JP Mergers Director's Report December 2017 -

JP Director's Report

In this JP Director's Report: Editorial • Uncertainties in the determination of enterprise values Selected Opportunities:Company Sale • Company Purchase • Impressum

I believe in miracles Dear Readers, As children we are confronted early on with solemn questions of faith. For example: Do you believe in Santa Claus? At a certain age, belief in the miracle of Christmas is unshakeable. Where else would gifts come from? At some point, however, children become sceptical. And those with older siblings often have their belief in Christmas destroyed quite early. Disenchantment is the speciality of older children; from one moment to the next a rock-solid certainty turns into disappointment. Later, the magic of Christmas becomes the wonderful childhood memory of a time when believing was still so easy. It seems that the world we live in today doesn’t waste time in teaching us that there is no place for miracles or mysteries. Those who believe nevertheless are quickly dismissed as dreamers or fantasists. Only reality counts: the visible, the tangible, the provable. And this reality can sometimes be harsh and bleak. I don't know how you feel, but something seems to be missing from this world view. There is a void, a noticeable absence - the absence of magic and of a comforting, fundamental truth that transcends our lives. And what would be so wrong if that were indeed the case? Perhaps it would do us all good to marvel more, to question ourselves and to listen every now and then to the enthusiastic voices we had as children. The physicist Albert Einstein of all people, a very rational person, encouraged us to do just this. He said: “There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle.” And to be honest, who wants to live in a world where miracles are not possible? With this in mind, I wish all of us and our families a wonderful Christmas and a magical New Year. Season’s Greetings, Heinz Jäger

I believe in miracles

Dear Readers,

Heinz Jaeger As children we are confronted early on with solemn questions of faith. For example: Do you believe in Santa Claus? At a certain age, belief in the miracle of Christmas is unshakeable. Where else would gifts come from?

At some point, however, children become sceptical. And those with older siblings often have their belief in Christmas destroyed quite early. Disenchantment is the speciality of older children; from one moment to the next a rock-solid certainty turns into disappointment.

Later, the magic of Christmas becomes the wonderful childhood memory of a time when believing was still so easy.

It seems that the world we live in today doesn’t waste time in teaching us that there is no place for miracles or mysteries. Those who believe nevertheless are quickly dismissed as dreamers or fantasists. Only reality counts: the visible, the tangible, the provable. And this reality can sometimes be harsh and bleak.

I don't know how you feel, but something seems to be missing from this world view. There is a void, a noticeable absence - the absence of magic and of a comforting, fundamental truth that transcends our lives. And what would be so wrong if that were indeed the case? Perhaps it would do us all good to marvel more, to question ourselves and to listen every now and then to the enthusiastic voices we had as children.

The physicist Albert Einstein of all people, a very rational person, encouraged us to do just this. He said: “There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle.”

And to be honest, who wants to live in a world where miracles are not possible?

With this in mind, I wish all of us and our families a wonderful Christmas and a magical New Year.

Season’s Greetings,

Heinz Jäger

Selected M&A Opportunities (I)

Company Sale

Frozen Bakery Products | Greece

Strong Greek manufacturer of frozen bakery products (sweet and savoury cakes) with 300 employees and a turnover of € 30 million with an EBIT margin > 7 % is looking for a suitable partner. High growth potential, especially with expansion of export business.

Project 173077

Hardware Distributor | SO-Europe

Leading South East European distributor of information and communication technology with > 90 % B2B trade and a growing sales volume of just under € 90 million is looking for an acquirer.

Project 173593H

Medical Technology | Europe

European medical technology company is looking for investor / partner to expand its activities - including clinical studies and subsequent marketing of minimally invasive cardiological instruments. Investment volume > € 5 million.

Project 178941

IT System Integrator | Southeast Europe

Provider of business applications, IT infrastructure/cloud solutions, IT services and consulting with just over 100 employees and a sales volume of € 11 million is open for a partnership or takeover.

Project 179209I

Building Technology | India

Strong Indian specialist for building services engineering (especially HVAC & MEP) with more than 350 employees at 7 locations is looking for suitable partners (joint venture / investment) to better tap the enormous growth potential. The company has a turnover of around € 80 million, an EBIT margin of around 8 % and strong growth of around 30 % CAGR.

