Growth is a must for medium-sized companies in the DACH region that are leaders in their industries – often the so-called “hidden champions” – in order to secure continued success in the market. By using patient family capital, risks can be minimized and the existence of the business secured for the long term.
In a rapidly changing economic world, expansion and internationalization are becoming an imperative for medium-sized companies to be able to compete successfully in the market. How can these challenges best be mastered by entrepreneurs? Both organic growth outside the home markets and the initiation and implementation of international acquisitions require sufficient capital strength - whether to finance investments and operating resources or to financially support potential acquisitions and successfully integrate them into the organization. However, companies often lack confidence and experience in dealing with these unusual issues, as well as management capacity. Establishing and managing a branch or production abroad, especially in other cultures, requires experience and know-how. Otherwise, failure is often a matter of course. The acquisition and integration of international acquisitions also has many pitfalls. Many medium-sized companies have already had to experience this painfully, as numerous negative examples from the past decades prove. In extreme cases, failed expansion attempts can even put the previously healthy core company in serious trouble.
More than just capital
Companies can strengthen their capital base through an investment partner and thus spread the financial risks on several shoulders. A weakening of the balance sheet due to the otherwise often necessary borrowing can also be avoided in this way. Much more important, however, is the prospect of securing valuable know-how and access to experienced experts through equity capital. Successful investment firms are characterized in particular by the fact that they have an international network of experts and managers at their disposal, who can bring valuable support and experience to the organization as helpful advisors. Due to the large number of portfolio companies and transactions they have advised on, the investment firm’s team also has a great deal of experience with growth and internationalization issues.
Family Office as a long-term partner
Family capital is a special form of equity capital. Many large entrepreneurial families are now investing in businesses through their family offices. This family capital usually has a very entrepreneurial and value-oriented background and is invested for the long term without the usual rapid pressure on returns, which is particularly ideal for the successful expansion and internationalization of medium-sized companies. For example, members of the Brenninkmeijer family, including owners of the fashion retailer C&A, have been investing in medium-sized companies in German-speaking countries for many years in investments through Bregal Unternehmerkapital.
With family capital to the world market leader
In 2011, for example, Bregal acquired the company Novem Car Interior Design from Vorbach in Bavaria and in the following years very successfully implemented an internationalization strategy. After Bregal's entry, the company was able to strengthen its balance sheet considerably by means of a capital infusion. It was therefore possible to decisively expand the US presence with a new plant in Mexico. In addition, the company invested heavily in its expansion into China and Eastern Europe. Bregal provided additional equity capital of EUR 50 million in 2015 for these expansion efforts. In order to implement the expansion of the business activities in an experienced manner, the management was strengthened with top-class managers who led the expansion to success. This was accompanied by an advisory board with representatives from the industry (e.g. a former DAX-CEO), who supported the management as strategic sparring partners and advisors. Novem is now the global market leader for high-quality trim parts and decorative functional elements in automotive interiors with customers such as Daimler, Porsche, BMW, Toyota, GM and Tesla. With the help of private equity, Novem has been able to double its turnover to more than EUR 700 million in the last eight years. The number of employees rose from 3,500 to more than 6,200 as part of the growth and internationalization strategy.
Source: Die Unternehmervetrauten
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