Case-Studies

Chemicals

A US group in the chemicals industry wanted to sell its German subsidiary, which produces basic materials for the manufacture of medicines.

Terms of reference

A US group in the chemicals industry wanted to sell its German subsidiary, which produces basic materials for the manufacture of medicines. The two managing directors planned a management buy-out involving an equity provider. CMP was instructed to develop an optimised financing package for the proposed purchase through a combination of funds from a variety of public bodies and to subsequently implement the concept with the authorities and the participating banks. The extent to which the necessary investment of the next 36 months could be accompanied by state aid was also to be investigated.

Procedure

After two workshops with the managing directors and a subsequent analysis phase, CMP prepared an innovative complete financing concept that could be broken down into three main operations:

  • Financing the start-up of the managing directors, which acquires the status of a viable business through the purchase and the participation in the company’s assets
  • A surety bond provided by the federal state for the financial participation of the equity investor
  • Subsidisation of the investment over the next 36 months in the form of capitalisable fixed assets with the simultaneous maintenance of existing and establishment of further jobs at the plant in the state. The fact that the company became a classic SME (small and medium-sized enterprise) after the purchase meant that the lost subsidies could be optimised further.

Summary

The buy-out was successfully supported using the three instruments of a start-up, bond and subsidy. It took just 3 months from the application for state aid to implementation of the complete concept. The accompanying funding process was coordinated and implemented in parallel with the purchase process. Through the public funding instruments, the federal state was able to protect its interests in maintaining the location and triggering new investment in production facilities as well as research and development.

Sustainable development

This investment enabled the company to subsequently increase its sales from €10 million to €70 million. Two innovative research and development projects were completed on the site and over 100 high-skilled jobs were created – demonstrating the success that can be achieved with the sensible use of public funds.