FIN A N CE - Deutsche Beteiligungs AG

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There were similar findings regarding the positive and negative changes triggered by the buyout. There were more positive than negative aspects. The latter covered a wide range (see chart on next page). There do not seem to be any typical private-equity-induced changes but rather only company-specific changes. Again, strategic gains are valued higher than technical improvements in the financing department or the enhancement of processes. This positive image is confirmed by the fact that eight entrepreneurs said that the buyout had not resulted in any negative changes (see chart on next page). Benefits and drawbacks are often two sides of the same medal. One interviewee complained about exaggerated reporting requirements and the tendency of his investor to supervise him. On the other hand he considered it to be an improvement that he was much better informed Did your investor keep these promises? 12 No promises were made 4 Partially 1 No 1 n=13 Source: FINANCE Research Yes 7 about his company’s strengths and weaknesses, risks and opportunities, because of the many analyses and key performance indicators he had been forced to work with. Another entrepreneur welcomed the fact that the buyout had enabled him to pursue the growth strategy of his company more aggressively. At the same time he criticised the general attitude of financial sponsors, who are never satisfied and always want to see higher returns when the company performs according to plan. Overall, positive responses dominate the picture. Nine interviewees believed that the numerous positively assessed changes in strategy, organisation, and process management (see section “Decision-making process”) would not have been implemented without a buyout or would have been implemented significantly later. Only one company would have initiated the same changes if the buyout had not taken place. From the management’s perspective these changes also include the fact that they are now better able to focus on issues that directly add value to the company. Internal communication was named most often, especially with the middle management, followed by due diligence processes of M&A targets (see chart on next page). Furthermore, the management teams welcomed the fact that they had more time to communicate with customers, to bring in new business and to focus on new technologies and products. Three managers disapproved of the fact that they now have to spend more time on reporting. They also criticised that financing issues and the monitoring of external consultants are very time-consuming. FINANCE Studies | Private Equity in Mittelstand Companies
Three entrepreneurs welcome the fact that they need less time to communicate with their shareholders (see chart on next page). Complicated approval processes in large corporations or family businesses with several family members can take up a lot of time. One interviewee mentioned that he used to spend a great amount of time on explaining to several stakeholders why he spent so much time communicating with the other What has improved as a consequence of the buyout? (Several answers possible) The company was given a business perspective 3 Strategy is implemented more fiercely Company became quicker, more flexible with 3 more growth drivers 3 Acquisitions became an option 2 Professional support of the financial department 2 Better communication with shareholders 2 None 2 Analyses enhance corporate information 1 Better use of personnel 1 Access to capital markets 1 Modern organisation 1 General quality of management 1 Shareholders have become more reliable 1 Stronger awareness of financing issues 1 The company would not have survived without the buyout 1 More solid and long-term financing 1 Increasing R&D ressources 1 Improved risk management 1 n=13 Source: FINANCE Research FINANCE Studies | Private Equity in Mittelstand Companies stakeholders. Today he only has one contact person. Some entrepreneurs considered it to be a strain that they had to spend much time on reporting and special analyses at the request of their investors. As a consequence they paid less attention to business operations, sales and corporate strategy. A more efficient communication with their private equity shareholders apparently does not always guarantee that the management can focus on what is essential. Nevertheless, six interviewees believe that they have more power than before the buyout, mostly because they can decide independently and because their company is geared to a quick implementation of decisions. Only three interviewees find that they have less power than before. The reason: In all three cases the previ- What has worsened as a consequence of the buyout? Nothing 8 Losing long-term strategic perspectives The company is no longer backed by a large 1 corporation with great financing power Management feels supervised and spends too 1 much time with the financial sponsor The investor is greedy and continuously aims at 1 maximizing returns 1 Exaggerated reporting 1 n=13 Source: FINANCE Research 13
Page 1 and 2: FINANCE Studies Private Equity in M
Page 3 and 4: Content I Executive summary 4 II Th
Page 5 and 6: Cooperation between management team
Page 7 and 8: II Study results 1. The interviewee
Page 9 and 10: Shareholders before the buy-out Ent
Page 11: What type of support from your fina
Page 15 and 16: Would the changes have been impleme
Page 17 and 18: They are constantly screening M&A m
Page 19 and 20: not confirmed by the interviewees.
Page 21 and 22: Date of the Date of Secondary Previ

FIN A N CE - Deutsche Beteiligungs AG

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