It is interesting what the press has with its discussion of locusts in recent years, so everything done. Naturally there were some black sheep. But there are not always. I would refer in this context, an interesting contribution from the business week of November last year, that is reproduced below:
Private Equity as a partner for the middle class (by Volker Schmidt)
In succession, or a growth step: holding companies are as a partner for the middle class. The companies must fulfill conditions in the market have proven. Volker Schmidt, a partner with the U.S. private equity firm called Riverside, criteria for cooperation. The most famous investor in private equity, Christopher Flowers. Flowers colleagues are also suitable as a partner for the middle class. Source: Reuters handelsblatt.com
Imagine you have spent the last twenty years one company - successfully. The profit for each year to a fifth, so that you are above the market average. And yet something has to change: You have just completed her 55th Birthday celebration, her youngest son, his fifth. Apart from the birthdays you have in the past few years not had much of each other. Despite all the joy in entrepreneurship: they want more time for your children and financial security for your family. At the same time the company with its forty employees do not suffer, continue the growth. What to do?
A third follow-up cases are
A classic case for private equity. Of the in this country last year, 131 companies completed acquisitions by holding companies according to figures from the Centers for Management Buy Out Research (CMBOR) as 40 succession. There are many reasons: a company wants to ease up, diversify its assets or secure his life's work, the jobs and independence. Or the next growth step can not lift their own.
potential must
Vote by a private equity fund as a partner, but must match the conditions. Thus, a company should have proven in most cases on the market. In concrete terms this could mean, for example: business value of between 15 and 150 million euros, operating profit of two million euros, as over ten percent return. The growth opportunities have to be right. Often fails because the expansion of a solid company to a lack of know-how, the lack of international contacts, or even the necessary capital. It is here, private equity can develop its strengths and create value.
change of ownership necessary
important however the willingness to let go: The old owner must give its majority. For in the rule requires that the private equity investor, to offer its own investors a security. Ideally, the current management team also increases with one. Sun continuity is possible. In the daily business of the ownership change is hardly noticeable. The investor only supported with strategic issues on a quarterly as taken Advisory Board. This is the rule from the previous owner, two employees of the investor as well as two to three seasoned managers from the respective industries that deal with their experience and Contacts contribute. In the above-mentioned case, the father is, of course, the advisory board - and after three years, is still one of the most active members.
Volker Schmidt is a partner at U.S. private equity firm Riverside in Munich.
