3 questions to smart minds

Investments in demand: medium-sized companies on the stock market

For this 3 questions to Thomas Stewens

Bank M
Photo: T.Stewens | Bank M
29. July 2014

Private equity invest­ments have long since estab­lished them­sel­ves in the German SME sector. But despite the rising stock markets world­wide and although the DAX was able to break through the magic 10,000 mark this spring, at least in the short term, the German capi­tal market is still waiting for a breakth­rough as a finan­cing plat­form for SMEs. The expec­ted exits of PE inves­tors via the stock market are still rare. Well-prepared compa­nies no longer have to fear the forma­li­ties of the stock exch­ange. Inves­tors are only waiting for convin­cing success stories from German “hidden champions”. 

For this 3 ques­ti­ons to Head of Bank M — repre­sen­ta­tive office of biw Bank für Invest­ments und Wert­pa­piere AG, Frank­furt am Main

1. What makes the midmar­ket the perfect invest­ment universe for investors?

Inves­tors value three things in parti­cu­lar about listed compa­nies: strong, entre­pre­neu­rial manage­ment, a long-term stra­te­gic plan and, of course, convin­cing figu­res. Charac­te­ristics that we find again and again with our many medium-sized custo­mers. Where else are there so many stra­te­gi­cally thin­king, firmly rooted in the busi­ness and indus­try-expe­ri­en­ced company leaders with a stable smell? The econo­mic success of small and medium-sized enter­pri­ses is undis­pu­ted. Tangi­ble targets from the manu­fac­tu­ring SME sector are ther­e­fore in demand on the capi­tal market. Our team at BankM is in a conti­nuous exch­ange of ideas with inves­tors from all over Europe and over­seas — inclu­ding insti­tu­tio­nal inves­tors, insu­rance compa­nies, KAGs, large private inves­tors — and they are not inte­res­ted in risk-free 30% returns, but in long-term stable, compre­hen­si­ble, real invest­ments — precis­ely the busi­ness models of the “hidden cham­pi­ons”. The capi­tal market is ready to provide medium-sized compa­nies from Germany, from Europe with equity capi­tal in suffi­ci­ent volume and at econo­mic conditions.

2. So the capi­tal market is ready. And the compa­nies them­sel­ves, too?

In prin­ci­ple, in any case! Because a good growth story comes from hard facts and compre­hen­si­ble, reali­stic fore­casts. And the medium-sized compa­nies are certainly not lack­ing in hard facts: a convin­cing inter­na­tio­nal market posi­tion, inno­va­tive yet proven tech­no­logy and precis­ely timed produc­tion proces­ses. It is precis­ely these ingre­di­ents that account for the remar­kable long-term succes­ses of German SMEs, which often flou­rish in obscu­rity. And these are precis­ely the ingre­di­ents that make a stock market story a best­sel­ler. Of course, an IPO comes with some requi­re­ments that require some prepa­ra­tion. But this is not witch­craft and espe­ci­ally compa­nies that are alre­ady prepared for profes­sio­nal finan­cial and report­ing tools through coope­ra­tion with a PE inves­tor will not have much trou­ble with the forma­li­ties at the stock exch­ange. If further impul­ses are added, then the basis for a successful IPO is opti­mally prepared.

3. If compa­nies and inves­tors are ready, will we soon see more IPOs in Germany as well?

Of course, that is what we would like to see, and the deve­lo­p­ment in recent weeks and months at least indi­ca­tes an upward trend. But for this quietly babb­ling brook to become a stable stream, addi­tio­nal impul­ses are needed. For exam­ple, we support our medium-sized custo­mers in tapping into China, the world’s most attrac­tive growth market, and in parti­ci­pa­ting there in dispro­por­tio­nate and sustainable growth. The best way to achieve this is through active part­ner­ships or mergers, as nume­rous examp­les — above all VW — impres­si­vely demons­trate. Such a stra­tegy also convin­ces inves­tors. Our China desk conti­nuously iden­ti­fies and analy­zes attrac­tive medium-sized compa­nies in China — family-run compa­nies, mostly one gene­ra­tion “old”, excel­lently equip­ped with EC and with returns beyond the 20% mark. These compa­nies are ideal part­ners for German SMEs and toge­ther they are perfect stock market candidates!

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