as a “real” succession solution

Initial situation:
No successor in the own ranks

In many companies succession planning becomes a problem when the existing second management is not able or willing to take over the operational management or the entrepreneurial role of the company.

In these cases where no suitable operational successor is available to take over entrepreneurial responsibility, the succession planning becomes a real “succession problem”.

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SEITZ Heimtiernahrung · Management Buy-in

The outside solution

The solution is known as a Management Buy-in (MBI) and entails that the future managing director and entrepreneur comes from outside the company. However, this does not mean that the second management level cannot be (entrepreneurially) involved additionally.

An owner-managed ”Mittelstand” company is usually characterised by an organisational and management structure tailored to the current entrepreneur. Such a structure is built on top of a loyal second management level, which often has no leadership and/or entrepreneurial ambitions (anymore). This is an excellent starting point for a new external manager. As a “newcomer” an external manager can build on the many years of experience of the existing second management level if he succeeds in winning them over. This can compensate for the main disadvantage of the MBI, namely the fact that the new manager does not know the company from “inside”.

The basis for success

An alliance between the existing management level and the MBI-Candidate, who is characterised by complementary experience and high dynamic of change, is an excellent prerequisite for identifying unexploited opportunities and sustainably increasing company value in the long term. In addition, the participation of the second management level is considered as a recognition of previous performance and thus creates trust.

Strong alliance
with BPE MBI-Candidates

Ideally a candidate with whom BPE acquires a company is well-known and has been a part of BPE’s network for a number of years. However, the question of whether one is prepared to jointly acquire a company must be clarified in advance. A situation in which the determination to cooperate between the MBI-Candidate and the private equity firm is called into question would further increase the high complexity of a succession planning.

Through the BPE MBI-Initiative BPE has – for a number of transactions – been able to successfully form a committed buying alliance with a respective MBI-Candidate. Experience has shown that this increases the probability of actually engaging in a deal and closing a transaction. The buyer alliance between BPE and a suitable MBI-Candidate represents a unique selling proposition. Therefore, access to MBI-Candidates and knowledge of their suitability and willingness to actually carry out an MBI is an important prerequisite for being dedicated to succession problem solutions in the German “Mittelstand”.

Only the best

BPE institutionalised this concept in 2007 and, based on many years of experience, launched the BPE MBI-Initiative. Through regular events tailored to the identification of potential MBI-Candidates (BPE Entrepreneur Day and BPE MBI-Dinner), candidates previously identified through BPE’s extensive network are informed about the exclusive concept and their interest and suitability are evaluated. Only a limited number of approx. 10 managers are subsequently enrolled in the BPE MBI-Initiative. BPE also pro-actively sources possible transaction opportunities for its MBI-Candidates. Some MBI-Candidates identified through this initiative have already been active in previous BPE portfolio companies.