For two years Concorde Capital investment company has been looking for a buyer for the Dobrobut clinic network. In the end, I decided to buy a promising business myself.
In August 2014, Concorde Capital together with Oleg Kalashnikov, co-owner of the Luxoptica chain of stores, bought 80% of Dobrobut from Demchak. The new owners have approximately equal shares in the network, the previous owner has 20% left. According to the president of the Boris Clinic Mikhail Radutsky, the fair price of Dobrobut is $ 16–18 million. Demchak considers this estimate adequate, but does not specify the cost of sale. Despite the fact that in peacetime, a network of clinics was given $ 25–30 million, the seller is satisfied with the deal. “Today the value of living money in Ukraine is much more than a year or two ago,” Demchak argues. “With $ 1, you can buy what was previously sold before the crisis for $ 2–2.5.” Radutsky believes that Concorde has acquired an excellent asset – a company with a well-developed network and streamlined business processes. The company’s network consists of seven medical institutions in Kiev and one in Donetsk, providing a wide range of services: outpatient services, in-patient care, emergency care for adults and children. The clinics provide monthly assistance to an average of 20,000 patients.
What prompted the investment mediator to master medicine?
The history of the Dobrobut clinic began in 2001, when Demchak decided to create a medical center in Kiev on the basis of an insurance company. “It seemed to me that it was profitable, since insurance clients would be served in an affiliated clinic,” he recalls.
But a year later it became clear that businesses should develop independently. Initially, Demchak, being a financier in spirit, did not pay enough attention to the new direction. But in 2006, against the background of the growth of the private medicine market, the Dobrobut network began to show a profit. Revenue increased annually by 20–25%. At the end of 2013, the income of CJSC “Medical Center“ Dobrobut ”amounted to 98.31 million hryvnia.
In the summer of 2012, Demchak hired Concorde Capital as a consultant to attract investments.
The plans of “Dobrobut” were to expand the business – and construction of a new building with an area of 9000 square meters began in Kiev. m
For these purposes, $ 20 million was required. “Dobrobut” had clear requirements and a good business plan. Therefore, we embarked on the project, ”explains Igor Mazepa, general director of Concorde Capital.
In preparation for attracting foreign investors, Concorde organized a thorough network check – auditors from a specialized Austrian company evaluated the level of medical equipment, specialists and methods of treatment, and attitudes towards customers. Their findings satisfied the Concorde.
After the audit, the consultants sent a proposal to everyone who, hypothetically, could be interested in the deal. Among the first to respond to the proposal were the funds Advent International, Russia Partners, Blackstone.
The co-investors Concorde attracted Kalashnikov, who owns shares in the network “Luxoptika.” The investment company is called a longtime friend. The businessman himself says that Mazepa personally invited him to participate in the deal. The proposal seemed so tempting to Kalashnikov that he agreed after a couple of weeks of discussion and did not even conduct the Dobrobut audit – relied on the investment bankers’ conclusions.
The price of the parties agreed fairly quickly. The investment company did not include in the transaction structure a construction project (the one for which Demchak was looking for $ 20 million at the time). “We are not very confident in this project, we believe that several errors were made during its design, and its location also raises questions,” says Ivaniuk.
But even the lower seller price suited. Differences have arisen over the distribution of risks and responsibilities. Demchak wanted to maintain his influence on the clinic and not to allow his share to be blurred. In Concorde, skeletons in the closet were afraid of the demolition of a part of Demchak’s business. “At the stage of the formation of the agreement, we had 15-20 meetings,” Demchak says. “Some negotiations lasted longer than a whole working day.”
The agreement was signed in February 2014. Having initially bought 40% of the clinic, Concorde and Kalashnikov had to increase their share quarterly throughout the year. But at the next tranche, on August 1, they decided to speed up the process. “It was more profitable for us to close the deal ahead of time. In this case, we get operational control over the company and can start the phase of its active development earlier, as well as improve its operational efficiency, ”explains Ivanyuk.
For the Mazepa company, the investment in Dobrobut is a long-term one. According to Ivanyuk, the stake in the Concorde network is not going to be sold in the next few years, although it will not refuse to consider interesting proposals.
Demchak has already spent part of the money from the sale on payments to large depositors of the burnt Erde Bank. This decision, he explained his personal position. Despite failures in the financial markets, the businessman intends to continue to work for them: he is eyeing the undervalued banks and insurance companies.