You are reviewing a company based in Egypt , The company is the largest distributor of industrial chemicals with an 80% market share. The turnover in 2014 was US$ 2.6 million with a 19% EBITDA margin and 13% net margin. The business owners seeking US$ 2.2 million to be invested towards increasing capacity. They are not willing to be diluted beyond 48% shareholding in the business.
You have found the articles attached on the internet to help you with your quick analysis of the business. You believe that the company has a strong cash generation capacity but part of the challenge you have is that repatriation of profits from Egypt is a huge concern for investors because the government of Egypt has very strict policy regarding dollars leaving the country.
The business is currently registered as a partnership in Egypt between the two principals, investing in the partnership as the fund would result in a disadvantageous tax structure for the LPs. Egypt has a 10% capital gains tax which will dumpen your IRR at exit. It seems likely that one of the principals (the technical person) is likely to exit the business post investment, you’re not sure how core his role is in context of the business at this stage.
A draft analysis for the team (not exceeding 1 page on a word document), making sure you cover the following issues:
1) Preliminary valuation of the business and your view on the pricing
2) Your view of the challenges faced on repatriation of profits
3) Optimal tax structure for the investment
4) Your proposed solution to prevent the existing principal from leaving
The report should not exceed 4 pages

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