3 questions to smart minds

Trends in buy-and-build strategies in Corona times.

For this 3 questions to Dr. Joerg Zirener

One Equity Part­ners (OEP)
Photo: Dr. Joerg Zirener
6. April 2021

Under the influence of Corona in the first half of 2020, the total number of tran­sac­tions initi­ally decreased due to the uncer­tain­ties. Buy-and-build concepts, howe­ver, are proving successful in Corona times. Smal­ler compa­nies in parti­cu­lar bene­fit from selling to a PE-led company as part of buy-and-build concepts. It enables them to become part of a larger group and thus gain access to new products and markets, achieve a stron­ger percep­tion by custo­mers and suppli­ers, increase the attrac­ti­ve­ness for quali­fied employees and achieve econo­mies of scale on the cost side. This can be enorm­ously important, espe­ci­ally in a crisis.

For this 3 ques­ti­ons to Dr. Joerg Zire­ner, Senior Mana­ging Direc­tor at One Equity Part­ners (OEP) in Frank­furt am Main.

1. Along­side Corona, “digi­tiza­tion” is likely to be one of the most frequently used words in 2020. How have invest­ment proces­ses in the PE sector chan­ged in the lock down?

After a brief period of uncer­tainty in the second quar­ter of 2020, both buyers and sellers of compa­nies have quickly adapted to the new situa­tion and have swit­ched to orga­ni­zing sales proces­ses digi­tally to the grea­test possi­ble extent. We at OEP have alre­ady bought and sold compa­nies comple­tely digi­tally. Not only are the data rooms made available digi­tally, as has long been the case, but also all inter­ac­tions between buyers and the respec­tive manage­ment teams. Manage­ment presen­ta­ti­ons and expert panels are held via video confe­ren­cing plat­forms, such as the Inter­net. Zoom or Micro­soft Teams are hand­led digi­tally. For poten­tial buyers in parti­cu­lar, this means a signi­fi­cant increase in effi­ci­ency on the one hand, as one can operate much more effi­ci­ently due to the travel time saved and thus pursue more oppor­tu­ni­ties simul­ta­neously, which is parti­cu­larly advan­ta­ge­ous in buy-and-build situations.

The same is true for sale­s­peo­ple, who can other­wise hold elabo­rate manage­ment presen­ta­ti­ons or so-called ‘fire site chats’ with more pros­pects than usual. On the other hand, invest­ment proces­ses and successful tran­sac­tions are of course also heavily depen­dent on the perso­nal trust of the people invol­ved with each other, which in turn is more diffi­cult to build up in times of corona and a lack of perso­nal cont­acts. In the future, we will ther­e­fore certainly return to a healthy balance between digi­tal and physical.

2. To which sectors do you perceive the trends have shifted?

We are curr­ently seeing increased inte­rest on the part of the private equity indus­try in many things rela­ted to digi­tiza­tion in the broa­dest sense. Compa­nies, but also the public sector, have clearly had to realize that we are not adequa­tely posi­tio­ned with regard to this topic, espe­ci­ally in Germany. We are curr­ently expe­ri­en­cing a strong digi­tiza­tion push at many levels, which means that chan­ges that would other­wise have taken seve­ral years are taking place in just a few months.

The best exam­ple was the need for compa­nies to send a large portion of their employees to the home office virtually over­night. As far as the avai­la­bi­lity of hard­ware, end devices such as e.g. laptops requi­res, but also a corre­spon­ding band­width to be able to work smoothly. In a second step, the topics of secu­rity (cyber secu­rity), smooth coope­ra­tion (colla­bo­ra­tion) and also the digi­ta­liza­tion of indi­vi­dual busi­ness proces­ses that were previously hand­led physi­cally are linked to this in order to enable work-from-home models, but also to ensure that Corona-compli­ant on-site/of­fice opera­ti­ons can be imple­men­ted in the future. These are important trends that will keep us very busy in the future.

