Jan. 5, 2015


Romen Mathieu

Lebanon

Romen Mathieu

Chairman, Khoury Home

BIO

Romen Mathieu is the Co-Founder and has been Managing Partner of the EuroMena private equity funds, part of the Capital Trust Group since 2004, covering the MENA region. Mathieu is also a Board Member of the International Chamber of Commerce - Lebanon. He has more than 20 years of experience in corporate transactions and family-owned businesses, covering Europe and the MENA region. He was a Partner in Ernst & Young Corporate Finance and M&A in France. He began his career with Arthur Andersen, in its corporate restructuring and finance division in France. Mathieu holds two graduate degrees in Finance (DESS and Magistère) and a Master’s degree in Management from Sorbonne University.

What made you feel that Khoury Home was a unique investment opportunity?

Since 2005, I have established the EuroMena private equity funds targeting the Levant and North African countries. Since inception, the EuroMena's strategic objective has been to invest in companies with the potential to become leading regional groups. Our strategy proved to be very successful, as we have played an active role in transforming family-based companies into regional leaders. And our experience showed that international companies are, in general, more attracted to invest in companies with a diversified, regional presence. This has been instrumental in executing several successful exits. Investing in single-market companies is relatively less attractive to international players given the illiquidity of stock markets in the region. Furthermore, there are not many companies in Lebanon that are both regional players and also have the potential for high-ticket investment. In addition, our investment level is relatively high, in the range of $15 million to $20 million. Nevertheless, Khoury Home is one of them. It is a market leader with a track record since early 2000.

What has been the one most important message behind the Khoury Home takeover?

The main message behind the Khoury Home takeover was to prove our ability in preserving and creating shareholder value. Our fund management team is well equipped to fulfill executive roles when needed. This has made a tremendous difference for the company as it strengthened the management team significantly, and created a great corporate culture. Consequently, we have been experiencing strong financial performance since 2013.

What are the main points of the internal restructuring?

Khoury Home is by far the market leader, with an 18%-20% share in a very fragmented market. As a comparison, the second largest player in the market has less than half of our turnover. In general, it is easy to open one store to sell electronics in Lebanon. It remains relatively simple to own and manage two or three showrooms. However, it becomes much more complicated when opening more than five big showrooms. Today, any of our main competitors would reach five or six showrooms at most, but would not be able to grow further as they all lack the ability to become an institution. Originally, Khoury Home went from four to 13 showrooms very rapidly. During this period, EuroMena acquired a stake in the company and supported it in its transformation from a family business into an institution. We have been successful in optimizing the footprint from 13 showrooms to 10 showrooms, consolidating the MegaMart brand under the Khoury Home brand, introducing IT system optimization, and streamlining operational processes across all departments. In addition, we were efficient in managing the inventory, which helped us optimize our working capital needs. We are capable of planning early with all our suppliers due to the better understanding of the market's needs. Moreover, we have optimized our advertising spend while using more efficient channels.

Is this the model that you will follow when you start expanding regionally?

Definitely. Our experience during the past 18 months in restructuring the company has provided us with several best practices across all fronts. For example, providing superior customer experience along with operational excellence such as inventory optimization is now part of the company's DNA. This experience will make it easier to franchise and transform the company into a regional player. Additionally, we have a franchise plan and strong team to support our expansion plan. Also, we are registered with the Lebanese Franchising Association (LFA).

How would you evaluate your sales over the last year?

The consumer electronics market has been decreasing at a rate of 15% over the last two years. In 2013, our sales went down by 10% compared to 2012, impacted by the closure of some showrooms. However, sales are expected to increase again in 2014 as we are improving our conversion rate. In addition, the loss of sales is compensated for by an increase in gross margins, and a decrease in operating expenses.