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Volume 3/05  -  25.04.2005

Dear Sir or Madam,

it is already April 2005. Time is running away with us. Have you taken the appropriate steps to reach your strategic goals already? Consider our comments in the last JP Director’s Report: Strategic projects not initiated by June will not reach conclusion within the current year. Which means it’s time to get cracking with the realisation of your enterprising visions.

A man with vision is Heino Deubner, the majority shareholder and chairman of druckerfachmann.de AG. Based in Berlin, druckerfachmann.de AG is the leading provider of expertise in printing technology for companies. Deubner is just 34 and a true man of action. He is a team motivator who doesn’t go easy on himself. His background is in competitive sport and he sees himself as coach and player in one. How often have I sent him e-mails late at night, only to receive the reply within minutes as a matter of course.

In 1998 he founded his company in a difficult market. Heino Deubner achieved € 17 million in annual sales with 65 employees. Heino Deubner created his own economic upturn. Unlike the overall market trend, his company is growing. druckerfachmann.de has always made a profit.

We will present an exclusive interview with Mr. Deubner today (to the Interview). This will be the first in a series of interviews that will introduce outstanding entrepreneurs.

Best regards,

Heinz Jäger
-CEO, JP Mergers & Finance AG-

Topics of this issue

Selected acquisition chances in Germany and Polan

A number of private equity houses are seeking opportunities for investing €5 million upwards in highly profitable and fast-growing businesses.

Project no.: 49682
 

Investment company seeks small/medium-sized businesses
for the purpose of acquiring a majority holding.


Profile:

• Turnover: € 25 million or more

• Industrial companies

• Metal-working

• Ventilation/air conditioning technology

• No retail, service or construction companies

Project no.: 53448
 

Leading e-procurement company seeks
take-over candidate for the realisation of continued growth:

Software, services and/or consultancy companies
in e-commerce, e-sourcing, SRM, web/ASP technology

Profile:

• Located within Europe

• Mainly industrial customers

• Min. 20 salaried employees

• Positive earnings situation

Project no.: 49736

Polish non-alcoholic drinks manufacturer and bottler seeks strategic investor or acquirer

Profile:

• Revenues: € 2.5 million with considerable upside potential

• Exports currently ca. 60%

• Various well-established brand rights in Polish food retail trade

• Modern production plant incl. manufacture of PE bottles

• Proprietary mineral-water spring with unlimited rights of use

• Expansion potential to 8.5 ha commercial floor space

Project no.: 51866

Modern Polish dairy seeks strategic investor

Profile:

• Production capacities currently 35,000 l/d.

• Expandable to 50,000 l/d with modest investment.

• Current product range: cheese, dry curd cottage cheese, fresh products

• Modern production facilities in line with the tightest EU standards (mainly ca. 2-4 years old)

• Bio-certificate for the entire EU

• Young management team under German-speaking leadership

Project no.: 50422

4-star hotel in central Madrid seeks acquirer

Profile:

• Best position in central Madrid

• Ca. 120 well appointed rooms

• Total space ca. 8,000 m²

• Adequate leisure facilities

• Various possibilities for expansion

Project no.: 51560

ITK group of companies seeks majority acquirer for further expansion
 

• System integrators / system vendors

• Ideally with focus on communications technology / telecommunications

• Customer focus on SMEs

• Over 80 employees

• Stable earnings situation

Project no.: 22123
 

Leading steel trading house seeks investment partner to take over ca. 50 % of company shares.

Profile:

• Revenues: € 60m and growing strongly

• 85 employees

• Continuing good profit situation (over 5 % of revenues)

• Located in one of Poland’s principal industrial areas

Project no.: 38760

 

European IT service provider seeks outsourcing capacity (programming etc.) in Poland.

Project-No.: 46077
 

Anglo-American investor seeks hotels or hotel group.

Requirements:

• Property size: min. ca. 200 rooms

• 3 or 4 star

• Takeover of the property and, if suitable, the management. Potential investment in excess of € 100 million.

Project no.: 20902a

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The player-coach

Heino Deubner, Chairman of the Board at druckerfachmann.de AG, in interview with Heinz Jäger

Heinz Jäger: Mr. Deubner, you are the majority shareholder and chairman of druckerfachmann.de AG in Berlin. What is druckerfachmann.de?

Heino Deubner: I founded druckerfachmann.de based in Potsdamer Platz, Berlin in 1998 and it is Germany’s fastest growing service company in the hard-fought market for office printers with an average growth of sales of around 40% over the last 4 years. The company also plans to increase sales in the current business year 2005 by over 50% to nearly € 17 million. We provide solutions for printing, copying, scanning and fax in the office. As of 2005 we have 13 service locations throughout Germany.

Heinz Jäger: Your branch is plagued with stagnation. How do you manage to maintain this sustained high growth in sales year after year?

