Managerial consulting as a determining factor in the implementation of investment projects at KIVO LLC Kosovo
Consulting services in investment projects is a specific area of managerial consulting. The key characteristic for the provision of consultancy services in these cases lies in fact that it is based on a long-term relationship with the client, in which mutual trust and mutual transparency is a prerequisite for successful intervention and successful task completion. The consultancy process begins by generally understanding the investment goals, key market and project specific risks, targeted return on investment and envisaged timelines for the project. Engagements typically begin with an intensive engagement, where in-depth analysis of the market, technologies and intended products and positioning are considered, which all serve as a basis for conducting the feasibility study for the planned investment. Consequently, based on this work, the relevant advisory is provided, and the client makes a principled go- or no-go decision. However, in investment projects, this is just the beginning of the consultancy service and not the end of it. Depending on the approach selected by the client, the need for financing or in addition strategic partners, the advisory process continues dealing with issues such as site selection, technological solutions, purchase negotiations and of course financial or strategic partnership structuring. Once all the elements are in place, then investment banking activities begin, with the consultant being one of the vital actors in the discussions and negotiations with potential financing sources to make the project happen. This is also typically a very intensive engagement starting with initial discussions, expressions of intent and culminating with support in the due diligence process and financing term discussions culminating in financing contracts. Depending on the case, the consultant is also required to stay on in a lighter mode and monitor the actual investments and post investment advisory for a period of time. In some cases, in fact this evolves into a strategic advisory partnership that continues in the long-term relationship supporting the client as project goals change and market opportunities develop.
In Kosovo, there are not many consulting companies that have sufficient capacity to provide specialized investment advisory services. However, one of them is undoubtedly RECURA, which in the last ten years of operations has successfully supported its clients in generating more than €180 Million of direct investments. RECURA is a consulting firm focused on providing advisory services in the areas of corporate finance, business, management and investment banking. Its team consists of Kosovan experts who are UK and US-trained and couple this with extensive local and international experience. The team offers tailored consultancy based on relevant experience and in-depth knowledge of relevant industries and knowledge of the local market circumstances. With over 350 projects implemented since its establishment in 2010, RECURA has emerged as a benchmark of consultancy in Kosovo for both the private and public sector.
It is precisely RECURA that for over eight years has been advising the entrepreneur and owner of VM3, Mr. Visar Ramajli on one of the most successful recent investments in Kosovo. KIVO is a joint venture between Dutch partners KIVO Verpakkingen and Kosovan company VM3, who have over this period invested more than €15 Million in one of the most modern production facilities based in the town of Kacanik, Kosovo, where in a production area of over 7,000 sqm they employ over 150 employees in one of the most impoverished parts of Kosovo.
It all started when VM3 set out to diversify its current business activities and grow from their existing digital printing and design activities into industrial scale production of packaging materials. In this context, the consulting company RECURA was approached to analyse these business expansion opportunities in the field of offset printing and flexible printing and packaging with the initial idea of targeting the local and regional markets. In this process, they selected Recura as their consultancy partner in a process that started off with the provision of consultancy services to VM3 and gradually evolved into a long term strategic cooperation with Recura continuing to provide services to both VM3 and KIVO Verpakkingen in their joint venture KIVO LLC Kosovo.
The initial consultancy services included conduction a regional market analysis of the demand and supply of paper and plastic based packaging materials and consequently two separate feasibility studies for each of the product categories, paper based off-set print packaging and flexible based plastic printed packaging. As it turned out, the off-set printing paper packaging showed less of a potential and was deemed not feasible for VM3 due to the size of the required investment, competition and market trends and was ultimately considered too risky and not advisable to pursue. On the other hand, the flexible printing showed very good results, with a bigger market potential, less competition and more manageable modular solutions to the technology and was deemed as feasible and interesting to pursue. This then led to the development of a detailed business plan for the flexible printing project and a more detailed search on possible technological solutions and potential strategic partners / investors for the project. The search for a potential partner took over 18 months and meetings with many potential firms, mainly based in Western Europe. One of these meetings proved to be decisive, in that the hosts KIVO Verpakkingen were sufficiently impressed with what Visar Ramajli from VM3 Kosovo presented in terms of the business case, and it seemed that this coincided with their expansion plans at the time resulting in them expressing interest in further exploring of the partnership possibilities. This led to a process of over more than a year of discussions, visits to Kosovo and the Netherlands, during which Recura was tasked to revise the business plan and analyse the different scenarios and possibilities in terms of capacities, products and production costs. This proved crucial in enticing KIVO to seriously consider the opportunity and resulted in a principled joint venture agreement being signed in February of 2014. The challenge then turned to investment banking and structuring the financing required for the agreed investment. Over a period of six months, various investment sources and structures were explored and ultimately the structure for the initial investment of over €5 Million included a combination of equity, bank debt, vendor financing structured through an operational lease of machinery facilitated by a SPV created in the Netherlands and a Dutch Government support grant. With a year of the JV agreement, the actual production facility, machinery and trained staff were in place and KIVO LLC Kosovo started its production.
The joint venture was a key factor of success for the project as the Dutch Partner KIVO Verpakkingen provided part of the financing, transfer of technological know-how and training and most importantly access to EU markets, enabling the joint venture to actually start production with over 70% of its production capacity already contracted to large European clients. KIVO Kosovo underwent a continual growth process since then, in the meantime tripling its production capacities, size of the facility and investing over €15 Million in Kosovo by now, exporting over €12 Million to EU markets.
The case of cooperation between RECURA and KIVO is an outstanding example of a well-defined goal, flexibility in planning and professional advisory service provision. In principle, the consultant does not necessarily have more knowledge about the specific business or sector than the client does. However, in practice, a consultant has greater and more diverse experience in processes, provides the technical capacity and an independent opinion on the possibilities with no emotions. In a joint venture, a consultant is also a third party and enjoys the trust of both potential partners, thus playing the role of a facilitator and enabler in the whole process. In this context, RECURA has gained an unusually comprehensive perspective in analysing problems and dealing with issues and challenges.
The KIVO case serves as both an inspiration for RECURA's staff and as one of the most prominent references representing the tangible nature and results of the consultancy provided by RECURA. RECURA's company and team philosophy is growing together with growing clients’. RECURA consultants do not present magical solutions where none exist, instead they work and learn alongside the client to analyse and develop solutions that address client needs.
Intervention from external consultants can sometimes be considered as costly and as such is seen as an obstacle for creating consulting experiences with the consultant community. Consulting is essentially a physically intangible product whose effects are long lasting and sometimes not easily measurable. Therefore, this makes many entrepreneurs sceptical about hiring external consultants to solve company's internal problems. To this end, many donor programs (EBRD, EYE, KOSME) are geared to eliminate this obstacle by covering some of the consulting costs and facilitating the consulting process.
The growth and development of enterprises in Kosovo (albeit in very small numbers) necessitates the involvement of external consultants, as the capacity to address growth issues is often not found within the enterprise. Moreover, the transformation of family-owned businesses into genuine corporations where ownership and management are separated also raises the need for specialized consultants. Consequently, the growth and development of businesses in Kosovo will result in an increased demand for consulting services. The key to unlocking positive results and successfully fulfilling goals is through a combination of professional advisory, bilateral commitment and entrepreneurial ability to identify new business opportunities