Earlier this year, the start-up scene in Croatia picked up speed with the Rimac Automobili – Bugatti deal. The burgeoning Croatian manufacturer, which focuses on constructing electric hypercars, struck a deal with global automotive giant Bugatti, a subsidiary of Volkswagen, to form a joint venture for the production of next-generation supercars.
The newly formed Bugatti Rimac company will be focusing on the development of both Bugatti and Rimac next-generation vehicles by intertwining their expertise and resources. Over 400 direct employees will hit the ground running at the end of 2021. Some 300 of them will be working at the new Bugatti Rimac headquarters, located within the EUR 200 million Rimac Campus in Zagreb, and the rest at the Bugatti headquarters in Molsheim, France. The production of their respective brand cars will keep to their headquarters – Bugatti in France and Rimac in Croatia.
The deal itself was not a simple acquisition of Rimac by Bugatti. The Rimac Group, of which 37% is owned by Mate Rimac, the CEO and Founder of Rimac Automobili, 24% is owned by Porsche, with 12% owned by the Hyundai Motor Group and 27% by various other investors, is set to operate as the umbrella company for the endeavor’s two important subsidiaries: the aforementioned newly established Bugatti Rimac, of which 55% is owned by the Rimac Group and 45% by Porsche; and Rimac Technology, a full subsidiary of the Rimac Group. This means that Rimac Technology will continue as an independent operation, working on EV powertrains, batteries, components, and the like.
We spoke with the law firms that worked with Rimac and Bugatti, covering the deal in Croatia as the focal point of the entire transaction.
CMS by Bugatti’s Side
The French supercar maker Bugatti was represented on the deal by CMS, with Zagreb-based Partner Marija Zrno-Prosic advising on the ground.
CEELM: Congratulations on the deal! Tell us, how did it come to be, on your end? How did you get the mandate?
Zrno-Prosic: This mandate is a continuation of a long-term relationship between CMS and Porsche and Volkswagen. Locally, we have been advising Porsche in their M&A deals for several years now, including their investments in Rimac Automobili and establishing Porsche Digital Croatia, as a joint venture between Porsche’s digital arm and the founders of the Croatian tech company Infinum. Both Porsche and Volkswagen are clients of CMS in various jurisdictions, including Germany as a central point of coordination for this transaction.
CEELM: How was Rimac Automobili chosen for this cooperation?
Zrno- Prosic: Porsche’s investments in Rimac Automobili and the Bugatti-Rimac joint venture are two separate transactions. Positive results of the cooperation at the Porsche-Rimac Automobili level probably helped identify further cooperation possibilities at the Volkswagen-Rimac Automobili level as well.
CEELM: How was the deal structured? What’s next for the newly established venture?
Zrno- Prosic: There are various aspects of this deal, which makes the transaction structure quite complex, but in essence, following the incorporation of a new company, the hypercar parts of Rimac’s and Bugatti’s businesses will be transferred to it. Considering the fast-moving character of this industry, it is expected that the synergy effects of this business combination will show rather soon.
CEELM: What were the challenges that you faced while working on this transaction?
Zrno- Prosic: Considering that this transaction concerns several jurisdictions such as Croatia, Germany, France, and Luxembourg, combining the particularities of each legal system into one deal was quite challenging. However, all of this was successfully handled in the end thanks to the continuous support and efforts of all parties involved.
CEELM: What does Bugatti mean for the Croatian economy? How will its presence impact the overall economy of the country, especially in the technology and automotive sectors?
Zrno- Prosic: This transaction means a lot for our economy, not only as an important new investment in general but also because we are talking about an investment in the technology and automotive sectors. This places Croatia, a small country not usually considered as a target for such investments, on the radar of other potential investors – which is also encouraging for other sectors.
The same applies to the start-up scene in the country. After the great success of the first Croatian unicorn (Infobip), this venture is considered the second biggest success story. There are others as well, such as the aforementioned joint venture of Porsche and Infinum, the Swedish gaming giant acquisition of Nanobit, the continuing investments of various investors into Gideon Brothers, and the like. All of these tell of foreign investors’ increasing interest in Croatian start-ups, but also show that there is a growing number of businesses in Croatia that have the potential to go global and become much more than just a national success story.
CEELM: You seem to be a big believer in a snowball effect when it comes to investments.
Zrno- Prosic: Yes, I find it interesting how some local investments lead to other success stories. A good example is the Porsche Digital Croatia joint venture. The founders of Infinum themselves have often said that it was the original cooperation between Rimac Automobili and Porsche that lead to their introduction to and business cooperation with Porsche. This shows how one success story can broaden the interest in a local market, in general, and create new business opportunities and, ultimately, new success stories.
