capital, agreed to answer our questions about the deal.

CEELM: Mundus Services is a JV of Empower Capital and KJK Capital. Was KJK Capital involved in the acquisition and what was their role in the process?

S.N: Just to clarify, KJK (42.5%) and Empower Capital (42.5%) are partners in Mundus Services along with Mr. Lachezar Petrov (15%) - founder of Viki Comfort, one of the companies initially acquired by the JV. The two funds have two representatives each on the Board of Directors and we are all equally involved in the strategic management of Mundus Services, including in the process of acquiring VM Automation: Negotiations, valuation, due diligence, etc.

CEELM: According to a DGKV press release, “the acquisition of VM Automation will add technical capabilities to Mundus’s portfolio.” Can you describe what those technical capabilities are, exactly?

S.N: VM Automation is a leader in providing engineering solutions and services for energy efficiency and automation for enterprises and office buildings in the fields of industrial and domestic air conditioning, heating and ventilation, refrigeration equipment, backup and uninterruptible power supply (UPS and diesel / gas generators), and precision air conditioning technology for data centers, clean rooms, and infrared heating. The company offers complete engineering including investment consulting, technical management, design, supply and installation of complex solutions, and commissioning, warranty and post warranty maintenance of equipment. VM Automation delivers a wide range of maintenance & repair services for all types of equipment, as well as the supply of genuine spare parts, which minimizes the risk of breakdowns and equipment failure. The company is the official service center in Bulgaria of Johnson Controls, YORK, EATON, Systemair, Sital Klima, Riello UPS, SDMO, Alimar, SABROE, VIVAX, among others.

CEELM: How did you decide to work with DGKV on this acquisition?

SN: Based on our experience DGKV is our preferred and most reliable partner for legal due diligence, legal advisory, and documentation preparation. Mundus Services was creation originally from the acquisition of two companies, and subsequently expanded with two more acquisitions. DGKV were involved with Mundus from the initial stages of due diligence and of the establishment of Mundus Services. In this particular case we started working with DGKV since the setup of the JV and the natural choice was to continue this cooperation on the acquisition of VM Automation. We are convinced that DGKV are the go-to legal firm for complex transactions like this.

CEELM: DGKV assisted you in the negotiation process. What exactly was the firm’s role? Did it lead the negotiations, or focus more on the drafting and documentation while you led the actual negotiations?

S.N: We, the two funds, were leading the negotiations, while DGKV assisted us during the process and of course they took care of drafting all the necessary documentation.

CEELM: Do you intend to establish an in-house legal function for the company in the near future? Is there any advantage when CEOs/COOs manage the external counsel directly over the in-house lawyer?

S.N: No, at this stage we do not consider the option to establish an in-house legal function, because we don't need it. The question about the advantage when CEO/COO manage the external counsel seems too broad to me, because it all depends on the nature and the size of the business. For daily, routine legal issues we can indeed rely on an in-house lawyer, but when it comes to more complicated and serious problems like preparing transaction documentation, court cases or negotiations, we consider it appropriate and less time-consuming for the decision making process if the CEO/COO liaise directly or work closely with the external counsel.