catalyst partners - onyx · • total global ipos 1,979 and capital raised usd287 billion • bric...

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Perspective on Capital Markets Evolution1

Catalyst Partners Business Model3

Table of Contents

SME Market Overview2

ONYX Structure4

Catalyst Partners Team5

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The revival of the capital markets in Egypt took place in the early 90s, as a consequence to the Paris Club and World Bank agreements

Egypt’s involvement in the Gulf War …

- During 1991, a US – led military coalition supported by Egypt initiated a massive strike to the Iraq’s forces in response to Kuwait invasion

- During the early 1990’s, the Gulf War had negative impact on Egypt economy; resulting in a wide budget deficit, lower foreign currency earnings, slow GDP growth and high inflation rates

- With external debt reaching 105% of Egypt’s GDP in FY1990/1991, the need for serious reform to the Egyptian economy was clearly required

… instigated reform agreements with Sovereign Institutions …

- The government took positive steps by concluding an agreement with IMF in 1991 and the ERSAP with World Bank

- Evidence of Government approval on the privatization program and its implementation were set as conditions to the release of ERSAP

- ERSAP goals were (1) Stabilization of economy (2) Structural adjustment to stimulate medium and long term growth (3) Improve social policies (4) policies adjustment to reform public enterprises and liberalize all prices including interest rates

- Simultaneously, Government concluded an agreement to reschedule and write off its debt to the Paris Club members

… leading to the privatization program and capital markets revival

- The privatization started in 1991 with the decree of Law 203 governing privatization and public investment and continued in 1993 with Law 95 that created the holding companies, as vehicles for privatization

- In 1992, the Capital Market Law and its executive regulations were issued which revived the Egyptian Stock Exchange, that was dormant for the previous 40 years

- As part of the reform , Egypt eased many price controls, decreased subsidies, eased inflation, reduced taxes, and to an extent liberalized trade and investment

Capital Market Evolution

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Major IPOs

Market Characteristics

Investors Characteristics

Major IPOs

Market Characteristics

Investors Characteristics

Egyptian Economy Evolution

1994 – 1998‘First Era’

2004 – 2008‘Second Era’

1 2


0.3%

2.9%

4.2%4.5%

4.9%

5.9%

7.5%

6.1%

5.4%

3.5%3.2%

3.2%

4.1%4.5%

6.8% 7.1%7.2%

4.7%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Reforms & Privatization

Global Economic Crisis

Historical Egypt GDP Growth

Rate, %

Sources: IMF

Capital Market Law & Debt restructuring

Major Structural Reforms

The evolution of capital markets could be viewed via comparison of two eras that reflected economic boom periods; namely, 1994 – 1998 and 2004 - 2008

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During 1994 – 1998, the IPO market recorded its historical hike with 73 IPOs, mostly public sector companies; a trend of private companies’ IPOs came at the end of the era, mostly medium size companies at the time

1 1994 – 1998

Number of IPOs per year Major IPOs during 1994 - 1998

Public sector

Private sector

Company % Sold IPO Value (USD ‘000)

AIC for Construction 43% 26,735

EGYTrans 4% 5,729

EFG 40% 60,000

Mobinil 40% 173,771

Orascom Holding for Hotels 95% 40,071

Olympic Group 27% 29,410

Savola 25% 41,690

El Ezz Porcelain (Gemma) 35% 28,710

Company % Sold IPO Value (USD ‘000)

Ameriyah Cement 71% 68,000

Medinet Nasr for Construction

75% 54,716

Nile Cotton Gining 100% 85,871

Kabo 63% 52,958

Upper Egypt Contracting 85% 4,032

Bisco Misr 63% 26,404

During 1994 – 1998: • The majority of IPOs in the initial years were for public sector companies

that were being privatized; 37 companies were sold through majority IPO’s with a total value of EGP6.3 billion; 16 public sector companies were sold through minority IPO’s with a total value of EGP1.8 billion

• P/E multiples during the initial years were quite low by global standards, given that offerings were made by then in-experienced public sector banks

• Private sector IPO’s started towards the end of the era, as the market valuations became more inline with international norms

• IPO’d private sector companies were medium size companies at the time (e.g. OHD, EFG, Olympic, Savola, Gemma), that eventually grew to become regional and multi-national firms

Sources: EGX BulletinThe Results and Impacts of Egypt’s Privatization Program – Privatization Coordination Support UnitZawya

22

23

20

7

1

Total of 73 IPOs

Non Comprehensive


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At the time, other key emerging markets were almost ‘on par’ with Egypt; also generating high number of IPOs with deal sizes similar to Egypt

Snapshot of IPOs in Emerging Market 1994 - 1998

Company Country Value

Companhia Brasileirade Distribuicao

Brazil USD351 million

CompanhiaParanaense de Energia-COPEL

Brazil USD605 million

China Eastern Airlines Corporation Ltd.

China USD66.9 million

Huaneng Power International, Inc

China USD586 million

Shandong HuanengPower Development Company Ltd.

China USD55.9 million

Indonesian Satellite Corporation

Indonesia USD449 million

Grupo lusacell, S.A. de C.V. (Series L)

Mexico USD110 million

Desc, S.A. de C.V. Mexico USD505 million

Electricidade de Portugal, S.A.

Portugal USD168 million

In china, 668 IPOs took place during 1994 – 1998 with total value of USD 36.8

billion

In India, 3,537 companies got listed on the Bombay stock exchange during the

1990’s alone

In Malaysia, 325 IPOs took place during 1994 – 1998. From 1993 to 1996, listed firms raised more than USD5.9 billion

reflecting average of more than USD26 million of capital raised per IPO

In Turkey, 130 IPOs took place during 1994 – 1998 with total IPO value of

USD193 million


Sources: China Stock Market in a Global Perspective - Dow Jones IndexesBorsa Istanbul Boom and Slum p Periods in the Indian IPO Market - Reserve Bank of IndiaBursa Malaysia NYSE Data

1 1994 – 1998

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The 1990’s era reestablished the global financial market integration trend, witnessing a boost in the capital flows, with an equal look, to emerging markets

• During the 1990’s, Cross – border investment increased significantlywhich took place mainly through mutual funds and pension funds.Moreover, US funds started to consider emerging markets as sourceof ‘Hot Money’

• Mutual funds expanded in the emerging market in both scope andsize; new specialized sub-categories were established to reflect theirglobal strategy and focus on emerging markets

• The most rapidly growing funds categories in the 1990s are theemerging market funds, Asia funds and Latin America funds; emergingmarket funds grew from 3 funds in 1991 to 165 funds in 1998

• During this period, hedge funds were introduced to the market andallocated only a small percentage to emerging markets

• During the First Era, key emerging markets were each producing alarge deal flow, with similar IPO sizes, and accordingly, were lookedupon on a ‘pari passu’ basis

Allocation of Pension Funds to Emerging Markets - 1997

According to world bank survey (1997); pension funds hold approx. 1.5 –2% of their portfolios in

emerging markets


Sources: Mutual Fund Investment in Emerging Markets MSCI applied research

Asset Management

1 1994 – 1998

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4 IPOs

Total IPO Value:

USD 1.4 billion

2 IPOs

Total IPO Value:

USD751 million

2 IPOs

Total IPO Value:

USD881 million

4 IPOs

Total IPO Value:

USD2.0 billion

2005 20072006 2008

During Second Era 2004-2008, Egypt IPO market became dominated by private sector companies, yet primarily large caps with IPO sizes exceeding EGP 1 billion

Public

Private

Companies that went public during 2004 - 2008


Sources: Egyptian Stock Exchange

2 2004 – 2008

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Comparing the Two Eras in the Egyptian IPO market history, the market witnessed structural changes reflected in a significant decline in number of IPO’s, and a higher average for deal sizes

Number of IPOs

during the 2 Eras

73

12

Total IPO Value

during the 2 Eras

USD 3.0 Billion

USD5.0 Billion

• Institutional investors - pension, mutual and hedge funds - typically have a minimum investment ticket that would cover their overheads in order to add a particular investment to their portfolio

• Distribution to retail investors is necessary to ensure secondary market liquidity, and hence maximize the value of the company through the liquidity premium