On the part of OEP, we are curr­ently seeing in many of our port­fo­lio compa­nies that the need for office space will reduce by about 30% after Corona. This is mainly due to the increased flexi­bi­lity in terms of work assign­ment and work loca­tion of many employees. There will be fewer fixed work­sta­tions in the offices, but rather shared spaces that will be booked and used as needed. At OEP, we have long been invol­ved with tech­no­logy as one of our invest­ment prio­ri­ties in both North America and Europe, with a wide range of expe­ri­ence in soft­ware, IT service/digitization and hard­ware equip­ment. For exam­ple, we have In March of last year — at the height of the first Corona crisis — we deli­bera­tely inves­ted in the area of hard­ware equip­ment by acqui­ring MCL , which is based in Böblin­gen, Germany, because we saw a clear need to catch up here, as descri­bed above. Since the acqui­si­tion of MCL , we have succee­ded in the last 12 months in signi­fi­cantly streng­thening the company through 3 further acqui­si­ti­ons in the areas of cyber­se­cu­rity, cloud trans­for­ma­tion and mana­ged services, posi­tio­ning it for the future and incre­asing reve­nue by 50% in the process. Earlier this year, OEP also inves­ted in Spanish digi­tiza­tion specia­list VASS, adding another plat­form in this fast-growing area. Foun­der Javier Latasa and the manage­ment team of VASS speci­fi­cally chose OEP for its exper­tise and compel­ling ‘buy-and-build’ track record to deve­lop VASS into a global provi­der of digi­ta­liza­tion solu­ti­ons. Curr­ently, thanks to many virtual conver­sa­ti­ons, we are in exch­ange with various inno­va­tive solu­tion provi­ders to estab­lish VASS in Nort­hern Europe, Latin America and the USA.

3. We have seen a digi­tiza­tion push in the last 12 months that would have other­wise taken 3–5 years. What is the new “normal” between PE inves­tor and port­fo­lio company or target? What has shifted?

Within the last 12 months, almost all inter­ac­tions between port­fo­lio compa­nies and PE inves­tors have shifted to the virtual space. Where once there were almost exclu­si­vely face-to-face meetings, today there are video confe­ren­ces. In the future, I think the pendulum will swing back to the middle a bit more and there will be a healthy mix between face-to-face meetings and virtual confe­ren­ces. This crea­tes the perfect balance of main­tai­ning rela­ti­onships of trust and being able to discuss important issues in person, while also gaining effi­ci­ency when it comes to stan­dard meetings that can be held virtually. Further­more, new types of colla­bo­ra­tion were also crea­ted within the frame­work of digi­tal work­groups and work­places, which will conti­nue to be used in the future and contri­bute to impro­ved colla­bo­ra­tion across borders and compe­ten­cies. Also in rela­tion to the custo­mers, very promi­sing virtual working methods such as e.g. Webi­nars, which offer signi­fi­cant added value for custo­mers and allow products and solu­ti­ons to be presen­ted to a larger audi­ence at the same time. These will also conti­nue to be used in the future, in addi­tion to perso­nal visits and trade shows.

Dr. Jörg Zirener

Dr. Jörg Zire­ner is Senior Mana­ging Direc­tor at One Equity Part­ners (OEP) in Frank­furt. Since joining OEP in 2006, Dr. Zire­ner has successfully execu­ted various invest­ments for OEP in both tech­no­logy and indus­trial envi­ron­ments, focu­sing on buy-and-build concepts that have enab­led port­fo­lio compa­nies to gain access to new products and markets, increase custo­mer and supplier aware­ness, attract quali­fied employees, and achieve econo­mies of scale on the cost side. Curr­ently, Dr. Zire­ner is on the advi­sory board/supervisory board of the follo­wing compa­nies: DWK Life­sci­ence, Lutech, Neology, Veri­ma­trix, MCL, VASS and Bibliotheca.

Prior to joining OEP, Dr. Zire­ner was a senior project mana­ger in the restruc­tu­ring divi­sion at Roland Berger Stra­tegy Consul­tans. In addi­tion, Dr. Zire­ner foun­ded his own company, which focu­sed on the marke­ting of fan artic­les in connec­tion with the 2006 World Cup in Germany and the German Bundes­liga. He studied busi­ness admi­nis­tra­tion at the Euro­pean Busi­ness School in Oestrich Winkel, the Univer­si­dad de la Empresa in Buenos Aires and the Ecole Supé­ri­eure de Commerce de La Rochelle.

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