This video was made at GREIF VELOX in Lübeck, a BPE portfolio company acquired in an MBO in 2018.
Five steps to the goal
After the initial contact, a personal meeting should take place in order to get to know one another. This can either take place at the company’s premises or, if strict confidentiality is to be guaranteed, at BPE’s offices. It is usually followed by the exchange of a signed confidentiality agreement before any meaningful and sensitive documents are sent to BPE.
If possible, this should be followed by a company site visit. Ideally, an indicative company valuation can be presented and discussed within the first two weeks following any initial contact. In addition, a basic assessment and concept for a potential transaction can be determined and reiteratively discussed. Helpful, yet not absolutely necessary, for the initial assessment is the presentation of a detailed and conclusive business plan as well as annual financial statements of the company.
In the period between the second and third week, the proposed transaction can be formulated in a more detailed manner and a mutually acceptable offer can be prepared. Financing will be structured in an optimal way considering future requirements of the company.
The participation structure varies from case to case and is based on the unique needs of the parties involved. Other influencing factors are the existing capital structure, tax and corporate law conditions, as well as the preferences and requirements of future partners.
Letter of Intent
Following discussions between the parties on the key criteria and framework of a possible transaction, BPE will prepare a detailed offer in the form of a Letter of Intent (LOI). The Letter of Intent includes a detailed description of the terms and conditions of the envisaged transaction. This should be the basis for the implementation of the transaction and should cover all relevant issues.
The signing of such a Letter of Intent is scheduled for the fourth week and serves as a starting point for subsequent reviews and the following due diligence phase.
Depending on the size and complexity of the transaction, a detailed investigation and (re)examination of all economic and legal information as well as the market environment is planned. Typically, this process takes place between the fourth and eight week. Furthermore, if necessary, financing commitments will be obtained from all banks involved and an initial draft Sale and Purchase Agreement (SPA) will be prepared.
Usually, the due diligence process consists of the examination of the following individual components:
Sale and Purchase Agreement (SPA)
Simultaneously, SPA negotiations are set to begin and should not exceed a period of three weeks. Ideally, the transaction should be completed three months following the initial contact.
After completion of the transaction
An essential part of BPE’s investment philosophy is the support and development of its portfolio companies after the investment has been made. After the completion of the transaction process, a company advisory board is established. The advisory board consists of external experts, the selling entrepreneur if applicable, and a representative of BPE. The advisory board assesses the progress of the company during the sensitive succession process and supports the company’s new management in defining a sustainable, long-term strategy.
The new shareholder agreement includes individually set intervals and methodologies by which management informs BPE about relevant developments in the company. Although BPE is a “hands-off investor”, we support our portfolio companies in certain areas if appropriate. For example, we have actively supported existing portfolio companies in the acquisition of complementary companies or business units. This also applies to the search for qualified personnel as well as to decisions on major investment and expansion projects. Due to the limited number of portfolio companies, we are always available at short notice and without bureaucracy.