Heino Deubner: Through a high degree of specialisation and focusing on a market segment that the general “IT world” has addressed very half-heartedly. These days, companies are crying out for competent service providers who excel with know-how in the converging markets for printers and copiers. Our customers have no problem understanding us however complex the business may be; our message arrives at the customer.

Heinz Jäger: Your team displays extraordinary motivation. How do you manage keep your employees inspired?

Heino Deubner: That’s a question I ask myself, too. It’s unbelievable; I have fantastic employees who are ready to give their all for druckerfachmann.de. This team motivates not only itself but me too, and I’m happy to do the same in return. As I see it, all that counts is loyalty and team spirit, and the employees are well aware of that. I always talk very directly and I exemplify the fact that the only thing that counts is results. My guess is that my team identifies well with that.

Heinz Jäger: Tell us: what is the principle of your style of leadership? And what role does the customer play at druckerfachmann.de?

Heino Deubner: The customer is never an annoyance for us; he gives the company the chance to develop and he gives us the chance to make a living. We grow according to the needs of our customers.

My principles of leadership are relatively simple. The boss has to be absolutely competent and has to make fast decisions. From the first day on I gave my people a clear vision and goals. My employees always know where I'm going with druckerfachmann.de and they apply their energy in exactly that direction. I communicate a lot, and I’m constantly trying to convince those around me. Leadership by persuasion.

Heinz Jäger: Your workload is enormous. The impression you make on me is of a player-coach. You are a role model for your employees.

Heino Deubner: Yes, that’s right - I work hard and I do it for the love of it; it’s just plain fun. Every day I remind myself of our goal to be the Number One in Germany one day. We really want to achieve something extraordinary and we know that that’s only possible if we give our all, 100%. It’s easy to say that you give your all, but believe me, we have many employees who really do just that.

Heinz Jäger: What are your plans for the future?

Heino Deubner: I’ll confine my answer to my career development. I want to build up druckerfachmann.de and I won’t let up while I’m doing it.
It’s a great challenge for me to provide solutions to the large and existing potential in the market. You know that we are a young company and, in the mid- to long-term, we are reliant on partners; this is a major area of my work right now.

With the aim of being Number One in Germany, I have a great deal of work before me, which means that I don’t have to worry about plans for the future. I only have the one plan. To continue with the successful development of our young and fantastic company.

Heinz Jäger: I wish you and your team every success. Thank you for speaking with us.
 

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Tips & Tricks: Cross-border Transaction (3)

A cross-border transaction is an international company transaction in the form of a take-over or a fusion, from both the buyer’s or seller’s point of view.

Cross-border transactions involve parties from at least two countries. Compared to “simple” domestic business, cross-border transactions require a greater degree of experience and expertise. Thus, many medium-sized companies turn to experienced and competent consultants for assistance with the preparations, negotiations and execution of international M&A transactions to aid the realisation of the respective growth strategies.

Author: Nadine Jörges

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Schillerstr. 101 • D-63512 Hainburg • Tel. +48 (6182) 990483 • E-Mail: Vorstand@JPMergers.com
www.JPMergers.com

Mergers & Acquisitions • Partnering • Financial Engineering • Interim Management
 

Fusion: The Alternative to Company Succession (II)

In the first part of our article on fusion (see JPDR No. 02/05) we reported on transaction models with a “gentle” change of shareholders so that the frictions typical to company successions are avoided. The fusion partner, on the other hand - in this case a strongly expanding (young) company - is presented with an attractive opportunity for rapid (inorganic) growth without unduly burdening their financial resources.

The second part of our article addresses the ways to achieve an efficient fusion process.

Ways of efficient fusion

Without doubt, a company fusion is more than the simple coming together of companies. Essential to a fusion, is to achieve a lasting harmonisation of corporate cultures, structures and processes. The legal act of signing contracts is the conclusion of intensive, sometimes month-long preparations that are followed by further strenuous months of integration.

1. Rules of play, communication

The starting point of this process is often a no-strings conversation between entrepreneurs at a trade fair or congress, for example. At some point the idea crops up that cooperation would be of mutual benefit and the first information and documents are exchanged. Over time, the initial idea develops into a firm intention. Before talks become more involved common binding rules of play have to be defined, at the very latest when an expanded circle of people such as specialist departments are to become involved:

• Precise definition of the trustworthy persons who are to be involved in the fusion process, and

• The agreement of internal and external rules of communication (incl. non-disclosure).

For some it is the most natural thing in the world, for others it seems excessive; in practice a lack of game rules - or even poor rules - can lead to the mistakes that cause fusions to fail and, under certain circumstances, can cause lasting damage. External communication in particular makes high demands on discipline. A fundamental principle should be, to put it loosely: “As long as the ink on the contract isn’t dry, there’s not a single word to be said, either internally or externally!" Who can forget the public ridicule after the failure of the fusion between the Dresdener and the Deutscher Bank?

