Where’s the exit?

Developing scenarios for an investment management company to exit from a private investor’s chemical company.

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Stern Stewart & CO. GmbH
Salvatorplatz 4
80333 Monaco

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Starting situation – buy first, plan later

Owing to problems that originated internally, the chemical group was taken over by a private equity investor during the financial crisis. Despite the takeover, it was unclear whether a medium-sized enterprise could be put back on its feet by an investor. The key question of whether a chemical conglomerate, which in the past had achieved moderate success, could be repositioned in the chemical industry as a problem solver remained unanswered. The only clear goal was to launch an IPO in three to five years’ time – however, there was no roadmap towards achieving this goal.

Project approach – sum of the parts instead of the conglomerate as a whole

Given that an IPO is the most challenging of all sales options, proceeding with a far-sighted perspective was going to be critical for success. A precise analysis of all the business units according to market attractiveness and competitive advantage formed the applied solution for a consistent equity story. Based on an ambitious target enterprise value, a concrete value enhancement plan was developed. The organizational structure that had evolved over time was replaced with a structure that was clearly built according to customer groups. This eliminated duplications and accelerated decision-making. Thanks to a ten-point plan based on a gap analysis, it was possible to speed up the transformation process and identify realistic scenarios for making an exit in three to five years’ time.

Finding – clothes make people – companies are defined by their organizational structures

Even the most highly regarded private equity companies invest time and again without any clear plan of what to do with the target company at an operational level. By focusing too much on the exit strategy, evaluations often overlook potential improvements. Even without a major turnaround within the company, a great deal can be achieved by making small changes to the organization. At the same time, these adjustments must be incorporated into the master plan for reaching the target enterprise value.

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