• To meet institutional investors minimum investment requirements, as well as secure secondary market liquidity through retail investors, typically, a minimum IPO size of USD 143 million (EGP 1 - 1.5 billion) is necessary, which translates into a company with a total market capitalization of USD 429 – 714 million (EGP 3 – 5 billion)*

• During the period 2004 – 2008, IPOs were dominated by private sector companies, primarily large caps, with IPOs in excess of USD 175 million (EGP 1 Billion)

• During this Era, however, the number of IPOs were limited to 12, which is clearly attributed to the limited number of companies in Egypt of proper size and readiness to go public

Comparing Two Eras in Egyptian IPO History


*Based on exchange rate EGP/USD = 7

2 2004 – 2008

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During the second economic Era, key emerging markets – namely BRIC countries -significantly outperformed Egypt in terms of number and size of IPOs produced, whereas they were on par with Egypt during the 1990’s Era

• Total global IPOs 1,979 and capital raised USD287 billion

• BRIC countries (Brazil, Russia, India, China) fueled the global IPO market; raising more than 40% of total proceeds

• Greater China, by itself,conducted 259 deals raising capital of USD66 billion

• During 2004 – 2008, BRIC countries significantly outperformed Egypt in terms of number and size of IPOs, whereas they were on par during the 90s

Number of IPOs (2007) Value of IPOs (2007, USD Billion)

Illustrative Period


Sources: Ernst and Young Global IPO report Egyptian Stock Exchange

2 2004 – 2008

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The evolution and importance of emerging markets was reflected in the way investors started to perceive these markets as a core allocation in their portfolio

Evolution of Global Market investment in Emerging Markets

MSCI Index Evolution

• Back in the early1990’s, the financial community perceived emergingmarkets as too illiquid and risky to trade. As such, institutionalinvestment in these markets was, relatively very minimal. Nowadays,these markets are part of the international portfolios representing astrong investment proposition, particularly for the expanding base ofhedge funds

• There is huge evolution in the level of complexity from one emergingcountry to another. The BRIC countries (Brazil, Russia, India andChina) offer advantages in terms of investment vehicles, tradingcosts and restrictions

• Funds developed different strategies for emerging markets during thelast decade moving away from the historical long/short approach witha longer bias

• The average allocation of US pension funds to emerging marketsequities reached 4.5% in 2010 reflecting an increase of 50% from anaverage allocation of 3% just 3 years before, and 200% increaseover their average allocation in the mid 1990s

• Moreover, the mutual fund industry in emerging markets hasexpanded by more than 19 times over the period 1990 – 2003

• MSCI introduced the first comprehensive emerging markets indexduring 1988. At that time, there were only 10 countries in the index;Mexico, Argentina, Brazil, Chile, Greece, Jordan, Malaysia, Philippines,Portugal and Thailand

• At the launch of the MSCI emerging markets index, the combinedmarket capitalization of the 10 countries represented less than 1% ofthe global equity opportunity set reflected by the MSCI ACWI index –a global equity index consisting of developed and emerging marketcountries.

• Within 10 years only, the MSCI emerging market index constituentsgrew to almost 7% of the MSCI ACWI index

Composition of the MSCI ACWI Index (1987 – 2007)


Sources: MSCI Applied ResearchThird party research on emerging markets

2 2004 – 2008

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To conclude, the limited focus given to SMEs by government and investment firms was the reason behind the anemic IPO activity in the Second Era

Key Observations

• During the First Era, the Egyptian capital market witnessed a large number of IPOs:• The privatization program which made available relatively large cap public sector

companies, initially at attractive valuations• Towards the end of the Era, as the market became more sophisticated, a trend of

medium size private sector companies going public was evident, as valuationscame more in line with global norms; primarily based on the founders reputationand growth story rather than on the internal readiness of firms

• In retrospect, most private companies that went public were put on a growthtrajectory that took them to being regional and multi-national players

• Institutional investors perceived the Egyptian market, on a normalized basis, ason par with other emerging markets

• Despite the economic boom between 2004 – 2008, the number of companies that wentpublic were very limited:• Institutional investors expanded in size, increasing their overheads and hence their

minimum investment ticket• Other emerging markets offered a much larger number and size of IPOs,

compared to Egypt• Investment Banks operating at the time in the market were structured to address

the large caps only• The investor market, both international and local, became more sophisticated,

requiring companies going public with internal readiness to ensuresustainability rather than just ‘name investing’

• Limited number of companies in the Egyptian market were of the required marketcap and readiness to go public

Take-away

• So, why was the trend of the mid capsgoing public in the First Era NOTobserved in the Second Era?

• Limited focus and development of theSME segment despite economic growth,which didn’t produce companies thatwould be considered ‘IPO material’, andmatched the growth witnessed in othercompeting emerging markets, as well asmeet the evolution in institutional investorsrequirements

• Lack an active platform to list SMEcompanies, whereby EGX was the onlyavailable option, at the time, for listingwith strict regulations such as highcapital requirements

• LACK OF INVESTMENT AND PE FIRMSTHAT WERE INTERNALLYSTRUCTURED TO SERVE MID CAPS,BUILDING THEM INTERNALLY ANDGROWING THEM INTO ‘IPOMATERIAL’


2 2004 – 2008

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Table of Contents


ONYX Structure4


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� In Egypt, approximately 99% of businesses in the SME sector are in the non-agricultural private sector, accounting for 80% of total value added activities in the Egyptian economy. Moreover, SMEs employ about 75% of the non-agricultural private sector labor force and 67% of the overall private sector workforce

� SMEs play a major role in economic development, particularly in emerging markets. Studies indicate that formal SMEs contribute up to 45% of employment and up to 33% of GDP in developing countries

� MENA region is in the midst of a significant transformation, moving from an economy fueled largely by an abundance of natural resources to a diversified knowledge-based economy with a broad range of industries. The transformation began several years ago, when regional manufacturing and services companies were started, sovereign wealth funds began making major investments in companies, and local governments established free-trade zones to attract foreign businesses, and knowledge workers. The development of competitive indigenous economies came on back of investments in SMEs

� SMEs act as a catalyst for innovation and competition to help in achieving the highest sustainable economic growth and employment, while maintaining financial stability to contribute in the development of the world economy

� SMEs needs for accelerating growth:

� Clear vision & strategy

� Well structured business plan

Breakdown of formal small & medium enterprises in developing countries

Sources: Egyptian Ministry of Finance, SME Development Unit & Egyptian Ministry of Foreign Trade- SME Policy Development Project IFC, , “Scaling-UP SME Access to Financial Services in the Developing world”Closing the Credit Gap for formal and informal MSMES - IFC

Enterprises # of professions

Very Small 1-4

Small 5-14

Medium 15-49

Large >50

Egypt enterprises sizes

� Internal business process structure

� Financial modeling

� Identification and development of financial needs

� Sustainable Corporate Governance via public company regulatory environment

SME’s Overview

Small & medium enterprises are the growth engine of developing economies

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Even though SMEs create the most new jobs across countries; it faces many obstacles to grow especially in developing countries due mainly to the lack of access to finance

SME’s Overview

Number of MSMEs Globally (Millions)

Number of MSMEs Developing Economies (Millions)Financing Gap in Developing Economies

Almost 55% to 68% of formal SMEs in developing countries

are perceived to be un-served or underserved

by the formal financial sector

• MSMEs face various challenges including weak investment climate, poor infrastructure and the most critical challenge is the access to finance.

