3 questions to smart minds

Private equity in business succession

For this 3 questions to Peter Kroha

INVISION Private Equity
Photo: Peter Kroha
13. April 2016

Opti­mal succes­sion arran­ge­ments in compa­nies rarely exist. They are the result of targe­ted prepa­ra­tion and profes­sio­nal execu­tion. It is important to start early with the careful iden­ti­fi­ca­tion of the right succes­sion partner.

For this 3 ques­ti­ons to Part­ner and Mana­ging Direc­tor INVISION Private Equity in Düsseldorf

1. What issues arise when a private equity firm enters the busi­ness succes­sion process? (opera­tio­nal conti­nua­tion and capi­tal succession)

When an invest­ment company joins the company as part of a succes­sion plan, the opera­tio­nal conti­nua­tion of the company plays the central role. Invi­sion specia­li­zes in succes­sion plan­ning, so we know what matters. Ideally, the opera­tio­nal succes­sion is solved toge­ther with the old owners. The outgo­ing share­hol­ders or mana­ging direc­tors should be invol­ved, if possi­ble, in the selec­tion of the new opera­tio­nal manage­ment, regard­less of whether the succes­sion is resol­ved intern­ally or extern­ally. After all, it’s not just about profes­sio­nal compe­tence, but also, among other things, about ensu­ring conti­nuity and trust, as well as under­stan­ding and passing on the exis­ting corpo­rate culture. The employees of a family busi­ness must not be unsett­led by the change in the fami­liar share­hol­der struc­ture and the entry of an invest­ment company. Invest­ment compa­nies bear a lot of respon­si­bi­lity in succes­sion situa­tions and must live up to this, ideally through trans­pa­rency and open­ness. The basis for successful coope­ra­tion is trust and, although our main “raw mate­rial” is capi­tal, our busi­ness ulti­m­ately remains a “people business”.

2. On the subject of busi­ness deve­lo­p­ment, how do you go about iden­ti­fy­ing poten­tial targets, i.e. companies?

Invi­sion has been active in the market for many years, and during this time we have built up an exten­sive network of consul­tants and cont­acts who bring us invest­ment ideas and with whom we work closely. Our clear invest­ment focus on German-spea­king SMEs and our many years of expe­ri­ence with successful succes­sion plan­ning mean that we are also “recom­men­ded” as a suita­ble inves­tor and part­ner. Of course, we also proac­tively look for oppor­tu­ni­ties to parti­ci­pate. We try to iden­tify compa­nies that fit our invest­ment crite­ria and approach the owners directly. We often talk to owners for many years before we take a stake in the company. Since we offer solu­tion-orien­ted parti­ci­pa­tion, we can defi­ni­tely be flexi­ble in meeting the needs of the company owners. If, for exam­ple, a foun­der of a company wishes to sell only a part of his company and bequeath the rest to his child­ren, we will take this wish into account. Being flexi­ble and respon­sive to the needs of the people invol­ved helps us to convert iden­ti­fied target compa­nies into investments.

3. There is a lot of liqui­dity in the market, valua­tions are high. What does this mean for your invest­ment management?

Indeed, inte­rest rates are at an all-time low and good invest­ment oppor­tu­ni­ties are scarce. In the private equity indus­try, many compe­ti­tors ther­e­fore speak of the infa­mous “golden needle in the haystack” when it comes to finding good, new invest­ments. Accor­ding to the prin­ci­ple of “demand and supply”, this has as a conse­quence that valua­tions are very high and are expec­ted to remain so for some time. We must ther­e­fore invest with disci­pline and patience.
Having parti­ci­pa­ted, we must first and fore­most actively deve­lop our share­hol­dings. The “buy low, sell high” stra­tegy of the early 1990s has long since ceased to exist. We are requi­red to improve our share­hol­dings through various measu­res, e.g. through addi­tio­nal acqui­si­ti­ons. Over­all, at Invi­sion we take a very struc­tu­red approach that essen­ti­ally screens and addres­ses 5 areas: (i) Increase in sales, (ii) Cost opti­miza­tion, (iii) Liqui­dity Enhance­ment, (iv) the stra­te­gic posi­tio­ning and (v) proper corpo­rate governance.

About Peter Kroha

Peter Kroha took up his new posi­tion at Invi­sion on Septem­ber 1, 2014. He opened a new office for the company in Düssel­dorf to further deve­lop its invest­ment acti­vi­ties in Germany. Prior to that, Peter Kroha spent more than 15 years at Montagu Private Equity LLP, a pan-Euro­pean private equity firm, where he held various posi­ti­ons. He was initi­ally based in the London office before moving to Düssel­dorf where he led Montagu’s acti­vi­ties in the Germany, Austria and Switz­er­land region for over 10 years. At Montagu, he was respon­si­ble for a number of very successful invest­ments in various sectors. Peter Kroha was also a member of Montagu’s Invest­ment Commit­tee and Manage­ment Group. He has also been invol­ved in fund­rai­sing, inclu­ding for the Montagu IV Fund, with a total volume of €2.5Bn. Prior to joining Montagu, Peter Kroha worked in London in the mezza­nine finance depart­ment of HSBC Bank.
Peter Kroha comple­ted his law studies in England, a Legal Prac­ti­cing Certi­fi­cate from the College of Law in Ches­ter, and a Busi­ness Admi­nis­tra­tion Diploma from the Euro­pean Busi­ness School.

About Invi­sion Capital

Invi­sion is a leading Swiss and German based private equity firm focu­sing on small and mid-cap compa­nies in Europe, in parti­cu­lar the DACH region. Since 1997, Invi­sion has inves­ted in over 50 compa­nies, helping them realize their growth poten­tial and posi­tio­ning them for sustainable success.

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