Darby's Investment in Sirma: Professionalizing an Entrepreneurial Firm

In March 2010, Burak Dalg n (HBS MBA 2004) led private equity firm Darby's investment in S rma, a local Turkish water and beverage company. S rma was owned and managed by members of two Turkish business families. The existing management, while being highly entrepreneurial, had paid less attention to managing the company in a professional manner, leading to a highly leveraged balance sheet and a significant need for financing. After the investment, S rma introduced new products, opened a new factory, and built up its financial reporting system from scratch. Two years after Darby's investment, S rma's operational performance had improved. However, the company was still suffering from significant financial problems. By early 2013, although S rma had received two cash injections from Darby, the company still required another round of financing. Dalg n was looking at three potential options: Should Darby make another investment in S rma? If Darby stayed invested in S rma, should it replace its managing partners? If Dalg n advised Darby to exit, would that be a premature move?