3 questions to smart minds

Many challenges despite good exits

For this 3 questions to Thomas Bühler

AFINUM Manage­ment, Munich
Photo: Thomas Bühler
26. March 2019

The situa­tion for private equity profes­sio­nals in Germany is beco­ming more complex. Purchase prices for new invest­ments are curr­ently more expen­sive than ever before. Exits are also booming. Although the purchase prices may be conside­red high from the buyers’ point of view, the market as a whole has not been harmed by this so far; it is still booming, albeit under chan­ging parameters.

For this 3 ques­ti­ons to Thomas Bühler, Mana­ging Part­ner and foun­der of AFINUM Manage­ment in Munich

1. 2018 was a record year for AFINUM. They were able to realize seve­ral exits but also four invest­ments. What is the back­ground of this so posi­tive scenario?

2018 was really a good year for AFINUM. We were able to launch two buy-and-build concepts that we had built up very successfully in previous years. In this context, it paid off that we were able to support the compa­nies in attrac­tive acqui­si­ti­ons in addi­tion to orga­nic growth. In both cases, we assume that the acqui­rers will conti­nue to pursue this growth course.

In 2018, we were able to enter into four new invest­ments for our fund laun­ched in 2017. In three cases, these are succes­sion situa­tions where we also aim to increase value through a mix of orga­nic growth and acqui­si­ti­ons. In another case, we were awarded the contract for a carve-out from a medium-sized group of compa­nies. This is parti­cu­larly inte­res­t­ing for us, as we intend to invest more in the carve-out segment in the future. The chal­lenges are simi­lar to many succes­sion plans, but some of the oppor­tu­ni­ties are even greater.

2. How do you assess the current year and the coming year? The market development?

From an opera­ting perspec­tive, we are opti­mi­stic about our port­fo­lio compa­nies. This is mainly because in recent years we have incre­asingly focu­sed on compa­nies that are in less cycli­cal indus­tries, which is helpful in vola­tile times. — With regard to dispo­sals from the port­fo­lio, we expect contin­ued inte­rest in well-posi­tio­ned and growing compa­nies. We will again dispose of seve­ral port­fo­lio compa­nies in 2019 and 2020. There will still be many secondaries

In terms of new acqui­si­ti­ons, there is a decent deal flow. Unfort­u­na­tely, company valua­tions are also high in the small cap segment. This requi­res a focus on opera­tio­nal value crea­tion. In addi­tion, it is always neces­sary to find inte­res­t­ing niches. At present, we see such oppor­tu­ni­ties above all in the area of medium-sized carve-outs, which we intend to address more intensively.

3. What are the biggest chal­lenges you see in the small-cap sector right now?

One of the biggest chal­lenges at present is certainly the high valua­tions when acqui­ring compa­nies. On the other hand, the price level on the market is again good when you have compa­nies to sell.

A chall­enge of a comple­tely diffe­rent kind is the recruit­ment, moti­va­tion and manage­ment of execu­ti­ves. Even for growing and profi­ta­ble compa­nies, good mana­gers are not auto­ma­ti­cally found. Today, we spend a much higher propor­tion of our time on the search and selec­tion of suita­ble managers.

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