2. Benchmarking / Due Diligence

Generally speaking, the goals of a merger are:

• The improvement of the market and competitive situation

• Broadening of the product or customer portfolio

• Realisation of synergies and scale economies

The synergy effects mentioned above do not necessarily result from fusion by default, as one may expect, but are the hard-earned perceptions of one-off opportunities. It is essential that both companies analyse their structures - early on and without reservation - for the selection of the future common procedures according to the principle of best practice. This is easier said than done; which department leader is happy to face criticism of his area of responsibility, or is even ready to admit that the colleague in the partner company has come up with better solutions?

It is strongly recommended that a neutral moderator should be taken aboard to maintain objectivity in the discussions.

Let’s continue with the theme of humaneness. From time to time during the pre-merger process we experience a phase of collective euphoria or even “infatuation” which is followed by a “cold shower” of hard facts. In exercising mutual due diligence to the benefit of both parties, all of the relevant facts pertaining to the fusion partners must be ruthlessly laid open for inspection. Excessive tactical manoeuvring or withholding of information is always detrimental to the future cooperation. Just imagine a situation arising whereby process risks unknown to the partner suddenly emerge just a few months after the fusion. In such cases a forthright approach is recommended so that potential stumbling blocks can be identified and eliminated at an early stage.

Possible focus points for due diligence:

• Legal structures

• Historical data (annual financial statements)

• Finances, contractual obligations, permanent debt obligations

• Assets, trade marks, etc.

• Current business development

• Taxation, law suits

• Employees, organisation, etc.

3. Target organisation / business plan

On the basis of a common and comprehensive data base (-> Due Diligence), the intended corporate structure should be developed (or even negotiated, on occasion). This involves the compilation of a common organigram with the planned allocation of the leadership positions. This is the starting point of many follow-up processes. One should indeed be clear about the fact that a fusion will affect each and every (!) part of the company.

The shared strategic visions for the future should be documented in the form of a business plan. The business plan sets the standards by which all of those involved will test their achievement of the common quantified and agreed goals. What’s more, the necessity of documenting this plan ensures that the companies go beyond mere philosophising and that they truly commit themselves to the common strategy. This is also important in view of the fact that other partners, such as banks, must also be approached with this theme in a suitable manner.

4. Company valuation

To get back to the shareholders:

Both parties have now gained a detailed impression of the other company, possibly through due diligence, and have agreed upon a common strategy which has been documented in the form of a business plan.

Now is the time to negotiate the proportion of shareholding that the two sides will take up in the new company. First indicators may be provided by company valuation. Varying amounts of effort can be invested in the different valuation methods. One should bear in mind that the micro-economical “nutritional value” of these methods is questionable; none of these methods can truly provide an accurate and comprehensive representation of all aspects of either the existing companies or of the future common company. By way of example, ask yourself if and how future planned synergy effects are to be considered in the allocation of shares. An agreement upon the proportion of shares requires judgement and a consensus based on pragmatic evaluation methods. This is of such importance because, unlike the situation of company sale or acquisition, the old and new shareholders have to have confidence in one another for their post-transaction cooperation.

5. Company law / Closing

The definition of the future allocation of shares is a big step towards an agreement based on company law. What follows is the drafting of transaction contracts, generally by agreed expert lawyers. The best suited transaction model should be decided in advance. Also to be considered is the taxation position of the circle of shareholders. The early involvement of taxation and legal experts is recommended for individual and optimised solutions.

The first climax after a demanding yet motivating pre-merger phase of a fusion is the closing of the transaction contracts. The legally binding signature under the transaction contracts represents the starting shot for the actual integration of the two companies.

But whoever said that dynamic business has anything to do with standing still?

In the third part of our article we will discuss possible exit scenarios and financing the fusion.


Author: Hans Jürgen Kenntner
 

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Some topics of our next JP Director's Report

• Tips & Tricks: Seed Capital

• Search for orientation

• Cross-border Leasing

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The JP Mergers & Finance AG

Combining competence in corporate finance with classical management consulting generates strength.

Our core competences are:
Corporate finance, mergers and acquisitions, partnering, financial engineering, strategy / planning / controlling, restructuring, participation management.

For further information please call us or send a brief e-mail to eMail. We shall be pleased to contact you.

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Acknowledgements & contact

JP Mergers & Finance AG
Schillerstr. 101
D-63512 Hainburg
 

Tel.: +49 (6182) 9904-83
Fax: +49 (6182) 9904-88
eMail: Vorstand@JPMergers.com
Internet: www.JPMergers.com

CEO: Heinz Jäger

Chief editor: Hendrik Spod

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Confidential copyright © JP Mergers & Finance AG 2005. Reproduction prohibited without preliminary authorization.