On course for growth with minority interests
For medium-sized entrepreneurs, there are many situations in which raising additional equity can make a lot of sense: Upcoming growth leaps and expansion plans, a change in the group of shareholders or the successful realization of a business succession are frequent topics. For example, if a shareholder has to be paid out, this usually quickly exceeds the credit limit that the company’s bank makes available to the company. Tailored equity financing can be a good alternative here. Then, at the latest, it is also necessary to consider where the company should develop. This is particularly true if previous co-shareholders or even the management want to take over the shares that become free and continue the company. For us, the goal is always to tailor equity financing to strengthen the independence and room for maneuver of the medium-sized company. The increased equity ratio in turn expands the financing framework. This enables the entrepreneur to focus even more on realizing his goals and visions.
In many cases, medium-sized companies operate in a field of tension: on the one hand, they are committed to tradition and geared to long-term, moderate growth; on the other hand, competition demands ever greater orientation to globalized markets, calls for flexibility and greater internationalization. This costs money, means increased risk and is usually not possible with debt financing alone. Often, the financing requirement for significant growth projects is between EUR 1.5 and 15 million. Investors with a range of financing instruments that can be combined with each other are particularly suitable for this. Such a financing package includes the classic minority shareholding, and in individual cases also a direct majority shareholding. VR Equitypartner also offers variants of mezzanine financing — for example silent partnerships or profit participation certificates — and can combine these with a direct investment if required. If necessary, syndications for equity and debt can also be arranged.
The desire to exert a strong influence on the strategic development of their portfolio companies is an important reason for many private equity companies to acquire majority stakes in particular. VR Equitypartner has its own approach here: we specialize in minority shareholdings and, as an active shareholder, work together with the existing management to develop the company further. An important prerequisite for success is that the entrepreneur and investor share the same values and ideas, both partners agree on the same goals and the “chemistry” between the acting persons is right.
The big advantage for entrepreneurs in structuring a minority shareholding is that they benefit not only from the capital, but also from more objective decisions and from the investor’s know-how, without having to give up control. This also includes the establishment of an advisory board that serves as a sparring partner for management. The introduction or optimization of professional controlling and monitoring systems is also part of this cooperation. Such tools can make a significant contribution to improving the control of company operations such as production processes, capacity utilization as well as inventory levels and working capital management — important building blocks in the context of a company’s development geared to long-term success.