Richard G. Ramsauer, Managing Partner at VTC Industriebeteiligungen and Rolf Schwirz, Chief Ex-ecutive Officer at FRIWO AG presented the fascinating takeover of FRIWO AG by VTC and gave insights into the future strategy of the company.
In the summer of 2008, VTC acquired FRIWO AG, a company working in the field of chargers and power supply. Seventy-six percent of FRIWO’s public shares were owned by the private holding company of Stefan Quandt, while the rest of the shares were in the hands of other free shareholders.
After first discussions between VTC and the potential seller (the private holding company), it became clear that there were two options to pursue the transaction. As FRIWO AG is a public company, the annual general shareholders meeting was scheduled roughly two months after this first meeting. The potential seller wanted to avoid commenting to the other shareholders about the stage of the transaction. Therefore, the first option was to work out a deal quickly before the shareholders meeting, while the second option was to wait until after the shareholders meeting and pursue a broader, less hurried M&A process.
VTC opted for the first option. In the end, there were only four weeks between the first meeting with the management of the holding company and the signing and closing of the deal. This transaction was hindered by several additional factors.
VTC had to work through the public markets making a takeover offer in order to comply with market regulations. On top of that, VTC was not allowed to see the company premises or speak with FRIWO management. This greatly limited the due diligence process to gathering information through desk research, discussions with market experts and the holding company’s management.
Luckily, other factors allowed further insight into FRIWO’s situation, which made the transaction possible.
As a public company, FRIWO was publicly listed for thirty years. Therefore, information could be collected from the long public record. Furthermore, the Quandt family was the majority shareholder for a very long time. These two aspects guaranteed transparency and trust. Finally, FRIWO sold their main business line—the production of mobile phone chargers—to Flextronics shortly before the transaction. As a result, the money obtained through this sale covered about 60 – 70 percent of the purchase price, offered by VTC.
All these factors gave VTC the decisive confidence to complete the deal and to end up owning 85% of the shares of FRIWO AG.
However, this was only the first step. After the transaction, the change management process began. By exerting their influence through the supervisory board, VTC started to shift the strategic focus of the company away from the focus on commodity products towards tailor-made customer solutions. In addition, FRIWO set up two production factories in Vietnam in the last three years and are now employing approximately 2,000 people there. This guarantees stable production and a good cost structure, allowing for a bigger margin growth. Overall, these measures have led to 6 percent growth during the last decade.
FRIWO follows a three-step plan to be even more successful in the future.
The first step is to enhance the production in Vietnam, not only to increase the capacity, but also to foster further vertical integration.
The second, intermediate step is to set up an operational excellence program, which includes management innovation. This includes reorganizing the company and work on the product features.
The final goal is to transform the company from a pure product company into a system provider.
VTC invested €55 million, made €40 million through dividends and holds 85 percent of the shares of FRIWO valued at €130 to 150 million.
Richard G. Ramsauer,
VTC IndustriebeteiligungenRolf Schwirz,