COO Profile: Mid Europa’s Manish Mittal
Currently in his sixth year at Mid Europa Partners, the largest private equity investor in Central and Eastern Europe, Manish Mittal takes stock of his journey from CFO to COO in conversation with The Drawdown.“My role is very wide,” Mittal says. “I am involved in everything that is going on at the firm, ranging from investor relations to deal structuring. My main focus is to ensure that my team can support the deal teams effectively.” Mittal joined Mid Europa in 2012 as part of the succession plan for founder and then-managing partner Thierry Baudon. Baudon had taken on COO responsibilities following the departure of Mittal’s predecessor around 2009 – effectively acting as managing partner and COO.
Succession at the firm came into focus ahead of fundraising for its fourth fund, leading to Matthew Strassberg and Robert Knorr being tapped as co-managing partners. “I was part of the succession plan when I joined Mid Europa. We were about to launch fund four and part of the succession story was that it would be Thierry’s last fund who was then managing the back office,” Mittal recalls. “I now work very closely with the co-managing partners, Robert and Matthew, on managing the affairs of the firm.”
Because Baudon had been managing the mid-back office and operations on top of his managing partner responsibilities, the succession plan needed to include the appointment of a dedicated operational leader. Mittal was brought in as CFO, joining from technology growth investor Kennet Partners, and was promoted to COO in 2015.
His time at Mid Europa has been largely shaped by the evolving European regulatory landscape, which he helps the firm to navigate through a range of organisational initiatives.
In his work to ensure Mid Europa is in prime operational shape has meant tax regulation, including the OECD’s Base Erosion and Profit Shifting (Beps) framework, has been a large part of Mittal’s efforts. “There has been a whole host of new regulation. Beps is clearly one of those. However, as tax compliance has always been of paramount importance to Mid Europa, we believe we are fully compliant with the regulation,” he says.
From the firm’s base in London, Mittal oversees Mid Europa’s operations, which span the European continent, including locations in Warsaw, Istanbul and Budapest. Its funds manage or have managed investments in 14 Central and Eastern European countries, however, the firm only counts around 25 professionals.
Most of the finance function is managed centrally from London, though some of the local offices outsource accounting for basic book keeping; Mittal says the firm decided against in-sourcing IT after a recent review because its spread-out nature requires local support.
To manage compliance across such a diasporic organisation, Mittal’s goal has been to create a culture of compliance within Mid Europa, which is an FCA regulated firm. “Even though we’re UK regulated and have various offices across the region, each individual signs up to our compliance policy even if they’re not in the UK – so everyone has to abide by it. It’s one set of rules for every individual, regardless of where you’re located, so it’s very centralised in that sense,” he says. “We provide compliance training on an annual basis. There has been a whole raft of new legislation, regulation and guidance, not only on compliance, but on tax as well. We try to do as much as we can from a training perspective for the Mid Europa team, so they are all up to date with the latest developments.”
With the constant change in the private equity market, we are continuously having to adapt to a world where private equity seems to be caught in the crossfire, which is a sad thing.
In addition to third-party advisers, a member of Mittal’s team will also work alongside the deal professionals when they are executing transactions, to review structures and pass on best practices. On a day-to-day basis, Mittal also uses governance, risk and compliance consultant Cordium to support compliance monitoring.
Crossing the bridge
A more current consideration for Mittal is how the Mid Europa funds use capital call lines, as their proliferation has raised questions around the impact of not using them. Mittal says the firm is not using fund finance to the degree it is being deployed in the current market, instead only using it to bridge investment for short periods of time, when a fund has been unable to draw down capital in advance of closing a transaction. “We haven’t used fund financing for what we understand other GPs are doing, which is effectively drawing down once or twice a year and using the capital call facility to see them through that,” he says.
Attitudes towards fund credit lines are far from unanimous among Mid Europa’s LPs: some are encouraging the use of bridging facilities, while others are dismissive. For Mittal, a central concern is what the implications might be for performance comparisons. “More and more funds are doing it and clearly it has an impact on net performance. I think there can be an element of doing yourself a disservice by not using it, because when an LP looks at you, your performance may not look as good as those funds using capital call facilities.
Fundamentally, two different GPs could have an identical portfolio, but because one GP funded it through the use of fund finance, they end up with a better net IRR; and ultimately we will be compared to those other GPs who will show better net returns than us.”
For Mittal, one of the major projects he will be focusing on over the next 12 months is implementing a new data platform across the firm. “It’s something I wanted to do sooner, but realised it will take a lot of time and I don’t have the bandwidth to handle it simultaneously with other projects we are currently occupied with,” he says.
Mittal views this task as vital for maintaining the infrastructure at Mid Europa; to centralise and automate data capture, as well as manage the increasing bespoke LP requests: “We need to embrace the use of technology. This will not only allow us to do more analytics on the underlying data, but we can also use it to streamline our reporting process.”
Declining to name the provider, Mittal says he has settled on a platform to implement. The decision to postpone implementation until such time that sufficient resources could be allocated to the project was a result of reference calls Mittal made when he was evaluating potential platforms: “The feedback was that it was the right platform to have, but to not underestimate the implementation effort and period.”
The number of GPs and LPs using the system chosen by Mid Europa was an appealing factor in Mittal’s assessment of the right platform, but he found that leaning on his network for recommendations and references was influential to the selection process. “We didn’t ask six different providers to come in and pitch to us. Instead, we had conversations with our LPs and a couple of other GPs as well,” he says. “You filter the market through these calls and references, rather than going in completely blind, having everyone pitch to you. I think you should leverage what other people have learnt,” Mittal says.
Between speaking to his network and identifying the widely used data products in the market, the short list was narrowed down to a couple of contenders, and following further evaluation, Mittal made his final choice.
Looking beyond the new data platform, Mittal has plenty more on his plate, “I’ve found that I’m never in a state of rest. With the constant change in the private equity market, we are continuously having to adapt to a world where private equity seems to be caught in the crossfire, which is a sad thing.
“It’d be nice to sit back and think about how to be one step ahead, but in a way, once you finish one thing, there’s something else that’s banging on the door that you need to deal with.”