Project 158993

Biomass power plant | India

Operator of a 10 MW biomass power plant (annual turnover 7 Mio. € with 35 % EBITDA margin) is looking for a suitable partner for the expansion by a second 8 MW biomass power plant under construction (20 years energy purchase agreement) as well as further projected plants (50 MW until 2030).

Project 172946B

Wine Specialist | Germany

Sales company for selected wines in (individualized) representative large bottles for hotels and restaurants of the upper category, renowned resellers, B2B and private customers looking for a buyer.

Project 179328

Packaging | Germany

A suitable acquirer is sought for a German specialist of transparent folding boxes and round cans with a stable annual turnover of € 5.5 million. Support for establishing a foothold in Germany might be provided by the current owner (an industry service holding).

Project 58393

Cosmetics / Hygiene | Eastern Europe

European manufacturer of cosmetics and hygiene products with 90 % export business, 26 million € turnover and around 6 % EBITDA margin offers a majority position.

Project 173593

Soaps / Cosmetics | Southern Europe

Strongly growing manufacturer of soaps and cosmetics, especially for well-known international customers (hotel chains and retailers) with a turnover of about € 25 million and an EBIT of about € 2 million, is looking for a suitable partner (minority or majority) to support its growth path.

Project 173077S

Logistics | South East Europe

South Eastern European logistics provider - (inter)national freight, courier and freight deliveries, logistics for a supermarket chain - with a fleet of 200 own vehicles and 10 bases is for sale. Turnover around € 30 million with an EBITDA margin of around 10 %.

Project 179209L

Retail Execution Measurement | India

Dynamic Indian company for retail measurement and testing (in-store intelligence, availability visibility indexing, mystery audits, direct-to-bank payouts, tertiary sales measurement, market operating price audit) with 2 locations, access to > 250,000 retailers and > 30,000 retailers on its own Android platform is looking for a suitable partner to seize the immense growth opportunities.

Project 172946E

Villa with Hotel | France

The owner of an estate in southwest France based on a 17th century mansion and 55 hectares of land is looking for a partner to expand its activities. The property has a 3-star hotel with 46 rooms, restaurant, spa/hammam/pool, tennis court, as well as extensive riding facilities with over 40 stables.

Project 179407

Hotel | Germany

A 4-star hotel with 80 rooms / 180 beds, 5 conference rooms, several offers in the field of gastronomy, leisure and wellness located in a holiday region of Southern Germany is for sale. The hotel is successfully led by a professional tenant with long running time.

Project 179328

Uncertainties in the determination of enterprise values

A common question as an entrepreneur is "what is my business worth?", especially with regard to a possible sale of the business. For a first overview, the "multiples" are sufficient, as multipliers derived from past M&A transactions on EBIT / EBITDA / sales in comparable company sizes and sectors. The result is a range within which the enterprise value of your own company is likely to move. It is clear that the enterprise value is ultimately determined by supply and demand in the market and by the other contractual conditions for the sale of a share.

In order to strengthen the own chain of argumentation one tries to find an objective estimation of a company value as possible. Due to different interests of buyer and seller an objective enterprise value can hardly be named. Only subjective marginal prices can be determined, which result from the respective view. Even if the subjective value determination is finally counting in the context of a M&A process, it must be emphasized that the subjective value can only be based on an objective basis.

Despite objective foundations, it is difficult to eliminate uncertainties. The economically correct value of a company is basically derived from the future income that accrues to the owner. If the planned earnings are an initial uncertainty, the exact determination of a capitalization interest rate is even more important.

Although low-risk government bonds have a "low interest rate", riskier investments have a higher interest rate. Often there is a useless discussion about possible trading restrictions on the investments, which in turn drives up the interest rate, too. One should only think about the risk of the company in question that can be expressed in interest rate percentage. The derivation of the capitalization rate via the financing structure is probably too simple an approach and leaves far too many loopholes open. Debt financing can significantly reduce the cost of capital and therefore influence a "standard calculation". In a negotiation process, the future market situation is decisive for the price (enterprise value) in addition to all key figures.