• The access to finance constraint is more significant and serious in developing countries where financial markets are not developed, in addition to the weak regulatory and legal frameworks

• In developing economies, banks usually decrease their exposure to SMEs compared to those in developed countries and they tend also to charge them higher interest rates and fees

• 45% - 55% of the MSMEs universe in developing economies recognize access to finance as an operational constraint

Sources: Closing the Credit Gap for formal and informal MSMES - IFC

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Morocco

• Central bank of Morocco adopted a more public/private partnership approach

• The Maghreb fund was established as a 10-year private equity investments in diversified local companies focuses on SMEs with USD76.3 million in capital commitment

• Central bank of Morocco ,under IFC guidance, undertook a radical reform of the aged national credit reporting system and simultaneously establishing the first Private Credit Bureau

Egypt

• After the Egyptian revolution, the government will focus its resources on SMEs to achieve its political and economic goals through creating a more attractive business environment and to tackle unemployment, inflation, increase foreign direct investment, and accelerate GDP growth

• No barriers of entry nor bureaucracy creates a fertile soil for SMEs to grow

• SMEs are considered as the growth engine of the Egyptian economy accounting 80% of total value added activities and attract 47% of total investments

Iran

• There are 71,000 registered small units which accounted for more than 94% of all registered enterprises as well as 45% of employment in the country

• Export of oil & gas, accounts for up to 82.5% of country's total exports; whereas, industrial SMEs represents less than 5% of total non-oil exports. Iran needs to increase its non-oil exports in order to become an active partner in the WTO-led process of globalization

• The consumption market in Iran is very extensive, and most SMEs in Iran are not exposed to their foreign rivals due to Iran’s political status

Turkey

• Authorities have for many years carried out a variety of programs to support SME’s

• Adoption of the Bologna Charter on SME • Commitment for several years to stabilization &

structural reform programs in agreement with IMF• Created SEGEM (Industrial training & development

centre ) and KOSGEB(Small & medium industry development organization)

Sudan

Turkey

Egypt

SaudiArabia

Syria

Yemen

Algeria

Iraq

Tunisia

Iran

MENA region is a fertile soil for small & medium enterprise markets to flourish

SME’s Overview

Libya

Sudan

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� The SMEs plays a significant role in the economy, and its potential for growth, whereby it accounts for 80% of GDP and 75% of the labor force

in the private sector *

� The SME sector is expected to do particularly well, reinforced by the support of the Egyptian government and international agencies. In this

context, the Egyptian government has established a number of reforms to promote SME growth, which include:

� Reducing the regulatory burden on SMEs by simplifying the complexity that used to exist in the institutional setting of SME policy -

including a wide range of ministries and agencies. Such complexity negatively influenced synergies maximization between public programs

� Improving SME’s access to finance through a number of path-breaking measures, including; the launch of I-Score Credit Scoring

services on borrowers and its upcoming projects include specialized SME rating; A set of leasing guidelines with simplified contract

registration procedures that can be completed within 48 hours without limits on the number of assets

� Encouraging institutionalization of the SME sector; in this respect, the Central Bank of Egypt beginning of February 2012 announced

that it introduced a database for all SMEs in Egypt covering 36,000 enterprises

� Establishment of NILEX provided an attractive exit option for private equity firms invested in SMEs

2009 2010 2011 2012 2013 & 1Q2014

� Egypt is expected to witness the second free presidential elections in its history� The project of the new president is expected to encompasses a special program for SMEs Development

� After the 25th of January revolution, Egyptian government will focus on growing SMEs as they are the main pillars of the country’s development and represent the catalyst that will transit Egypt from being an Emerging country to a developed economy� NILEX abide by the same trading rules of EGX

� The World Bank approved a USD300 mil. loan to support Egyptian small enterprises� President Obama’s Global Entrepreneurship Program has selected Egypt as the pilot country to educate Egyptian entrepreneurs

SMEs growth in Egypt

� The Egyptian Financial Supervisory Authority (EFSA) was established in July 2009, which would function as the common regulator for all financial institutions (Non-banks)

Sources: Ministry of Finance SME Development Unit, “SMEs Stock Exchange in Egypt”

� 5 new companies were listed on NILEX; bringing the total listed companies to 24 companies � The EFSA started discussions on the amendments of the capital market regulations which were approved during 1Q2014

SME sector represents 80% of Egypt GDP, and is expect to receive significant focus from government and int’l agencies over the coming period to create growth

SME’s Overview

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� The high growth rate achieved over the previous half decade of President Mubarak’s rule has been primarily driven by the

privatization reforms introduced under his rule. This growth however has been highly unequal and has not benefited the poor

� As a result of the ‘crony capitalism’ witnessed under Mubarak's rule, Egyptians have been highly suspicious of the private

sector. This along with the labor unrest witnessed during the revolution in terms of industrial actions taken by labor has created

a minority view which advocates for a return to President Abdelnaser’s Nationalization programs. Nevertheless, there has

not been any serious action taken towards that direction within any of the post-revolution governments.

� The private sector in Egypt has significant ability to achieve real economic growth for the country. During 2012/13 64% of

investment in the country was undertaken by the private sector. The sector’s share of GDP has seen un uptick from 61.% in

2012/13 to 60.8% in 2011/12. Most of the private sector in Egypt consist of informal small to medium size enterprises and

family business

� The government is taking positive actions to assure its commitment towards a market based economy, and that the

government have already established a committee to analyze and overcome bottlenecks facing SMEs

� After the revolution , many cases where brought against private sector companies. This was due to the growing belief that

these companies obtained land and licenses in an illegal fashion. As expected, this increased the uncertainty in the country,

and so to counter this, the Government decided to enact a law which prevents third parties from challenging any

agreements between the private sector and the government, creating a greater sense of stability between prospective and

established investors

SMEs/family businesses will be the growth engine in the next decade , however, they however have to be catalyzed to overcome the bottlenecks facing them

Private Sector Overview

SME’s Overview

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Target and actual SME lending as % of total loans*Target and actual SME lending as % of total loans*

� Despite the encouraging prospects of the SME sector, SME

financing is quite underdeveloped in Egypt in comparison to its

MENA peer.

� The shortfall in loan/deposit to SMEs is one of the highest in Egypt,

standing at 20% compared to the MENA average of 11% *

� The shortfall of bank and other types of financing to the SMEs in

Egypt can be attributed mainly to:

� Size: The capital needs of SMEs are usually small, making

them not very profitable for banks

� Higher Risk: SME financing usually entails higher

perceived and arguably real risk causing them to be

rejected by many financers

� Lack of Transparency: Lack of transparency and clarity in

SME business models have discouraged financial institutions

from providing SME financing

Sources: World Bank, “The Status of Bank Lending to SMEs in the Middle East and North Africa Region”

Government: Egypt developed a policy framework to support SMEs and providing different channels to help this underserved sector grow including the Social Fund for Development, Industrial Modernization Center (IMC), General Authority for Investment (GAFI) and SME development Unit

CP: developed a new concept “Incubation” which will help SMEs to create value and to turn them into an attractive bankable & scalable enterprises that can pursue conventional financing methods and explore capital market through listing on Egyptian Stock Exchange

Government & CP support

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Target for SME lending Actual SME lending Funding gap

SME financing is clearly underdeveloped primarily due to the small size, perceived higher risk, and lack of transparency

SME’s Overview

20 |

Sources: IFC

Capital markets

Trade financing/fact

oring

Lease financing

Bank financing

Growth capital

Long-term

Medium-term

Short-term

Financing needs

Micro Small Medium Large

Firm

sizeMostly targeted by micro-finance

institutions

Targeted by banks

Growth companies in the SME sector are in need of capital to finance the working capital and growth plans

� Growth companies in Egypt need incremental capital in the short-term, to ensure they are able to emerge from the current market dislocation into a strong financial position:

� Balance sheet may need to be restructured

� The companies may have strong growth prospects and/or opportunity to capitalize on depressed valuations through acquisitions

� Companies with strong corporate backgrounds and compelling business models are experiencing difficulties raising financing in the current environment:

� Too early in corporate life cycle for bond markets/ no rating

� Equity markets have all but closed for small and mid cap companies

� Private Equity ‘Growth Capital’ is ideally placed to fill this gap:

� Liquidity available � Experienced professionals to invest in

high growth /turnarounds/ restructuring opportunities

SME’s Overview

21 |

According to McKinsey, less than 30% of family businesses survive the third generation of family ownership; while, KPMG claims that the ratio is only 10%

Family Businesses Survival through 1st to 3rd Generations | %

• Succession

• Legal Structure

• Access to Finance

• Tax Efficiency

• Human Capital Upgrading

• Human Incentive Structure

• Operational Upgrade

• Governance (Segregation of ownership and management)

Sources of Challenges (within a given environment)

Source : Mckinsey and KPMG

In the absence of dealing with the above challenges; time becomes the most aggregeous of threats

SME’s Overview

22 |

Benefits for Private Equity

Provision of long-term equity capital

Historically, SMEs faced constraints in terms of financing; they had two sources only whether accumulated earnings or debt

financing for funds, since public listing was expensive. The availability of PE funding would help in diversifying SMEs’ capital

base by providing long-term equity funds

Provision of support services

PE investments institutionalize SMEs, increasing their ability to compete and grow by providing vital inputs which ensure

business sustainability, good corporate governance, enhancing operational efficiency, useful business contacts and

experienced leadership. These SMEs would eventually contribute positively to the society as a whole by creating more job

opportunities and economic

Benefits for SMEs

Attractive IRR

The Egyptian SME sector will achieve robust growth in the near future. PE investments should realize attractive IRRs

Structural improvements

Conducive regulatory reforms have done away with many of the earlier risks associated with PE investments in Egyptian

SMEs. The PE market that earlier depended on networking and connections in getting the deals is becoming more open.

