What development do you expect for the PE market in 2021?
Traditional corporate buyers — whether private equity funds or corporations — still have a lot of money. For this reason in particular, I expect to continue to see many transactions in Germany. Deal flow may even be increasing because more companies need fresh equity as a result of the economic crisis and corporations are accelerating the divestment of non-core businesses.
However, the future of many buy candidates, especially in cyclical industries is much more uncertain due to the Corona crisis, but buy prices are often still relatively high. We scrutinize very critically which companies offered to us for purchase we would like to acquire. But, of course, the fact remains that our mission is to invest — even in difficult times.
This year we have already realized two sales: the Krefeld-based slag recycler C.C. Umwelt and the marzipan manufacturer Schluckwerder. If two more purchases were added in 2021, we would be on target. Of course, we would like to exceed this plan. Our new fund provides us with 150 million euros in equity for four to six transactions.
The higher the price paid for a company, the more ambitious the business plans must be with which the company can meet the investors’ return expectations — initially in theory. But when ambition gets out of hand, the pressure on management and the entire workforce increases enormously. And when business plans fail because they were overambitious, everyone involved has to pay the price: the employees, the lenders, the fund managers and their backers, pension funds and insurance companies, for example.
We have never made bargains — even if, in retrospect, it may look that way to outsiders when we sell a portfolio company. Unfortunately, such assessments rarely take into account the entrepreneurial risks we have taken together with the executives of our portfolio companies, how many nerves we have left behind in change processes, and how much capital we have invested in technological and business improvements. Bargain — this is really a superficial term in our business.
We are looking for companies for the Novum Capital portfolio that generate at least five million euros in EBITDA per year. We see our potential in mid caps. There, top-notch managers, large consulting budgets, sophisticated strategies and operational efficiency are not ubiquitous. Otherwise, most of the companies for sale would probably not be on offer. It is in these deficits that the design and value enhancement potential we are looking for lies.
Novum Capital is experienced in solving a wide variety of business problems and helping to shape strategies for success. And we have the capacity to contribute know-how as well as capital. Particularly in the case of smaller companies, we can contribute a great deal in a relatively short period of time to maintain these companies, promote their expansion and ultimately increase their value in the long term.
About Novum Capital
Novum Capital invests capital from German and international pension funds, pension plans and foundations in medium-sized companies with annual sales of up to 200 million euros. In this way, Novum Capital helps to ensure that the investors can continue to provide financially for their beneficiaries and/or pursue their foundation’s purpose to the fullest extent possible.
Novum Capital supports its portfolio companies in improving their market position, increasing their profitability, expanding the benefits of their business models for society — and increasing enterprise value. To achieve this, Novum Capital also invests business know-how — and passion.
About Felix Homann
Felix Homann has been with Novum Capital since 2012. He has been instrumental in shaping the company — in particular the development of investments on a deal-by-deal basis to the first two institutional investment funds (2017 and 2020) with a total fund volume of 225 million euros. Internally, he coordinates in particular investments in the sectors: Services,
Energy and Environment, Healthcare and Pharmaceuticals, Software and IT.
Prior to joining Novum Capital, he worked for the US investment bank Goldman Sachs. — Felix Homann holds a Master of Engineering in Electrical and Electronic Engineering from Imperial College London and is a CFA® Charterholder. During his studies he was a scholarship holder of the German National Academic Foundation.