Only listed companies know their actual market values. As an M&A advisor, you therefore have the task of summarizing all the information from the industry in a single code and thus summarizing it in a risk surcharge. The "theoretical" capitalized earnings method is thus brought to life from "outside" ... and will approach a calculation with multiples.

The main uncertainties here are to be highlighted and eliminated:

The uniqueness of a company
The reliability of the fundamentals
The correct use of multiples
Exchange comparative values at transaction values.

In addition to craftsmanship and experience, creativity is also required to represent market risk or risk in general using interest rates. This is a challenge that should sensitise all those involved in order to guarantee subjective success for both negotiating partners, which will be achieved through careful elaboration of the value argumentation.

Author: Tobias Kemmerer

Selected M&A Opportunities (II)

Company Purchase

Convenience | DACH

Western European supplier of convenience products for bulk consumers, such as appetizer plates, mussels, quiches, pies, spring rolls, gratins, is looking for a strategic partner in Europe (preferably in the DACH region), all forms of cooperation (joint venture, equity participation, etc.) are open to discussion, the company generates sales of over € 500 million and is the market leader in its home country.

Project 171331

Food Service | DACH

International food group is looking for investment and cooperation opportunities in the area of food service / bulk consumer delivery service with a sales volume of more than € 50 million, especially in Germany.

Project 179394

Plastic Packaging | Europe

Innovative Western European packaging manufacturer is looking to take over manufacturer that deals with the extrusion or thermoforming of food packaging.

Project 179469

Co-Packing | Europe

Strong European packaging specialist for food is looking for participation and takeover opportunities in the co-packing sector with a sales volume of more than € 10 million.

Project 72603

Industrial Service | DACH

A German industrial group is looking for participations / takeovers in the industrial services sector with a turnover of € 10 million, good earnings and strong growth.

Project 178736Z

Food Ingredients | Europe

Strong international food group seeks acquisition opportunities in fruit processing or natural raw materials for the food industry with a turnover of at least € 10 million and positive earnings situation.

Project 172122

IT Service Provider | Germany

Growing IT service group seeks acquisition opportunities in the area of digitization / transformation from € 6 million turnover and good profitability, primarily in Germany.

Project 179289

Cooling and air-conditioning technology | DACH

European group in the field of refrigeration and air-conditioning technology is looking for expansion companies in the field of installation and maintenance with at least 10 employees in German-speaking countries.

Project 178722

Food production | DACH

Successful group of companies is looking to acquire food manufacturer in German-speaking countries. Ideally succession solutions for companies with at least 1.5 million € EBIT.

Project 175844

Private Equity | Europe

Leading German equity investment company is seeking companies from € 15 million in the IT, industry, chemicals, lifestyle and FMCG sectors to acquire a majority stake.

Project 178736

Industrial Service | Europe

German Industrial Services Group is looking for companies in the areas of maintenance and quality assurance services, digitisation, automation and IoT solutions for further expansion.

Project 174830

Small- and Medium Companies | DACH

Multiple German investment companies and family offices are looking for marketable, medium-sized companies with annual sales of € 10 million or more and good prospects for majority ownership.

Project 178927

Minority Participations | Europe

European investment company offers strengthening of the equity base for medium-sized companies and family businesses with a turnover of € 10 million or more through minority direct investments, especially in Germany.

Project 179082

Producing Industry | Germany

MBI-Investor is looking for production or production-related services, B2B, preferably primary industry, mining, chemical industry, mechanical engineering, metalworking industry, Region: Germany, turnover > 20 Mio. €.

Project 179207

Safety Engineering | Germany

German service provider in the field of security technology is looking for investment opportunities in a strong competitor for further expansion. Turnover from € 5 million.

Project 178736Y

Software & Electronics | Europe

Technology investor invests in innovative medium-sized technology companies with unique selling points. Industries: software, materials, electronics, industrial technologies, mechanical engineering. Turnover greater than € 10 million, positive EBITDA.

Project 158701

Construction | Europe

Strong group of companies in the "construction" sector is looking for acquisition opportunities in construction-related areas, such as manufacturers of building components/articles, building materials and chemicals, as well as construction companies.

Project 59559

In this JP Director's Report:

Editorial • Uncertainties in the determination of enterprise values