Moreover, the country will witness many reforms in favor of SMEs as they represent the future in Egypt after the Egyptian

revolution; thus, so SMEs will be the most appealing investment to PE firms

Exit options

The NILEX & EGX provides an attractive exit option for PE investments in Egyptian SMEsEgypt PE funding

requirements is

estimated to be in the

range of EGP1.2-3.0

billion* per year, a

significant amount of

which can go into the

Egyptian SME sector

CP acts as a ‘Catalyst’

Sources: Ministry of Investment, “Beyond the Crisis: Policies to Support Young Enterprises”* EGP/USD = 7

Opportunities Exist for PE Capital in Egypt SME Market

SME’s Overview

23 |

Factors in SME upgrading in Egypt

• The scarcity of medium-sized enterprises in Egypt is not only due to the difficulty of small firms to upgrade, but also because upgraded firms have difficulty sustaining their new (medium) sizeSME Upgrading

• SMEs in Egypt are constrained by the business environment, especially problems in state-business interactions such as licensing, taxation, inspections and governmental efforts to protect competition

• These problems are mainly due to deficits in law enforcement rather than the cost of these procedures in terms of time and money

• Deficits in the rule of law (especially in state-business interactions)*

Business Environment

• Six factors are main determinants of upgrading in Egypt:

• Human capital (quality education, work experience and international exposure)

• Motivation and readiness to take calculated risks

• Investment in human resources development (HRD)

• Market research

• Access to finance

Determinants of SME Upgrading

Source: Which Factors Determine the Upgrading of Small and Medium-Sized Enterprises (SMEs)? The case of Egypt by German Development Institute

Egypt’s private sector is dominated by micro and small enterprises. 92% of all companies are micro enterprises (1 – 4 employees), 7% are small enterprises (5 – 49 employees) and much less than 0.6% are large enterprises (100 employees or more). Medium-sized enterprises (50 –

99 employees) account for just 0.13% of all formalized Egyptian companies

SME Upgrading

Limitation

SME’s Overview

24 |



Table of Contents


ONYX Structure4


25 |

Enterprise Development / Management Consultancy

Investment Banking

Our Business‘Fostering Success’

Become the ‘House’ of choice in helpingSME’s transform into impactful andsustainable economic ‘players’

Nurture passionate Entrepreneurs’ambitions such that they become the mainpillars of the emerging and promisingEgyptian economy

Having sculpted and instilled in ourselves allthe necessary tools and expertise to act as‘incubators’ or ‘catalysts’ engenderingincremental growth for SME’s

Vision

Mission

Role

Catalyst Partners aspires to transform SMEs into impactful and sustainable economic players, becoming the ‘House of Choice’ for SMEs

CP Business Model

Private Equity

‘ONYX’

26 |

Management ConsultancyAdvice

Financial Advice

Incubated Partner knowledge and

experience in their field.

Institutionalizing of the company

• Catalyst Partners is willingly to engage in any of these phases provided a set of criteria is observed:

− Scalability

− Management Characteristics:− Knowledge − Energy

− Conviction that pursuing the journey towards IPO and its execution is fundamental to continuity

One Man Show First Steps Walk Talk Run Institution

Catalyst Partners aims through its business model to institutionalize its Incubated Partner

Advisor Vs. PrincipalEnsure Business

Continuity

CP Business Model

27 |

� Existing companies having ‘Proof of concept’(i.e. not a greenfield ), with sweat spot for investment between EGP 50 – 500 million

� Scalable business model with no ‘ceiling for growth’

� Management depth, energy and knowledge

• Management team have enough depthevidenced by second line management

• Management team are passionate, entrepreneurs with deep knowledge of their own business

• Management team are perceived as engines of growth i.e. have attributes to source high levels of energy to deliver anticipated growth

� Pre-agreed commitment for going public within 2-3 years through an IPO

� Vision & Strategy

� Business Plan

� Corporate Governance

� Operating Model

� Operational Efficiency

� Top & bottom line maximized via evocation of efficient business processes

� Bring Incubated Partners to a level of maturity consistent with being publicly offered on Egypt’s stock exchanges

� ‘Feed’ the equity markets with attractive, liquid traded securities featuring high underlying growth

� EGX and NILEX is expected to see increasing primary market activity due to inverse relationship between:

Criteria / Attributes Growth / Nurturing

1 2 3

Growth Capital

# of IPO’s

Size

Start-up

IPO

Matu

rity

Incu

bation

Contr

act

Valu

e E

xtr

act

ion

Value extraction timeline 18 – 36 months

IPO

Catalyst Partners defined road map for the incubation process which starts with a solid selection criteria and end with the IPO event

CP Business Model

28 |

Deal sourcing

Assessment & screening

Letter of intent

Commitment Committee

‘Soft’ due- diligence

Value extraction contract

‘Hard’ Due Diligence

Growth strategy & planning

Financial needs identification

Investment Committee for bridge financing:

- ONYX as a first resort

- Or third parties

Growth plan implementation:

- Strategy

- Business processes

- Financial needs

- Operations assistance

- Corporate governance

“IPO”

CP signed with 3 brokers as distributors for CP placements

Complete/partial exit

Growth

Efficiency

CP’s principals’, employees, banks & sell side brokers, third party agents, and marketing

Investment banking

execution Value extraction team

Value extraction

team

Catalyst Partners defined road map for the incubation process which starts with a solid selection criteria and end with the IPO event (Cont’d)

CP Business Model

29 |

Stake1

CP Incubated Partners

3

Pre-screening process Presentation Investment Committee

� Investment Committee decision either to take it on as an:

� Incubated Partner(or)� Investment Banking (or)� Decline

� Catalyst Partners prepares a detailed investment proposal illustrating the incubated partners capabilities, strength, competitive edge and the IP’s vision, strategy and business plan

Investment phases

� CP prepares an investment presentation to the investment committee/ BoD internally or to third party highlighting expected return & exit scenarios

Phase I Phase II Phase III

2

Yes

No

Investment Banking

Investment creation process starts with pre-screening of potential IPs, presenting to CP Investment Committee (IC), then a decision

CP Business Model

30 |

Raising required funding to finance growth including:• Equity funding• Quasi equity funding• Structured products funding• Mezzanine financing • … etc

Private Equity Growth Capital

Strategy Design• Vision & strategy • Business plan• Corporate governance• Organization & Capability building• Internal business processes• Implementation roadmap• …etcImplementation Support• On the ground, hands on support in

the Implementation program and progress monitoring

Enterprise Development “Management Consultancy”

Investment Banking• Design & execute Merger &

Acquisitions ‘M&A’ transactions• Arrange for trade finance, working

capital finance, leasing transactions• Design & execute capital markets

transaction; equity or DebtDue Diligence• Assess financial statements• Understand and audit accounting

process and outputs• Engineer new corporate legal re-

structuring

Corporate Finance

Catalyst Partners tags three sets of skills onto Incubated Partners to unleash growth through its ‘Ra3ye’ product

SME Incubated Partners

Accelerated Growth

CP Business Model

31 |

Marketing

Operational & Implementation Support

FinancialControl

AdditionalFinancing

GrowthStrategy

� Develop marketing plans� Support marketing teams

� Handle implementation support and monitoring of the strategic initiatives� Cooperatively identify areas for efficiency improvement/ productivity analysis� Facilitate visits by outside experts (complete/overall assessment and advice)

� Business planning and budgeting� Accounting and management information systems� Facilitating hiring and training of key capabilities

� Identify alternative sources of financing� Leverage relationships with local banks & financial investors� Provide negotiation and contracting support for funding process

� Formulate growth plans� Re-shape value propositions and business model� Develop corporate and business development plans

