Slaven Kordić: Our plan is to have one hundred illusion museums worldwide in the next five years

The recent acquisition of the company Metamorfoza revealed to the wider public a rather unknown fact that the educational-entertainment concept of the Museum of Illusions managed to expand to a number of cities across four continents in just six years. What are the further plans of Invera Equity Partners, the private equity fund management company associated with this firm, and what innovations can we expect in the private equity fund industry, was revealed to us in an interview by Slaven Kordić, executive partner at IEP, who also announced two new acquisitions during the conversation.

You recently invested in the company Metamorfoza. How did that happen?

– We started talking with the owners of Metamorfoza even before the pandemic, at a time when we did not yet have a registered fund, but we had the idea that we would launch it. In the meantime, the founders of that company entered negotiations with another fund, but the investment did not materialize. We established the fund in the meantime, so we sat down with them again and started negotiating.

Why did you choose this company?

– There are several reasons for that. Metamorfoza, besides its company in Croatia, owns two subsidiaries in America and Hungary. The ‘Museum of Illusions’, a Croatian concept devised by the founders of Metamorfoza, has become a global story. It has now grown to 36 locations worldwide, generating more than 50 percent of its revenue in the American market. Additionally, the company’s financial indicators are very good. It has no debt and is highly profitable.

So, it expanded globally through franchising?

– Yes, Metamorfoza expanded through franchising because such a concept is the least capital-intensive. This has proven to be a very good decision as it has expanded extremely quickly since 2015. We will slightly modify that business model – we will maintain growth through franchising, but we would also like to open our own museums in top locations simultaneously. For the next year, we already have nine signed franchises. Our plan is to have 100 museums in five years. It is currently unrealistic to predict what the ratio will be between franchise and owned museums, but we believe we will have at least a dozen, if not more, of our own. We are very excited about that. Twelve or thirteen years ago, I worked as an advisor to our entrepreneurs whose companies were acquiring various foreign companies. And today we are witnessing Croatian companies, such as Infobip, Rimac, and Metamorfoza, expanding into foreign markets.

Wasn’t COVID-19 a setback for you? The entertainment industry segment is among the biggest losers during the crisis…

– The biggest risk of this project is COVID-19. The concept was proven even before it. It has been shown that people love to visit such museums. The only potential problem is another lockdown. Although COVID-19 hit Metamorfoza and its revenue fell by about 50 percent, it, like its franchisees, managed to remain profitable.

So, it is quite a profitable business if it can survive such a decline…

– That is one of the reasons why we invested in that company. Additionally, we love the concept. We think it is well-designed as well as a way for further growth. Of course, we also recognized the founders and employees as potential partners with whom we will further develop the company.

On the other hand, such an idea as the ‘Museum of Illusions’ is relatively easy to copy?

– Such a concept is, of course, difficult to protect, and with minor modifications, someone can certainly copy it. The best way to defend against competition is to be the first in the market. And that is precisely what the franchising concept has enabled Metamorfoza – to expand and take the first position. In that segment of ‘illusions’, it is currently the largest. Such a concept belongs to the so-called mid-way segment of the entertainment market. It is a form of entertainment, an attraction, where people spend an average of up to two hours. In that category are ‘Madame Tussauds’, ‘Chocolate Museum’, ‘Museum of Broken Relationships’, etc. The mentioned segment grew significantly before COVID-19, and the largest players in the world, such as Lego, which, together with Blackstone, owns Merlin Entertainment, which operates attractions like ‘London Eye’ and ‘Madame Tussauds’, ‘London Dungeon’, etc., have entered it. They are significantly developing this segment and see the greatest growth potential in it. When we first spoke with the owners of Metamorfoza, they had only 15 museums. By the end of this year, there will be about 40. They recently opened a museum in Milan, and soon one will open in Tel Aviv, Philadelphia, Budapest…

Can you explain, using the example of Metamorfoza, what you bring to that company that it could not achieve on its own? Let’s demystify the role of private equity funds; what do such funds bring to entrepreneurs?

– When we talk about this, we should also understand the motivation of the entrepreneurs. Some time ago, I held a lecture in which I spoke about five transactions we made that year. None of them were the same. Examples include Infobip, which was recapitalized and will likely go for an IPO, and Nanobit, which was sold to a strategic partner. The structures of these transactions are different. So, much depends on the desires and motivations of the owners. The founders of Metamorfoza clearly expressed their wishes. First, they have no problem selling a majority stake, but they also said they believe in their concept and do not want to sell 100 percent of the company. We found ourselves at a level of 65 – 35. They thus retain a smaller stake in the company because they believe we will achieve growth. It was very important for them to receive a new impetus in the context of a cash injection that will be used for expansion. That is why we recapitalized the company with three million euros. They also stated that they are willing to work in the company for some time and transfer their knowledge, but that they would eventually move to advisory positions.

You can read the entire interview in the printed and digital edition of Lider.