Capital Times Investment Advisory Closes Deals for $ 500 million in Total Value Over the Last 15 Years. How the Company transformed after its partners split the business.

What is the future of M&A advisory for Capital Times amid a concerning trend when medium-size businesses try to perform M&A deals in-house?

Read the article in Forbes

In March 2020, Sergey Goncharevich, managing partner of Capital Times faced a new challenge. It wasn’t just the COVID-19 pandemic-related problems. Sergey had to split the Company with his long-term business partner Erik Nayman.

To make a long story short, Sergey Goncharevich (44 -year-old) kept the Capital Times brand and the key investment banking division (B2B) while Erik Nayman took the wealth management division (B2C) under the Hugs brand. Sergey has closed five deals for a total amount of about $ 100 million since then. The fifth deal was closed in late September.

Over the Company’s 15 years history, Capital Times closed 38 transactions in Ukraine and Belarus and implemented over 180 consulting projects. The total value of deals has exceeded $ 500 million, Sergey Goncharevich told Forbes Ukraine.

Sergey Goncharevich is a native of Belarus. His career started in the Minsk Transit Bank, later he was CFO in a manufacturing company, and in 2004 he was appointed as a deputy chairman of Uniter investment company. Sergey was in charge of opening a branch of Uniter in Ukraine. The branch performed its first deal in Ukraine in September 2006 by selling a large stake in Zaporozh Electric Transformer Plant. “It was a really profitable transaction” according to comments from Mr. Goncharevich. Back then Sergey met Erik Nayman who headed the investment banking department at UkrsotsBank.

Belarusian Uniter offered Goncharevich to buy out the Ukrainian branch in 2007 and Sergey agreed to buy. He sold his apartment in Minsk for $ 200,000 and moved with his family to Kyiv. Erik Nayman became a partner with a 25% stake in the Company, then Nayman increased his stake to 44% by 2017. One of the initial prominent deals for Goncharevich and Nayman was investment advisory services for Ukrainian Delta Bank for a take over the Belarusian Atom Bank for € 5.5 million back in 2007. From 2008 through 2009, Capital Times focused on mergers and acquisitions. It was also a launch of a wealth management division headed by Nayman. In 2012, Goncharevich and Nayman acted as financial advisors in the purchase of the Odessa medical network Into Sana by Russia Partners (a subsidiary of the US Siguler Guff & Company LP).

In 2013, Capital Times completed three more deals with Russian investors. After the Russian military aggression in Ukraine in 2014, the Russian and Belarusian capital has fled the country, so the former connections with Russian investors became a disadvantage. “Capital Times team was almost without deals in 2014-2016,” says Igor Verkhoglyad, managing partner of Soul Partners. While the M&A market was inactive, Capital Times expanded its wealth management services as the financial crisis in Ukraine pushed domestic businesses to invest abroad. “Wealthy individuals wanted to move part of their capital in the safe-haven asset,” explains Goncharevich.

Capital Times returned on the M&A market in 2017, acting as a financial advisor to the IT company Terrasoft, which sold one of its divisions to the Belarusian SoftClub. “In terms of Ukrainian economic reality, the deal had a solid value,” says Alexander Popov, a former managing partner, and CTO at Terrasoft. Capital Times also at that period provided investment banking services for Lyakhovichi Dairy Plant when the plant was sold to the French Groupe Lactalis (the deal value was estimated at $10 – $11 million). Capital Times also attracted financing for Kharkiv-based children’s goods retail network Mamin Dom.

The most prominent deals for Capital Times were a series of investment banking projects for Orexim Group, a large Ukrainian grain exporter through the Black Sea ports. In 2018, Capital Times helped Orexim to raise € 31 million from the Black Sea Trade and Development Bank. Then in 2019 Capital Times acted as financial advisor for Orexim in selling a 75% stake in grain terminal in Mykolaiv seaport to the South Korean Posco Daewoo. The deal took two years, according to the head of Orexim Group, Yuri Budnik. “That deal was worth tens of millions of dollars, but less than 100 because we were selling a facility under construction,” says Goncharevich. “It was difficult to find a buyer, despite similar facilities cost more than $ 100 million.”

The third “seaport” transaction for Capital Times took place in 2020. The international trader Glencore bought from Orexim the Everi vegetable oil terminal in the Mykolaiv seaport. The combined transactions value with Posco Daewoo and Glencore was about $ 170 million, says Budnik. “After these deals, Capital Times can announce its unique experience in the port logistics sector,” says Verkhoglyad.

Ukrainian investment companies successfully close on average 30–40% of the deals they are working on, says Goncharevich. In the US and Europe, the figures are higher – 70% and 50%, respectively, according to data from Globalscope Partners, which includes 55 independent M&A companies worldwide.