CP provides its Incubated Partners with an array of support services

CorporateGovernance & Operating Model

� Board of Directors oversight� Legal structure� Organization structure, internal control frame work, decision rights, etc� Design effective incentive structures

On the Enterprise Development front, Catalyst Partners provides Incubated Partners with an array of support services

CP Business Model

32 |

Market & Arbitrage Opportunities

Architect Innovative Products

Create new products to fulfill market needs on the one hand and expand capital

markets’ products range, on the other hand

Act as a ‘catalyst’ on behalf of clients to take an

advantage of transitory market opportunity

Introduce to fixed income market Sukuk, securitization

and mezzanine financing

Introduce innovative instruments to cater the

growing appetite for unique products with promising

returns

Corporate bonds & commercial paper

Equity & debt raising for opportunistic projects

Fund Raising

Equity or interim financing and listing Incubated

Partners

Debt financing for incubated Partners

Trade & working capital finance for Incubated

Partners

On the Corporate Finance front, Catalyst Partners handles fund raising and structuring of innovative products …

CP Business Model

Independent Advisory Services Other Services

33 |

Due-Diligence

Financial Statements� Balance sheet� Income statement� Cash flow statement� Audit reports � Tax

Corporate Legal Structure � Organization ownership� Legal status � Organization charter� Licenses

Physical� Facilities � Reputation due-diligence � Service contracts� Engineering reports (if needed)

Legal Process � Follow-up on corporate

legal documents� Follow up on insurance and

tax conformity

… as well as a range of due diligence support services that includes financial statements support, corporate legal restructuring and auditing

CP Business Model

34 |

Incubated Partner

CP’s Incubated Company or Partner is in fact a partner

from ‘day one’

Incubated Partner

•CP & Incubated Partner ‘Ra3ye’ Product

• Upon satisfying CP’s Value Extraction SelectionCriteria, CP signs an incubation contract withthe prospective partner and receive equity.CP’s role is to support the Incubated Partnerentrepreneur/ management short and long-term plans, strategy and monitor theimplementation process via its ‘Ra3ye’ product

• With CP being a shareholder in the IncubatedPartners, a strong mutual relationship andtrust builds-up between CP and the IncubatedPartners

CP receives equity in the Incubated Partner in return for its ‘Ra3ye’ product

CP Business Model

35 |

Agribusiness

• Animal products and feed

• Farming and contract farming

• Seed supply

• Agrichemicals

• Agricultural equipments leasing

• Logistics and processing

Consumer Facing

• Retail & Distribution

• Clothing and consumer durables

• Service Providers such as business

centers, cleaning services , etc

• Consumer entertainment

• Processing & payment

Real Estate

• Private property ownership

• Commercial real estate

• Residential or industrial properties

• Land and fixtures

• Developers

• Building or assembling

infrastructure

Food

• Research & development; Food

technology

• Manufacturing

• Marketing and packaging

• Food processing

• Distribution logistics including

warehousing, transportation and

logistics

Education

• Education sector is divided into

three main areas; school education,

higher education and further

education

• Creating high standards of program

and business practices

• Support entrepreneurs to achieve

scale

The focus of investments is on consumer facing, education, and food

Pharma & Healthcare

• Retail & Distribution

• Drugs licensing & manufacturing

• Medical consumables

• Hospitals

• Laboratories

CP Business Model

36 |

Catalyst Partners has a strong pipeline of Incubated Partners that is currently under discussion

Company ‘A’

Company ‘B’

Company ‘C’

Company ‘D’

Company ‘F’

Company ‘G’

Company ‘H’

Company ‘I’

Company ‘J’

Company ‘K’

• One of the largest growers and exporters of vegetables and fruits from Egypt to major retailers in the European market, with a broad portfolio of products and potential for vertical integration

• A high quality manufacturer of frozen and canned vegetables and fruits, to the bulk European market, with potential to build own brands in local and export market

• A major printing and publishing shop of education books, and owner of ‘The Brand’ for support books related to the primary school students

• A legacy retail food chain that targets B,C,D sector with significant growth and presence across the region

• A private pharmaceutical company specialized in the production and marketing of a wide range of antibiotics applying most advanced quality standards

• A major market player in the pharma industry since 1998 providing wide range of pharmaceuticals and healthcare products

CP Business Model

• A high quality manufacturer of a wide range of products from beef, veal, chicken, ducks and lamb products that are processed as smoked, cooked, air-dried or marinated

• One of the top leading freight forwarders in the Egyptian market in textiles business and different kinds of goods and projects

• One of the pioneers in frozen poultry market providing high quality products, in addition to frozen fruits and vegetables

• The only company in Egypt with Advanced Smart Public Transport Solutions. “Misr Bus” owns CPT and Al Heba companies

37 |

CP proved its resilience during Egypt’s most critical time; successfully executing various investment banking deals and securing required financing for its ‘Incubated Partners’ while restructuring their business models

Leased Fleet of Trucks

EGP5 million from

November 2013

Secured debtEGP20 millionEUR2 million

from

April 2014

Independent advisor

of QNB Life Insurance

May 2014

Rights Offering

EGP20 million

May 2014

Turnaround & Restructuring through

Equity Raise

EGP40 million

March 2013

Debt Restructuring

EGP30 million

December 2012

Capital Increase

EGP15 million

High Net Worth Individuals

September 2013

‘

Special Purpose Vehicle (SPV) to finance Agri-

business

EGP20 million

October 2013

CP Business Model

38 |

Internationally Successful Similar Models

� GA is a leading global growth equity firm with the edge of providing both capital and strategic support for growth companies

� GA provides capital for growth and add value by partnering with management to build market leaders

� This objective is met by combining a collaborative global approach, sector-specific expertise, and a deep understanding of growth driver

� For over thirty years, General Atlantic has provided deep understanding of market trends and industry-specific expertise to help growth companies achieve scale, extend global reach, and complete acquisitions

� General Atlantic partnered with almost 200 companies

� Their investment target is to invest annually USD1.0 -2.0 billion with investment range USD50.0 - 500.0 million as minority or majority in private and public companies and the company partner with 8-12 new investments each year

� General Atlantic manages USD17.0 billion in capital

� Their portfolio covers 5 continents and 10 countries. The team consists of 75 investment professionals and operations experts providing global insight and regional expertise in General Atlantic’s global offices located in Greenwich, New York, Palo Atlo, Sao Paulo, London, Dusseldorf, Mumbai, Singapore, Beijing and Hong Kong

� Sectors investing in are: Business Services, Emerging Markets Consumer, Energy & Resources, Financial Services, Healthcare, Internet & Technology

� Eureka Growth capital was founded in 1999

� Since its establishment, Eureka Growth Capital partner with owners and managers of growing companies to help them define and meet their objectives

� Eureka targets to invest in talented entrepreneurs and management teams that have identified profitable market niches and seek both capital and trusted counsel to support their growth into outstanding enterprises

� Eureka acquires businesses in partnership with proven managers, in change of control transactions that bring significant ownership to the managers causing the success of the business

� Eureka strategy is to support these managers with minority stake providing flexible investment structures designed specially to meet the needs of the company

� Eureka seeks to invest with business owners focused on long-term growth rather than short-term liquidity

� Eureka main focus is to support profitable businesses with less than USD75.0 million in revenue. The company also partner with proven industry executives with investable capital to make opportunistic acquisitions. Initial equity investments range from USD4.0 million to USD10.0 million, but larger investments can be made with co-investment from their Limited Partners

� Their investments focused mainly in Mid-Atlantic and Eastern US

� Seera is licensed and regulated by the Central Bank of Bahrain (CBB) as an Islamic Wholesale Bank

� Their main focus is equity investments with the objective to develop a diverse investment portfolio providing attractive risk adjusted returns

� Their strategy is to acquire controlling stake in established small or medium sized enterprises in the Middle East, North Africa, USA and Europe with acceptable minimum EBITDA and an immediate need for growth capital. Targets must have market positions, distinctive products or services and sustainable value proposition. Seera looks for industry growth drivers that are fundamental and compelling and strong management teams with a clear business strategy exhibiting multiple avenues for growth and market share augmentation

� Seera also seeks opportunities for direct investment in stable, asset-rich industries with high-quality cash flow generation and lower business risk characteristics

