3 questions to smart minds

Participation in companies in difficult situations

For this 3 questions to Dr. Patrik Fahlenbach

Solvesta AG
Photo: Patrik Fahlenbach
27. April 2016

The restruc­tu­ring of compa­nies is charac­te­ri­zed by a high degree of comple­xity. Without finan­cing in such a situa­tion, the goal of “going concern” and “getting on track”, cannot be achie­ved. Various funding resour­ces are available for this purpose.

For this 3 ques­ti­ons to Board of Manage­ment — CEO of Solvesta AG in Munich

1. Solvesta AG focu­ses on equity invest­ments in medium-sized compa­nies in diffi­cult situa­tions. Where is your focus? How do you act?

Solvesta AG is the first listed invest­ment company to specia­lize in the acqui­si­tion of busi­nesses from insol­vency. The target compa­nies have a turno­ver of between €20 million and €80 million and are head­quar­te­red in the legal terri­tory of the German Insol­vency Code. Solvesta AG does not have a sector focus. It is prima­rily rele­vant that the main causes of insol­vency do not lie in the market, product or sales area. Since it can gene­rally be assu­med that a restructuring/financial inves­tor cannot operate the core busi­ness better per se than the entre­pre­neur hims­elf. We ther­e­fore prefer insol­vency cases in which the main trig­ger is finan­cial over-indeb­ted­ness, liqui­dity bott­len­ecks or — and here typi­cal German SMEs are often simi­lar — clas­sic manage­ment errors on the part of the entrepreneur.

In insol­vency situa­tions, Solvesta AG’s special insol­vency and tran­sac­tion know-how enables it to conduct a prag­ma­tic due dili­gence process and to make a purchase decis­ion while the appli­ca­tion process is still ongo­ing (usually only 6–8 weeks). Solvesta AG is regu­larly cont­ac­ted directly by M&A advi­sors or, in excep­tio­nal cases, by insol­vency admi­nis­tra­tors, as the other rele­vant buyers of these crisis compa­nies are stra­te­gic compe­ti­tors with little tran­sac­tion experience.

2. Are the exis­ting finan­cing models prac­ti­cal? Are there new approa­ches to finan­cing turn­around situations?

Due to the insol­vency procee­dings, it is usually diffi­cult for the new company to obtain tradi­tio­nal bank finan­cing, in parti­cu­lar from banks. for working capi­tal, to be main­tai­ned. Howe­ver, in the case of credit insti­tu­ti­ons that are alre­ady invol­ved in the old company, it is often possi­ble (econo­mic­ally) to nego­tiate a credit roll­over if the advan­ta­ges for these insti­tu­ti­ons of finan­cing the conti­nua­tion solu­tion outweigh the liqui­da­tion scena­rio. These can be job preser­va­tion (usually important for local banks) as well as a higher liqui­da­tion rate or a better colla­te­ral posi­tion in the new company.

If one leaves the field of bank finan­cing, asset-based finan­cing approa­ches are parti­cu­larly useful. This can be senior secu­red real estate finan­cing, a sale-and-lease-back model for machi­nery or facto­ring of (future) receiv­a­bles as well as, unfort­u­na­tely, inven­tory finan­cing, which has so far only taken place in excep­tio­nal cases or in combi­na­tion with factoring.

3. What active support do you offer?

Most often, in the context of the insol­vency of the prede­ces­sor company, the owner leaves the company for a conti­nua­tion solu­tion. Accor­din­gly, Solvesta AG will fill the resul­ting vacan­cies in the areas of sales, produc­tion and commer­cial manage­ment, which were mostly in the care of the company owner. For this purpose, we prima­rily rely on those experts who are employed by Solvesta AG or who have alre­ady accom­pa­nied us in advance as market experts within the scope of the due diligence.

As the insol­vency procee­dings do not trans­fer all contracts neces­sary for the opera­tion of the company to the new company, it is parti­cu­larly important to ensure that the new company does not become a party to the insol­vency procee­dings. to arrange the entire legal frame­work of the new company through a Chief Restruc­tu­ring Offi­cer (CRO) appoin­ted by Solvesta AG. Finally, a hands-on func­tion of the invest­ment control­ler on site ensu­res that the commer­cial objec­ti­ves of the invest­ment are defi­ned and tracked.

About Dr. Patrik Fahlenbach

Over 15 years of tran­sac­tion expe­ri­ence: as an autho­ri­zed signa­tory for one of Germany’s most successful indus­trial holding compa­nies, acqui­ring compa­nies in special situa­tions; as a consul­tant (inter alia for KPMG) and; as mana­ging direc­tor of two start-up compa­nies. Opera­tio­nal and restruc­tu­ring know-how acqui­red as inte­rim CFO in medium-sized company and as commer­cial direc­tor. Busi­ness expe­ri­ence in deal­ing with insol­vency situa­tions and legal back­ground in German insol­vency and tax law. Very strong analy­ti­cal skills in the finan­cial area and the ability to trans­form parties’ econo­mic objec­ti­ves into legally tenable agree­ments. Successful free­lance consul­tant and multi­ple award winner for busi­ness and finan­cial plan deve­lo­p­ment. Expe­ri­ence as a univer­sity lectu­rer for the subjects “Entre­pre­neu­rial Manage­ment”, “Control­ling” and “Cost and Finan­cial Management”.

About Solvesta

Solvesta AG is a manage­ment holding company that exclu­si­vely acqui­res majo­rity inte­rests in opera­ting compa­nies. Solvesta AG supports its port­fo­lio compa­nies in all opera­tio­nal and commer­cial matters through manage­ment services and capi­tal in order to promote their growth and enable them to survive inde­pendently in the market. The selec­tion of compa­nies poten­ti­ally to be acqui­red is basi­cally oppor­tu­ni­stic, i.e. without a sector focus and inde­pen­dent of the deve­lo­p­ment phase of the company to be acqui­red. Howe­ver, the Solvesta team is charac­te­ri­zed by a special core compe­tence in the acqui­si­tion of medium-sized compa­nies out of insolvency.

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