Among deals that Capital Times failed to deliver was a defeat in the fight for a controlling stake in Ergopak, a home goods manufacturer, which was sold at a valuation of near $ 20 million. Goncharevich represented the interests of the Ukrainian company Biosphere, owned by Andrei Zdesenko, who wanted to buy Ergopak from a fund managed by Horizon Capital. Goncharevich said that he “did not expect a competitor bid for Ergopak from foreign investors”. As a result, Ergopak was bought by the Greek Sarantis Group. “We remain on friendly terms with Zdesenko,” says Goncharevich. “But there was a difficult period in communication with him after the potential deal has collapsed.” Zdesenko did not comment on the issue.

Capital Times launched a rebranding campaign after successful deals the company performed for Orexim Group. Fedoriv Agency, one of the most famous marketing agencies in Ukraine was hired for the rebranding. “We wanted to modernize an image of our services to get closer to our IT clients,” says Goncharevich. The marketing budget topped a couple of hundred thousand dollars. The Company relocated to Astarta business center, to be a neighbor for many IT companies which were potential clients for Capital Times.

In 2018, Capital Times helped Intellias to sell a minority stake to Horizon Capital and supported the sale of Belarusian IT outsourcer SolbegSoft to Estonian developer Helmes. There were bidders from the US, UK, and Poland, as well as Ukrainian AVentures Capital for a minority stake in Intellias. Capital Times served Intellias as an exclusive financial advisor. “Foreign advisers are perhaps more technically savvy, but they have much less depth of understanding of the Ukrainian market,” says Vitaliy Sedler, CEO and co-founder of Intellias.

In 2020, Erik Nayman initiated a split of Capital Times. “You need to focus on your business,” he explains. “My business is B2C, but 20-25% of my time was spent discussing joint projects and business processes.” Nayman was satisfied with the decision to split the business: administrative costs of his wealth management division have been greatly reduced since then. “Nayman’s consistently profitable wealth management complemented the cyclical M&A business run by Goncharevich at that time,” says Vitaly Gorovoy, founder of the investment company InSoft Partners.

Thanks to Nayman, the Company remained profitable even in the most difficult periods, Goncharevich confirms. “M&A advisory income is volatile: when a deal is closed – you are extra-profitable, when there are no deals – you are balancing around zero,” says Goncharevich. Currently, Capital Times has enough reserves to work independently even in hard years, Nayman commented after the Company was split. According to him, both M&A advisory division and wealth management division have been earning pretty similar profits in recent years.
Capital Times commissions for M&A are 3% – 5% of the transaction value, according to Goncharevich. In cases for attracting financing, the commission percentage is lower. “Our target projects start from $ 10 million, but in the IT sector the project can start from $ 5 million,” says Goncharevich. After Capital Times was split, there were several deals for Goncharevich who closed the deal with Glencore, provided an advisory service in the acquisition of 81.46% stake in iPOST courier delivery company by Nova Poshta, and advisory for the sale of the Belarusian jewelry chain Tsarskoe Zoloto to a foreign investor.

Sergey Goncharevich closed the recent major deal at the end of September 2021 by attracting finance for Ascet Shipping from OTP Leasing for the purchase of barges. Capital Times has an estimated revenue of several million dollars a year. Capital Times has about 30 employees in Kyiv and Minsk offices. The Company’s current portfolio includes 20 projects for which contracts have been signed. Contracts for 37 new advisory projects are under discussion. Capital Times is looking for projects in the following sectors: agricultural logistics, infrastructure, and TMT (telecom, media, technology).

There are also personal investments. Goncharevich has a minority stake in Glovo delivery service and ARVI VR gaming company, as well as a 25% stake in IT company Beesender.com, which develops chatbots. Among Beesender.com clients are Leroy Merlin, BNP Paribas, Ajax, EVA. Staying just an M&A boutique is risky, says Gorovoy from InSoft Partners. Fewer companies are using advisors. “We need deep expertise in a particular market, which is not always the case for investment companies operating in many industries at once,” he explains.

In Ukraine, only 15% of companies hire M&A advisors, says Goncharevich. For example, Intellias, with which Goncharevich collaborated earlier, has created its own mergers and acquisitions division. Goncharevich is looking at areas of smart investments and corporate governance – consulting in exchange for a stake in the company. “We plan to be more active in corporate governance consulting and strategy consulting,” says Goncharevich, who is on the registries of independent directors in Ukraine and Belarus and has experience working on supervisory boards. Capital Times now offers an additional new service of creating an advisory board and supervisory board for medium-sized companies.