� Investment process; after they define a prospective investment, a detailed due diligence is embarked to generate both qualitative and quantitative data about the company, profitability, offering, cost base or relevant factors. The main focus is on investment that offers exceptional potential for extended profitable growth and have a clear exit within 3-5 years. Seera does not aim to have operating control, they monitor performance through direct board participation and regular meetings. Seera also helps the executive team to develop a business plan with clearly defined targets, provide strategic, financial and operational support for growth initiatives

CP Business Model

39 |



Table of Contents


ONYX Structure4


40 | ONYX - Structure

Key Terms

The Vehicle Name ONYX

Legal Structure Joint Stock Company

Exclusive Financial Advisor Catalyst Partners

Legal Advisors Matouk & Bassiouny

Geographic Focus Egypt

Size EGP500 Million

Investment Period 18 - 24 months

Investment Tenor Estimated at 5 years

Redemption Period Redemption takes place on an investment by investment basis

Minimum Subscription EGP7 million

Management Fees 2% p.a

Carried Interest 20% over 10% (hurdle)

Expected IRR 35% - 45%

ONYX Key Terms

41 |

ONYX will only invest in

CP’s incubated

partners & CP sourced

turnarounds/ restructuring opportunities

PresentationONYX Investment

CommitteeONYX Stake Acquisition

• CP extracts value from incubated partners and determine its financial needs. A pre-screening process for ONYX

• CP prepares an investment presentation to ONYX investment committee/ BoDhighlighting ONYX expected return & exit scenarios

• ONYX deploys cash to acquire direct stake in CP’s incubated partners/ investment opportunity

• ONYX studies the investment opportunity presented by CP and decided on either to accept the investment or refuse it

ONYX - Structure

Pre-screening Process

0-6 Months 5 days 5 days 10 days

CP acts as a pre-screening engine for ONYX to hand pick its potential investments, which goes into ONYX approval process after determining financial needs

Investment Process

42 |

Value extraction time frame is expected to be around 24 – 26 months

`

2 – 4 16 – 24

Fulfill CP criteria

1 – 2

Due-Diligence Analysis

Operational Plan

Strategy Deployment

4 – 6

Due-Diligence

Organization Assessment

Strategy Development

Operational & Financial Plans

8 - 16 6 – 8

Internal & External Assessment

Strategy Foundation & Formulation

Monitor Implementation

Listing & Public Offering

24 - 36

Financial Assessment

Bridge Financing (Debt or Equity)

Financial Plan

Financing needs are concluded

Equity

ONYX or third party*

Equity related

IPO

Set Roll-out Plans & Monitor Implementation

Exit through IPO

Value Extraction

Months

ONYX - Structure

43 |

Portfolio Companies

Growth Capital Turnarounds/

Restructuring

• Number of deals: 2 -3 deals

• Target investment: EGP10 – 30 million

• Exposure: ONYX shall not invest more than 25% of itsissued capital in any single company without board specialmajority consent

• Investment strategy: ONYX will seek minority stake

Growth Capital

• Number of deals: 2 – 3 deals

• Target investment: EGP20 – 70 million

• Exposure: ONYX shall not invest more than 25% of itsissued capital in any single company without board specialmajority consent

• Investment strategy: ONYX will seek to gain control overthe investee companies either through acquiring amajority/controlling stake or management agreement witheconomic interest or corporate governance enabling it toimplement its vision and strategy for each investment

Turnarounds/ Restructuring

ONYX - Structure

ONYX shall target growth capital and turnaround situations with an investment ticket range of EGP10 – 60 Million

44 |

Job Creation• The creation of jobs across the multiple sectors of focus, which are mostly

labor intensive in nature including but not limited to; manufacturing, agri-

business and education

Tax Payment• Generation of tax income to the government as a result of growing operations,

sales, profitability as well as salary payments, which is manifested in sales

tax, Corporate income tax, Individual income tax, etc

Foreign Currency

• Participation in foreign currency reserves accumulation as a result of the

expansion of the Incubated Partners export business; this is viewed in the

context that export potential is a key component of the “scalability“ criteria

for the selection of the Incubated Partners

SME Growth Contribution

• Incubated Partners are part of the SME’s space, which is a critical driver for

the economic growth of economic activity in the country, benchmarked by

other countries

Stock Exchange Development

• Given the ultimate goal of the incubation process - public offering of the

incubated partners – an ultimate outcome is the development of the stock

exchanges and its relevant infrastructure, expansion of its activities, growth in

invested capital which pours into more economic growth; particularly NILEX,

being the SME focused stock exchange

Throughout the incubation process, CP supports the economy through multiple areas

including

More importantly, Onyx serves its community in various ways and help stimulate economy in times of crisis

ONYX - Structure

45 |

Catalyst Partners has the capability to adjust ONYX structure and amend all required aspects to

turn ONYX into a ‘Shariah compliant’ product

46 |



Table of Contents


ONYX Structure4


47 |

The Catalysts

The Catalysts

Aly El-Tahry is Managing Partner and co-founder of Catalyst Partners, a financial advisory firm focusing on the Medium Size Enterprise space in

Egypt. Mr. El Tahry was co-founder of Delta Financial Investments, which was acquired by Arabiyya Lel Isthmaraat in 2012. Mr. El Tahry was also

co-founder of Hermes Financial and Beltone Financial Holding in 1993 and 2003, respectively; both now leading MENA investment banking

firms. Starting 1987, Mr. El Tahry served as Vice President of Kidder, Peabody and Co. out of their London Office and returned in 1990 to Egypt to

co-found Kidder,Peabody & Co.'s Representative Office in anticipation of Egypt’s capital market re-birth. Mr. El Tahry presently serves on the boards

of Martin Currie's Global Funds and MENA Capital's Hedge Fund. The October 1997 and September 1998 issues of Global Finance magazine named

Mr. El Tahry as one of the 'World’s 600 Most Powerful People in Finance’. Mr. El Tahry received his MBA from the Krannert Graduate School of

Management at Purdue University, West Lafayette, Indiana, USA, in 1987. In 1977 he earned B.Sc. degrees in Physics-Engineering from

Washington and Lee University, Lexington, Virginia and Mechanical Engineering from Rensselaer Polytechnic Institute, Troy, New York, USA,

respectively. He is a 6-handicap golfer and an Instrument Flight Rules rated pilot.

Abdelaziz Abdel Nabi is a co-founder and Director of Catalyst Partners, a financial advisory firm focusing on Medium Size Enterprises space in Egypt. Since

inception of Catalyst Partners, Mr. Abdel Nabi advised on a potential M&A transactions totaling EGP1.1 billion for Media and Packaging firms, raised equity of

EGP20 million through a structured special purpose vehicle ‘El Mozar3’ to finance Agricultural Incubated Partner, executed series of equity raise totaling EGP55

million through UK based financial institutions and GCC High Net Worth Individuals for FMCG Incubated Partner. Mr. Abdel Nabi, executed for incubated partners

EGP30 million debt restructure, raised debt of EUR2 million and lease of EGP5 million. Prior, Mr. Abdel Nabi co-founded Delta Investment Banking, a subsidiary

of Delta Financial Investments (DFI), which was acquired by Arabiyya Lel Isthmaraat in 2012. Mr. Abdel Nabi, advised on a potential ECM transactions totaling

EGP1 billion for Auto-motive, Real Estate, Electromechanical and FMCG firms. Prior joining DFI, Mr. Abdel Nabi worked in Beltone Financial Holding (BFH) in

Corporate Finance division were he lead a team overlooking BFH’s operations and investments in Europe and MENA region. In 2009, Mr. Abdel Nabi advised on

a potential EGP3.5 billion share swap agreement of publicly traded and private financial institutions with presence in Europe, US and MENA region. Prior joining

BFH, Mr. Abdel Nabi was an equity analyst at HC Securities covering chemicals, fertilizers as and building materials sectors. Mr. Abdel Nabi is currently on the

board of finance and banking committee in the Egyptian Junior Business Association (EJB). Mr. Abdel Nabi received a B.A. from the American University in Cairo

majoring finance; he also completed Beltone Academy Investment Course, and attended several advanced valuation and financial modeling courses.

