Lets focus on PE within continental Europe. We know that in continental Europe the issue of minority investment is absolutely fundamental, as well as the focus on growth capital. That means at the end of the day, the entrepreneur and the PEI has to stay together in the same company. Fabio, what are the key suggestions, in your experience, for an entrepreneur to live together with a PEI? That's a very important point for European PE because the chemistry and the personal relationship is absolutely fundamental for the success of a transaction. It's the most important element, more than anything else, because you always have problems to solve and if there is not a mutual respect, consideration, and good chemistry between the PEI and entrepreneur at a personal level, it may be a huge problem. What are the key tips and suggestions after more than 25 years of experience of doing those transaction in Europe? First of all, let me say, the basic decision of an entrepreneur, decide to open to PE, he may really understand that he is looking for a partner. He is not going to the bank just to have finance, he's just selecting a partner, it's like a marriage. It's very important that he starts with this kind approach and mentality. He should be open. He should be ready to share decisions with a partner, to be very clear about what the problems are. Also on a personal basis, financial basis, and company basis, he has to select the right partner because not all PE players are the same. According to the dimensions of the company. To the characteristics of the sector. To the characteristics of the shareholding structure. You have different players here, that may or may not fit with your needs. Maybe with the help of some advisor, if there is no know-how at the entrepreneurial level, but he really has to select who is the best partner for his specific needs, which can be different. Then, it’s very important to also identify the person that we follow. As I said before, the chemistry is so important, that the entrepreneur must know who will be on the board, and who will be his counterpart for the future, Because in some cases you may negotiate with someone, and then you have someone else following the deal. That doesn't work at all. I strongly suggest with entrepreneurs, ask who will be the person I have to deal with of the next three, four, five, six, years: The person, the name of the person. Then, obviously, another important point is to understand what is the decision making process of your partner. You may have a local partner staying in your own country, you may have international investors. Again, it’s always a different story. Sometimes it's better to have a smaller partner that is local, that can make a decision at home on a Sunday. In other cases it important or maybe better to have larger international investors, that obviously have a different decision making process. Sometimes they are partially based outside of the country where the company is based, also in this case, to understand what the decision making process of your partner is important. It’s also important to understand what the business model is. Not again all PEIs are the same. Some PEIs are more inclined to IPOs or certain kind of exits, others are more inclined to trade sales. Or maybe you need a wide international exposure in some cases it’s important in some cases less so. These are some suggestions for knowing your partner and first of all, understanding that he’s a partner not only someone providing money. Fabio, in the concept of management and ownership sometimes there is an overlap in the mind of the entrepreneur or in the company itself. How do you think it's possible to solve this interaction, this puzzle between management and ownership? You said correctly “possible.” It's not only, I mean, you'll restart. That's another fundamental point especially for southern Europe but, let me say, for Europe overall. Normally when you open your shareholding to PEIs, you have to accept the concept that company needs to be managed by managers. There are the shareholders and there are the managers. If you are not ready as an entrepreneur to clearly define your role and differentiate the role of management and entrepreneurship, it’s a problem. Normally, when a PEI comes, one of the longest discussions is obviously, we are alright, but we need a new CEO which is not a member of the family. Normally he or she is taken from outside. That's the first decision. Maybe the entrepreneur say yes, but then, the day after he starts causing problems. Sometimes there's a kind of competition between the entrepreneur and the management. The entrepreneur has difficulties in delegating and that is a problem. So the suggestion is first for the entrepreneur to understand that if you open your shareholding, if you want PE partners, you have to accept the rule of differentiating the role of shareholding and management. Second, you have to delegate to management the decision making power, obviously keeping it under control, but, you have to accept to delegate management. What is the solution to this? First of all, discuss that from the beginning. Be very clear, the PEI should be very clear on that. If you're not ready to accept that, at least I've got to know first, and maybe as has been in many cases in our experience, it may be one of the reasons of not making an investment. If the entrepreneur does not accept, and you think that the company needs an independent management team, or more structured management team, and the entrepreneur is not ready to accept that, you may not make the investment. But it should be very clear, immediately from the beginning. Another obvious solution is to, as we do many times, put in writing, exactly, the mandate we will give to the management with the powers. Normally the entrepreneur stays as a chairman of the company, 90% of the case. What kind of powers does the chairman have, the board, and what kind of powers are delegated to the management? You negotiate that before entering. So once you are there, it's already defined and clear. You said before that PE did sound like a marriage with, there's a PEI, there’s a company on the other end, the IPO could be very big desire. How is possible in your opinion to regulate in a certain sense the marriage if the common desire is to have a successful IPO? Normally what we call pre-IPO deals. So, I mean a situation where the PEI take a minority position, stay for a certain number of years, two, three, four years, then helps the company to be listed is the ideal situation because you have an exit for the PEI which is a minority position and in the meantime you are aligned in a final objective, so it's ideal. Obviously, you are to regulate that straight from the beginning of the deal. Before closing the deal, normally, on a contractual basis, you have terms and conditions which are regulating all the different way out options including an IPO. Technically what you do is put, in the investment contract, first of all, a commitment that all the shareholders make in order to make everything at best, in order to be listed in a certain period of time, let's stay three, four, five years. It is clear that investment is done with a view of an IPO. Why is that important? Because throughout the life of the investment you have a lot of decisions to make which are strictly linked to the IPO process so you have to start from the beginning. Then you have to define when the IPO will be done before entering, who is selling, who is not, because when you do an IPO, then you start having a discussion about is a capital increase, is a sell of shares? Who's selling shares, who is not? In order not to be misaligned at the moment of the IPO, is much better to find out as much as possible in the beginning. In our experience, we have a rule that from the first preapproval we have done with Natuzzi in New York in 93 or the first one are the leaders in pre-IPOs and we have the same rule. When there's an IPO we sell at two thirds of our shares on the day of the IPO and one third after one year. The entrepreneurs and market know straight from the beginning what the conditions are. You cannot negotiate the time by time, you say that from the beginning and that is the best way not to enter into strained discussion for the IPO, but I think that preIPOs are probably the best way to do minority investment. Because, I repeat, it’s providing an alignment of interest first. A way out which is not penalizing the investment, nor the company in any manner, but is only helping the company through another step of development after the IPO. But my suggestion going back to the suggestion of entrepreneurs to regulate in detail, before entering what are the term of condition of the future possible IPO. Thank you very much. Thank you very Fabio. Thank you to you Stefano.