Rimac Automobili Advised by Kunstek, Halle & Simac
Zagreb-based Kunstek, Halle & Simac Managing Partner Gordon Kunstek led the team advising Rimac Automobili on the deal.
CEELM: Congratulations on the deal to you as well! It must have been quite challenging. How did your firm come to work on it?
Kunstek: Kunstek, Halle & Simac has been the legal advisor to Rimac Automobili almost since its very inception so, naturally, our law firm has been representing Rimac Automobili in all of their deals, including those with the Camel Group, Porsche, Hyundai Motor Company, Kia Corporation, and Neurone. Seeing as how we have been advising Rimac Automobili for a very long time and that we as a firm have grown with them, it was logical for us to work with them on this historical deal. It is also worth saying that working with us through the entire transaction, given its complexity, were international law firms with which we had an amazing cooperation and that we continue to work with and encounter in other transactions, both in Croatia and abroad.
We are very glad and are very proud to have been given an opportunity to follow Rimac Automobili through all their development stages – all the way up, from a start-up. Their journey has been, without any false modesty, comparable to those of globally leading companies in the all-electric vehicles sector.
CEELM: What were some of the challenges you faced while working on the transaction itself?
Kunstek: As you can imagine the transaction was, from a legal, tax, financial, and operational aspect an extremely layered, complex, and challenging one. Thanks to the dedication, quality, knowledge, and faith in the deal of all of those involved, all challenges were successfully overcome. This is, for sure, the most complex, challenging, and time-consuming transaction that we have been engaged in. It seemed, countless times, that there is no end in sight and that we would be unable to honor the set deadlines. Honestly, I believe that we were not the only ones who thought, on multiple occasions, that the battle with time will be lost. Precisely for that reason, it was a huge challenge to synchronize and drive the advisors, from different sectors and different countries, that were necessary for this transaction to succeed.
The result is a clear benefit for both parties involved but reaching said result required the harmonization of a whole string of different business models and accounting practices, which was very demanding work requiring quality support on multiple fronts. Just to make it even more complicated, at the same time, a Porsche investment was ongoing that we too were advising on. This presented a challenge in and of itself and has definitely reduced the number of times we have had a full night’s sleep.
CEELM: How did the two parties cooperate? Was it smooth all the way?
Kunstek: The parties had a very professional and high-quality cooperation, at all times, and major efforts have been made for it to be that way – from all sides of the transaction. There were hurdles, of course. There were instances where it seemed we would be overwhelmed, while new matters kept popping up. We persevered.
CEELM: From your perspective, what does Bugatti mean for the Croatian economy?
Kunstek: This transaction means a lot for the Croatian start-up scene, Croatian economy, but also for the perception of Croatia in general. The transaction tears down a lot of prejudices about Croatia, as a country with a poor investment climate and a country that young people are fleeing from. What Mate Rimac wanted to show, and what I think he thoroughly managed to, was that Croatian talent is fully capable of creating a first-rate product – remarkable enough to attract foreign talent and reliable enough to attract foreign capital – on its own merits and in its own country. To be clear, we could have easily structured this transaction in many other countries. But we did not.
Internationally recognized investors considered that their investment was optimally structured in precisely this way, in Croatia. This is good news for the current and future generations of Rimac Automobili employees – they will push the company into its next developmental stage, via the synergy of domestic and foreign talent. This also serves as an open call for other foreign investors to confidently invest in local talent, locally. These deals prove that we are going in the right direction. Croatia can be a talent hub!
Open-ended Outlook – With Positive Notes
Given the size and the scope of this deal, it is without question that – whatever the future holds for Rimac Automobili – there is great promise, and not that far off. Creating over 300 new tech jobs in the heart of hitherto tourism-sector-first Croatia, Rimac Automobili could open doors to vast new opportunities and potential directions for growth.
“This is a truly exciting moment in the short, yet rapidly expanding history of Rimac Automobili,” Mate Rimac said in a press statement. “We have gone through so much in such a short span of time, but this new venture takes things to a completely new level. Rimac and Bugatti are a perfect match in terms of what we each bring to the table.”
However, the 33-year-old Rimac Automobili CEO thinks further ahead. “We are thinking longer term and Bugatti has a lot of diversity in its heritage that can be used to make products that are not only hypercars,” he says. “Therefore, there is the opportunity to make exciting, different cars that are both strongly electrified and fully electric.”
At least one thing is certain: with Rimac’s ten years of market experience and Bugatti’s 110, the automotive industry in Croatia is set to pick up speed.
This Article was originally published in Issue 8.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