48 | The Catalysts

The Catalysts

Mohamed Shoukry, is a Partner Leading the Enterprise Development of Catalyst Partners, a financial advisory firm focusing on Medium Size

Enterprises space in Egypt. Prior, Mr. Shoukry worked in Procter and Gamble (P&G) where he held different roles, across Management Consulting,

Financial Analysis and Internal Audit. In this context, Mr. Shoukry drove the re-designing of the International Trade processes with a view to

leverage scale and create and sustain a competitive advantage in the international supply chain. Mr. Shoukry, was a member in the internal audit

team checking on operations in Europe, the Middle East and Africa. Prior P&G, Mr. Shoukry was the Managing Director of Lucy Ginnery, a cotton

ginnery based in Ethiopia, where he re-structured and transformed the Company from dormant to fully functional profitable operation. Prior, Mr.

Shoukry worked as a Commodity Trader in North Delta Agriculture Co. – Egypt; whereby, Mr. Shoukry’s industry experience spans through multiple

areas including not limited to Manufacturing, Logistics, Distribution, Commodity Trading and Agriculture across Egypt, Sudan and Ethiopia. Mr.

Shoukry, holds MBA degree from the American University in Cairo (AUC) and is a certified Internal Auditor (CIA). Mr. Shoukry received a B.Sc. from

the faculty of Engineering, Cairo University majoring in Electric Power and Machines.

Ramy Osman is a Partner leading the Audit & Due-Diligence of Catalyst Partners, a financial advisory firm focusing on Medium Size Enterprises

space in Egypt. Mr. Osman was engaged in series of due-diligence and audit jobs for Catalyst Partners M&A transactions. Mr. Osman, finalized

due-diligence task for the purpose of an equity raise for Catalyst Partners Incubated Partners. Prior, Mr. Osman served as a Supervisor Senior in

KPMG Hazem Hassan. Throughout years in KPMG, Mr. Osman drove the audit & due-diligence engagements for a multitude of private companies,

family businesses and financial institutions. Mr. Osman, developed extensive functional experience in reviewing, and evaluating control systems, in

addition to, reviewing and auditing financial statements. Mr. Osman’s experience spans through multiple sectors including, Banks, Insurance,

Leasing, Mortgage, Investments, Brokerage, Mutual Funds, Manufacturing and Pharmaceutical. Prior to KPMG, Mr. Osman worked as a Section

Head at Prime Investments for Asset Management in the Operation Department; whereby he was responsible for supervising the appropriate

investment for cash surplus, management of cash required to settle the obligations, and issuance of the financial statements of mutual funds. Mr.

Osman is a Public Accountant R.A.A number 30 371 (Register of Accountants and Auditors – Ministry of finance). Mr. Osman is a candidate to

become a certified Internal Auditor (CIA). Mr. Osman holds a B.A. from Cairo University majoring Accounting.

.

49 |

The Catalysts

Tarek Effat is Business Development Director in Catalyst Partners, a financial advisory firm focusing on Medium Size Enterprises space in Egypt.

Mr. Effat is an active entrepreneur in the F&B business with two successful food chains. Prior taking the entrepreneurial path, Mr. Effat was the

Director of PR and Foreign Affairs in the Ministry of Investment (MoI); main responsibilities included setting and implementing the strategic plans for

the investment within the Egyptian Government, in addition to managing the private and public sector investments in Egypt. In 2012 & 2010, Mr.

Effat represented the MoI in The International Monetary Fund & World Bank annual meetings in Egypt. In 2010, Mr. Effat organized the COMESA

conference held in Sharm El Shiekh. Mr. Effat organized several Roadshows to UAE for private and public investors. Mr. Effat liaised all

communications with Ministry of Defense and Ministry of Interior. Mr. Effat served as a non-executive board member in several companies such as

Al Taamir Co. and Ashty Co. Mr. Effat in received his Bachelor of Police Science and law from the Police Academy; also completed Public Relation

and media skills courses.

CP Catalysts

Salma Elhady is an Associate in Catalyst Partners, a financial advisory firm focusing on Medium Size Enterprises space in Egypt. Ms. Hady was

engaged with Catalyst Partners founders since inception working on multiple transactions including M&A, equity raise, debt restructuring along with

the engagement on daily tasks related to Catalyst Partners’ Incubated Partners. Prior joining Catalyst Partners, Ms. Hady in Delta Financial

Investments (DFI) as a Senior Financial Analyst in the Investment Banking division and advised on various sell – side transactions across variety of

sectors including Retail Garment, FIG, Auto-motive, Electromechanical and Real estate. Prior joining DFI, Ms. Hady worked in Rasmala Investment

Bank as an Equity Research Analyst covering Telecoms and Petrochemicals sectors. Ms. Hady received her B.Sc. with honors in Finance and

Management Control from German University in Cairo (GUC), Faculty of Management Technology. Ms. Hady is a CFA level two candidate and

successfully completed the Credit (investments) course of Delta Rasmala. Ms. Hady joined Boss Bank Management Simulation and participated in

the PricewaterhouseCoopers audit simulation held at the GUC. Ms. Hady is currently a Msc. Sustainable Development student at the American

University in Cairo (AUC).

50 |

The Catalysts

Ahmed Yazid is an Associate in Catalyst Partners, a financial advisory firm focusing on Medium Size Enterprises space in Egypt. Mr. Yazid is

involved in the Enterprise Development Division working on business modelling, re-structuring and business plan development for Catalyst Partners'

Incubated Partners. Prior, Mr. Yazid worked in Akanar Partners as a Senior Analyst and participated in both buy and sell-side M&A and ECM

transactions, across a variety of sectors including Oil & Gas, FIG, Commodity Trading, F&B, Auto-motive, HORECA, Retail, Poultry, Transportation

and Logistics. Mr. Yazid advised on the sell side of a minority stake in FMCG firm to African growth capital fund with a total transaction value of

EGP120 million. Mr. Yazid received his BA with honors in Economics from Modern Sciences and Arts University, Egypt.

CP Catalysts

51 |

Annex 1

GV Case Study

52 |

Catalyst Partners (CP) developed its unique model which requires a set of criteria to be met by each potential incubated partners; Green Valley was the first company to satisfy this criteria

GV Case Study

• Catalyst Partners (CP) have seen in Green Valley a perfect opportunity to be its pilot incubated partner

• GV met all of CP criteria:• Scalable business

• Second line management

• Management business expertise

• Commitment to IPO

Why Green Valley?

• GVF: the processing arm of the group and isspecialized in producing processed peanutproducts. Established with the vision “to be theLargest Peanuts products manufacturer inthe Middle East”

• GVR: Considered one of the largest growersand exporters of peanut in the country. Startedgrowing peanuts in its owned land, andrecently changed their model topartnerships

• GVT: Focused on trading activities related toagricultural inputs including seeds, fertilizers,pesticides and Irrigation systems. The Companyis the sole distributor of Lindsy Pivotsystems in Egypt

Green Valley in a nutshell

2013

Capital Injection

2015e

Exit through IPO

Expected IRR: 45% -50%

53 |

Green Valley serves its community in various ways and stimulate the economy in time of crisis

Developmental

Economic

Social

• Job Creation: Employment of over 600 employees (Peak) in itsproduction facilities and partnership farms (historical)

• Tax payments: Different tax forms are paid to government as aresult of operations, sales, profitability and salary payments

• Foreign Currency: participates in foreign currency reservesaccumulation as a result of its export business

• Key Sectors Development: participates in developing one ofthe most important sectors for the Egyptian economy,agricultural sector, in terms of scale expansion, mechanization,etc

• Area Development: The company was a pioneer in thecultivation of peanuts (and previously potato) in virgin areas e.g.Owaynat, which is considered one of the up and coming agriareas in Egypt. Also, the manufacturing plant was able tocontribute to Salheya area; attracting employees andparticipating in fostering the economic activity in the area

• SME Growth Contribution: GV is part of the SME’s spectrum;which is a critical driver for the economic growth of the country,benchmarked by other countries

GV Case Study

54 |

A declining financial performance, inability to service debt, and illiquid situation was faced by our incubated partner

Green Valley History

• Green Valley is a peanuts based company working in cultivating, exporting and processing peanuts for decades. Over the years,Green Valley built a strong network of suppliers, traders and international clientele base. As the norm of family business, the Company was a ‘one – man show’ run solely by its owner and owned 100% by the family with no corporate governance measures considered all over the Company

