3 questions to smart minds

Downturn? Current developments in the private equity sector

For this 3 questions to Goetz Hertz-Eichenrode

HANNOVER Finanz Group, Hanover
Photo: Goetz Hertz-Eichenrode
14. May 2019

Many inves­tors are alre­ady taking a cautious approach to econo­mic deve­lo­p­ments — around half of LPs have adjus­ted their invest­ment stra­te­gies or models to ensure they are well posi­tio­ned for a poten­tial down­turn. At the same time, there is confi­dence on the inves­tor side that the disci­pline impo­sed by private equity will streng­then the resi­li­ence of companies. 

For this 3 ques­ti­ons to Goetz Hertz-Eichen­rode, Spokes­man of the Manage­ment Board, HANNOVER Finanz Group, Hanover

1. Hanno­ver Finanz has now been on the market for 40 years. What trends can you curr­ently iden­tify in the equity sector?

There is a lot of invest­ment capi­tal in the market. In addi­tion, the number of private equity compa­nies contin­ued to grow. Ther­e­fore, in rela­tive terms, there are fewer invest­ment oppor­tu­ni­ties and the diffe­rent charac­te­ristics of private equity houses are beco­ming more important. Espe­ci­ally for medium-sized compa­nies, it is very important to know with whom they are meeting. We ther­e­fore always advise entre­pre­neurs to take a very close look at their new private equity part­ner in advance. HANNOVER Finanz, for exam­ple, distin­gu­is­hes itself through its Ever­green funds, 40 years of expe­ri­ence in inves­t­ing in medium-sized compa­nies, and its network of experts that has grown over four decades.

Curr­ently, against the back­drop of a possi­ble down­turn, private equity houses are beco­ming incre­asingly choosy and also cautious, and prefer to invest in non-cycli­cal sectors — and thus valua­tions for such compa­nies conti­nue to rise. Howe­ver, this could also create oppor­tu­ni­ties for expe­ri­en­ced inves­tors in cycli­cal sectors such as auto­mo­tive, plant and mecha­ni­cal engi­nee­ring, or trade and retail. HANNOVER Finanz, for exam­ple, was very successful with this stra­tegy during the last finan­cial and econo­mic crisis.

2. Do you alre­ady regu­larly do digi­tal due dili­gence on poten­tial (future) port­fo­lio companies?

Digi­tal due dili­gence is, of course, an inte­gral part of due dili­gence for us and is on the agenda for almost every invest­ment oppor­tu­nity. Howe­ver, we do not see this as a sepa­rate compo­nent, but address the issue as part of commer­cial due dili­gence — often toge­ther with rele­vant experts from our network. This now applies to all industries.

3. How important are regio­nal repre­sen­ta­tive offices in spot­ting inte­res­t­ing companies?

Let us say in advance: Local repre­sen­ta­tive offices in the sense of branch offices are not our means of choice. The head­quar­ters in Hano­ver and our Austrian office in Vienna will remain in place. We are a small team, live from perso­nal exch­ange and are on the road a lot, in all fede­ral states. Our employees from Baden-Würt­tem­berg, Bava­ria or Berlin also have their perma­nent office in Hano­ver. Howe­ver, it is very helpful that we have streng­the­ned our presence in southern Germany, for exam­ple, with Joachim von Lohr — form­erly a member of the manage­ment of SüdBG and at home in Baden-Würt­tem­berg. In the future, he will also be the cont­act person for inqui­ries from Switz­er­land. Other employees also bring local color to certain regi­ons and have corre­spon­ding local networks.

In addi­tion to our own employees, howe­ver, a nati­on­wide network of M&A houses or entre­pre­neurs in whose compa­nies we have held a stake in the past is an important element of our stra­tegy in the search for inte­res­t­ing invest­ment opportunities.

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