Finance Monthly Deal Maker Awards 2019 Edition

www.finance-monthly.com 57 FINANCE MONTHLY DEAL MAKER AWARDS 2019 TRANSACTION REPORTS Transaction Report Mezzanine Management backs Optimapharm with €10m Mezzanine Management-advised fund AMC IV has committed €10m to support the growth of OPTIMAPHARM, a leading European full- service clinical research organization (CRO). The funds are earmarked for organic as well as acquisitive growth and give the fund a minority stake in the business. The deal marks Mezzanine Management’s first in Croatia. OPTIMAPHARM organises, monitors and controls clinical trials of new drugs for clients in the pharmaceutical, biotech and medical device sectors. Founded in 2006 by Gordana Gregurić Čičak and Igor Čičak, the business has developed a market leading position in the Adriatic region and has gone on to conduct over 250 trials across 20 countries in Europe and Israel. It has done this through its 13 offices including in Cambridge, UK and Antwerp, Belgium. This extensive European coverage is complemented by its network of preferred partners in the US and Israel. With the backing of Mezzanine Management, OPTIMAPHARM is looking to grow through acquiring complementary CROs in CEE to consolidate the regional market and also to expand its presence in Western Europe. One acquisition in the Czech Republic has already taken place and has been fully integrated, with a number of additional opportunities in the pipeline. This announcement appears as a matter of record only Mezzanine Management Backs Optimapharm With €10m Legal adviser to Mezzanine Management: Financial & tax due diligence adviser to Mezzanine Management: Legal adviser to Optimapharm: M&A adviser to Optimapharm: ADVISER INTERVIEW Marcell Nemeth at Wolf Theiss What preparation was needed prior to working on this deal? As Optimapharm whose business is strictly regulated has subsidiaries in a number of jurisdictions, we had to very carefully plan the scope of the regulatory due diligence, so as to ensure the consistency of the response from each relevant jurisdiction. The other relevant issue was that, in addition to the financial covenants engineered for the holding company, in reflection of the fact that the target companies (i.e. Optimapharm potential acquisition targets), there was a need to create complex definitions for the permitted acquisitions which are based EBITDA multiples and other similar financial criteria, as those targets were not known at signing. What specifications and regulations must be met regarding legal documentation, in such a transaction? As the funds industry is highly regulated, the documentation had to comply with the fund’s internal rules and in the broader sense, the requirements of Luxembourg law for fund lending as the entity that has provided funding was registered in that jurisdiction. In addition, we also had to take into account the limitations and restrictions arising from Croatian law in respect of cross-border lending. The documentation was based on LMA standards with special features reflecting the “mezzanine” (that is debt-equity hybrid) features of the loan provided by the client. Therefore, on the technical level, the loan agreement is required to reflect more extensively the nature and terms of the equity investment (that was affected by the client in parallel with the mezzanine funding) such as, exit opportunities and corporate governance issued than in case of a standard corporate or even acquisition finance facility. What challenges arose? How did you navigate them? The single biggest issue for both the sponsors (that is the existing shareholders of Optimapharm) and the lender equally, was the need to ensure that they cannot be diluted in their respective investments, so that the originally agreed balance of shareholder powers, corporate governance mechanics and mutual controls, as well as the lender’s share security, is not capable of being changed in a unilateral or non-consensual fashion. Given some specifics of the deal and other parameters of the investment, this was quite a unique situation and we have finally implemented an innovative structure resting upon cash sweep or mandatory prepayment triggers connected to capital increases, along with the usual tag-along and drag along protections.