FIN A N CE - Deutsche Beteiligungs AG

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� Communication and approval processes are significantly shortened; decision-making processes are optimized � Most managers believe that the implemented changes have made their companies more flexible and more efficient. � If the financial sponsor had not invested in the company, in many cases these changes would not have been made or only made at a later point in time. Only one company would have seen the positively perceived changes without a previous buyout. � The majority of the companies had personnel changes at the medium or top executive level. Often a financial director is put on the management board after the buyout. In some cases, members of the board have been replaced, especially as a consequence of unsatisfactory performance. � Once financial sponsors feel fully informed and have established a relationship of trust, they show a high tolerance regarding management errors. Most managers have their financial sponsor’s backing even in times of poor performance. 6 Ambitious financing, conservative implementation � In a buy-out process, companies are usually highly leveraged by using standardized financing instruments. The financing structure is manageable. Special financing tools such as high yield funds or bullet financing such as PIK notes (Payment in kind) are very rare. � Total debt is normally strongly linked to liquidity and working capital, but hardly ever a major cost factor. � Key performing indicators and controlling tools are cash flow, working capital and ebit/ebitda. � Financial sponsors remarkably seldomly offer new financial know-how to the companies. They mainly train the companies on how to communicate with banks and how to establish their own independent corporate financing structures. FINANCE Studies | Private Equity in Mittelstand Companies
II Study results 1. The interviewees – Top managers talk Interviewees* CFO 3 * In two cases both CEO and CFO participated in the interview n=13 Source: FINANCE Research In-depth interviews with CEOs and CFOs of 13 German Mittelstand companies that have been taken-over by financial sponsors between 2002 and 2006 were conducted for this study between February and April 2007. The interviews Transaction volume Large-cap (> 500 mio. Euro) 4 Upper mid-cap (250-500 mio. Euro) 1 CEO 12 Small-cap (< 50 mio. Euro) 2 Lower mid-cap (50-250 mio. Euro) 6 n=13 Source: FINANCE Research FINANCE Studies | Private Equity in Mittelstand Companies took between 60 and 90 minutes. Most were face-to-face interviews. In exceptional cases interviews were conducted by telephone. Anonymity was guaranteed to all interviewees. The majority of companies (seven companies) generated a sales volume of between €100 mil - lion and €250 million in 2006. One company had a sales volume between €250 million und €750 million. F ive companies had sales volumes greater than €750 million. W ith six interviewees the transaction volume (enterprise value) was in the lower mid-cap range (€50-250 million). T wo interviewed companies were in the small-cap range (< €50 million). One transaction was in the upper mid-cap range (€250-500 million). Four companies were in the large-cap range (more than €500 million). When selecting the interview sample, the objective was to have a good cross-section of privateequity companies that invest in German Mittelstand companies. Sales volume more than 750 mio. Euro 5 250-750 mio. Euro 1 100-250 mio. Euro 7 n=13 Source: FINANCE Research 7
Page 1 and 2: FINANCE Studies Private Equity in M
Page 3 and 4: Content I Executive summary 4 II Th
Page 5: Cooperation between management team
Page 9 and 10: Shareholders before the buy-out Ent
Page 11 and 12: What type of support from your fina
Page 13 and 14: Three entrepreneurs welcome the fac
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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