This video was made at GREIF VELOX in Lübeck, a BPE portfolio company acquired in an MBO in 2018.

Solving succession

First questions

Into safe hands?

Succession solutions with BPE as a long-term and value-oriented future shareholder – via a Management Buy-out or Management Buy-in – ensures the independence of the ”Mittelstand” company.

BPE replaces entrepreneurs with entrepreneurs, rather than with managers. This is the only way to ensure that the entrepreneurial spirit, which combines an exceptional level of commitment, a high level of identification with the company and its staff, as well as the enormous innovative power and flexibility typical for ”Mittelstand” companies, is maintained.

Internal or external
successor?

If an entrepreneur has the wish to entirely resign from operational responsibility when selling, the decisive question is who can and wants to take over the operational functions in the future.

Owner stays on board in an operational manner

When selling the company, the entrepreneur can initially continue to operate within the company if this is his wish. The motivation to do so may be to partially realise the company value for the benefit of risk diversification and to further develop the company’s potential with the help of a new majority shareholder. This specific case is known as Owners Buy-out and can be an initial step towards the arrangement of a subsequent succession.

Existing second management level with leadership ambitions

Is another qualified and motivated managing director or a second level management team willing to take over the company and its responsibilities? Furthermore, are they committed to financially participate by acquiring a stake in the company and taking on the entrepreneurial obligations that accompany it? This case is known as Management Buy-out (MBO).

External successor necessary

If this is not the case, there is the possibility of using an external entrepreneurial manager. This entrepreneurial manager must have the necessary ambition and ideally have been part of BPE’s Management Buy-in (MBI) Candidate Network (BPE MBI-Initiative) for a number of years. This prerequisite ensures that he has the necessary experience, appropriate qualifications and is additionally prepared to make a financial as well as an entrepreneurial investment.

… or a combination of both, the success model par excellence

Many cases involve the implementation of both an internal and external succession planning. Interestingly, this is the most successful variant, as stability and continuity of existing managers are augmented by the diversity and complementary experience of new, external managers.

Will the location be
safeguarded?
What will happen to the workforce?

Yes, the acquired site ordinarily represents an indispensable asset to the company and is therefore an important basis of the acquisition. Since BPE is neither a strategic acquirer nor a competing company, the acquired site is crucial in most cases.

Just like the preservation of the company site, the retention of the workforce is of fundamental importance, as it represents an essential asset to the company. The local roots and consistent specialisation is a hallmark of German ”Mittelstand” companies. We see an experienced and effective workforce as the capital and the basis for further successful development of a company.

How is the enterprise value determined?

Using the earnings multiple method, the value of the company and the resulting purchase price are accurately and transparently determined.

The basis for the valuation is a sustainable EBIT (Earnings Before Interest and Taxes), which is subsequently multiplied by a market-driven factor. The magnitude of the multiplier depends on various factors, such as technical expertise, national or international positioning, growth potential or R&D capacity.

Company liabilities are deducted from the enterpreise value calculated as per the above. This straightforward calculation results in a value, which represents the equity value (purchase price) of the company.

Factors influencing the company value

Technical competence
Positioning
Growth potential
Research dynamics
Development dynamics
Liabilities

Succession solutions with BPE as a long-term and value-oriented future shareholder – via a Management Buy-out or Management Buy-in – ensures the independence of the ”Mittelstand” company.

BPE replaces entrepreneurs with entrepreneurs, rather than with managers. This is the only way to ensure that the entrepreneurial spirit, which combines an exceptional level of commitment, a high level of identification with the company and its staff, as well as the enormous innovative power and flexibility typical for ”Mittelstand” companies, is maintained.

If an entrepreneur has the wish to entirely resign from operational responsibility when selling, the decisive question is who can and wants to take over the operational functions in the future.

Owner stays on board in an operational manner

When selling the company, the entrepreneur can initially continue to operate within the company if this is his wish. The motivation to do so may be to partially realise the company value for the benefit of risk diversification and to further develop the company’s potential with the help of a new majority shareholder. This specific case is known as Owners Buy-out and can be an initial step towards the arrangement of a subsequent succession.

Existing second management level with leadership ambitions

Is another qualified and motivated managing director or a second level management team willing to take over the company and its responsibilities? Furthermore, are they committed to financially participate by acquiring a stake in the company and taking on the entrepreneurial obligations that accompany it? This case is known as Management Buy-out (MBO).

External successor necessary

If this is not the case, there is the possibility of using an external entrepreneurial manager. This entrepreneurial manager must have the necessary ambition and ideally have been part of BPE’s Management Buy-in (MBI) Candidate Network (BPE MBI-Initiative) for a number of years. This prerequisite ensures that he has the necessary experience, appropriate qualifications and is additionally prepared to make a financial as well as an entrepreneurial investment.

… or a combination of both, the success model par excellence

Many cases involve the implementation of both an internal and external succession planning. Interestingly, this is the most successful variant, as stability and continuity of existing managers are augmented by the diversity and complementary experience of new, external managers.

Yes, the acquired site ordinarily represents an indispensable asset to the company and is therefore an important basis of the acquisition. Since BPE is neither a strategic acquirer nor a competing company, the acquired site is crucial in most cases.

Just like the preservation of the company site, the retention of the workforce is of fundamental importance, as it represents an essential asset to the company. The local roots and consistent specialisation is a hallmark of German ”Mittelstand” companies. We see an experienced and effective workforce as the capital and the basis for further successful development of a company.

Using the earnings multiple method, the value of the company and the resulting purchase price are accurately and transparently determined.

The basis for the valuation is a sustainable EBIT (Earnings Before Interest and Taxes), which is subsequently multiplied by a market-driven factor. The magnitude of the multiplier depends on various factors, such as technical expertise, national or international positioning, growth potential or R&D capacity.

Company liabilities are deducted from the enterpreise value calculated as per the above. This straightforward calculation results in a value, which represents the equity value (purchase price) of the company.

Factors influencing the company value

Technical competence
Positioning
Growth potential
Research dynamics
Development dynamics
Liabilities

Practical examples

Watch with sound

SEALABLE
BPE Corporate divestiture · MBO

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SEITZ Heimtiernahrung
BPE Succession planning · MBI

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Römheld & Moelle Eisengießerei
BPE Succession planning · MBO/MBI

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VTN Die Härterei
BPE Corporate divestiture · MBO