• Green Valley for Reclamation and Agriculture (GVR) - it business is driven by volume not margins - cultivated area has reached up to 5,600 feddan during 2008, which witnessed a clear decline driven by cash squeeze due to the absence of the key principal and the lack of top line management to overtake during his unplanned absence

• The decline in the overall company performance was triggered by two main factors;

• Green Valley used short term facilities to finance long term investments, namely, 3000 acres in Wadi El Natroon and building apeanut processing facility, which put the company in a cash squeeze. Accordingly, the Company was not able to re-pay back itsdebt liabilities; and so, GV was listed by the Central Bank of Egypt as a non-performing borrower

• Eng. El Sammak, founder and the key principal of the company, faced major health problems which required his absence for 2years. At the time, Amr El Sammak, his son and the current CEO of Green Valley for Food Processing (GVF) was not involved inthe business. This triggered halt in operations, further losses and aggravated the cash squeeze situation

• The Company’s cash squeeze resulted in multiple issues including inability to finance the targeted size of cultivated lands or being forced to cultivate in lands which are either cheap or offers terms of payment but not highly productive

• The Company started full restructuring with the implementation of a new strategy through partnering with Catalyst Partners, as the Company targeted higher crop yield this year to start reversing the historical downward trend

GV Case Study

55 |

The company’s first line of business – peanuts manufacturing – was completely chained by multinationals with limited margins and limitations on export although the product was developed by Green Valley

• Green Valley developed a unique coated peanuts snackwhereby it was able to conclude a unique recipe providing atasteful snack that the Egyptian market perceived very well,in addition to designing and tailoring the machineryrequired, whereby a patent on the machinery is in place

• The packed coated peanuts created a new segment in thesnack industry in Egypt, being the pioneer with no currentcompetition, in which the company has the edge of know-how, required skills, machinery, control of value chain andmarket penetration

• The Company has its own R&D, that constantly developnew recipes and upgrade previous ones, as well as for newproducts that are based on peanuts

• The Company used to distribute the product one of thebiggest multinational companies worldwide who also ownedthe brand name

• Acting as a toll station for a tycoon in the snacks markethad its negative impact on GV as they suffered from verysqueezed margins and they had exclusivity contract whichconstraint any other activity related to their product even inmarkets outside Egypt

Blanched

Dark Roasted

GranulatedIn – shell

Salted

Roasted Peanuts

Coated Peanuts

Flavored Peanuts

Peanuts Manufacturing Business Line

Main Products

GV Case Study

56 |

Since the involvement of Catalyst Partners (CP) in its capacity as the exclusive ‘Turnaround Agent’ and shareholder, GV witnessed a drastic transformation both internally and externally

Achieved Transformation since CP engagement

Board Restructure including experts and independent directors

Hiring finance team along with

restructuring the finance department

Formulating strategy and vision

Along with the management, shifted the business model

Established inventory and warehousing

system

Established a Holding Company

Utilized all unused assets

Settlement of Debt and raising new debt

Enforcing corporate governance measures

Created Costing System

Vehicles leasing to expand the

distribution network

Creating new financing structures

Raised equity and diversified the

shareholder base

Hired new qualified auditor

18 months

GV Case Study

57 |

GVR was successfully transformed from a state of almost bankruptcy to be back on track with the ability to raise new debt financing its export business and maintain its international clientele base

• Largest retailer in Switzerland,and is comprised of multiplecooperatives across the regions

• One of the largest retailers inSwitzerland and has multiplecooperatives across manyjurisdictions

• Sanfurt serves the wholesale andthe processing industry withfirst-class dried fruits, edible nutsfrom all over the world

• Nutriset is a family-owned andoperated food manufacturingcompany with a 25 year historyof research and innovation tomake nutritional productsavailable for the benefit ofchildren

Clientele Base

• GVR suffered from severe cash squeeze threaten its whole business and its ability to meet the demand of its international clients

• Upon settlement of debts and old dues, in addition to the whole restructuring that took place; banks started to see the potential in this business

• Through the new innovative financing structure, GVR was able to develop partnerships for cultivation and source high quality peanuts with the required specs to meet the demand of the EU markets

• During the current export season (2013/2014) GVR was able to export 2,513 tons versus 1,242 tons last year

• The management team went for its roadshow for the coming export season during February 2014

GVR Overview

GV Case Study

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GVF management along with CP support launched its own coated peanuts brand “Krinko” during September 2013 which is currently exported to major markets in the region

Current export markets

Export markets under negotiation

Portfolio of products

GVF along with the support and guidance of CP was capable to launch its products and expand locally and regionally:

• Signed with foresight one of the leading marketing companies in Egypt

• Developed new recipes through its R&D department • Expand its distribution network in Egypt • Started exporting to major regional markets through

agreements with reputable distributors • Expanded its product mix

GV Case Study

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Catalyst Partners (CP) have seen a huge potential in Green Valley (GV) to act as its pilot company in the ‘incubation model’. Even though GV had great problems and challenges, CP was able through its unique structure to turn the Company into an institution placing it on the runway to ‘IPO’

Review GV Business Model

CP built the structure and strategy of GV

Restructure Financial Reporting and Legal

Structure

• Books Restructuring• New Legal Structure

Design New Operating Model

• Organization Structure & Staffing

• Key Processes & Authority matrix

• Management Reporting System

• Building Required Capabilities

Design New Corporate Governance

• Board & Supporting Committees structure

• Board & Supporting Committees Responsibilities

• Modus Operandi

32

1

4

Milestones achieved

by CP

Reached agreement with banks to settle existing debts

Raised equity of EGP 35 million

Developed a unique structure to finance the cultivation

Along with GV management, launched a packed coated peanuts snack

Full financial and operational restructuring. In addition to establishing corporate governance foundation

Raised equity of EGP 40 million

Liquidated assets of EGP15 million

Sourced lease of EGP million to finance vehicles for distribution

Raised STD of EUR2 million to finance GVR

GV Case Study

60 |

Green Valley Holding Company owns 99.88% of the existing operational companies as well as the newly established distribution companies

Green Valley for Food Processing (GVF)

Green Valley for Reclamation (GVR)

Green Valley Holding (GVH)

• 99.88% owned subsidiary of Green Valley Holding

• Handles the peanuts growing, peanuts screening, local and export distribution for Green Valley


• Handles the processing business , for local and export markets, with all inputs from cradle to grave

Green Valley Overseas

• 75% owned by GVF and 25% ‘identified key man’ New company established Handles the distribution and marketing for GVF snack food products, globally

Green Valley for Exports

• 75% owned by GVR and 25% ‘identified key man’ New company established Handles the export of GVR products, globally –initially EU

Green Valley for Food Processing (GVT)


• Handles the sales of the irrigation pivot systems and trading in agricultural input materials – a non strategic business line for GV

--- Under establishment

GV Case Study

61 |

GV is planned to pass through 3 main phases between 2013 – 2015e

GV Strategic Map

Time to Implement

Straighten Cash-flows

Finalize Restructure of Financials and Grow Top Line

Expand Partners and Products Portfolio

� Inject equity to the business to solve the cash flow problem

� Rebuild relationships with banks, restructure and expand facilities

� Maintain export relationships with key clients, despite being unable to expand business currently

� Expand coated processing capacity, and establish own brand

� Establish a marketing & distribution setup that aims at expanding global business, and Initiate marketing activities for processed products

� Initiate internal restructuring

� Implement internal restructuring

� Finalize liquidation of selected assets to finance additional increase in investments required

� Restructure bank debt to optimize the balance sheet of Green Valley

� Build supply from Sudan for supply of peanuts required for coated peanuts

� Launch own brand of coated peanuts

� Conclude new contracts for coated with carefully selected distributers in the region

� Expand peanuts partnerships to take the company to the next level

� Expand geographic coverage and client base for exports e.g. Italy

� Stabilize balance sheet structure

� Conduct expansions in processing capacity, to expand portfolio of customers and grow its regional brand

� Introduce new peanuts products, along with relevant capacities e.g. Low cost, sweat coated, peanut butter

� IPO

A

B

C

2012 - 2013 2013-2014 2014-2015

GV is currently in this phase

GV Case Study

Thank You

Tel.: +20 (0)2 3347 2173 E-mail: [email protected]: 31, Geziret El Arab Street

Mohandessin 12411, Giza, EgyptWebsite: www.catalystpartners-eg.com

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