Managers become bolder with buyouts

Management buy-outs are becoming increasingly ambitious. www.1point401k.com

Managers and workers are becoming bolder when it comes to buying the firms where they work.

The number of management buyouts (MBOs) fell slightly in 2001 compared with the previous year, but the size of firms being taken over by their management has been rising significantly.

A report from the Swiss Private Equity and Venture Capital Association (SECA) and The Corporate Finance Group show that the number of MBOs in Switzerland in 2001 fell to 34 from 40 in 2000.

Spinoffs

In most cases (23) the MBOs were spinoffs of departments or subsidiaries rather than whole companies, with the largest being from Basel’s Regia Gruppe, a printing house, and Zug’s Simultan, one of Switzerland’s largest independent IT companies.

The Simultan spinoffs trace their roots to a rocky merger between Simultan and Wickert, Kleeb & Partner in 1999. The deal led to the spinning off of at least two departments into independent firms in 2001, including RedIT Group, with 320 employees, and Allocare, with 70 employees.

The number of MBOs in Switzerland varies from 35 and 50 deals a year. The last boom year was 1997 when there were 60 MBOs, according to Beat Unternährer of The Corporate Finance Group.

Larger deals

But the deals are getting larger (measured by the number of employees). MBOs in Switzerland in 2001 affected more than 4,000 Swiss workers, according to the report.

“With more and more capital available from national and international private equity funds, MBOs are now possible at larger firms,” says Unternährer in the report.

The largest transaction in 2001 involved a Financial Buyout of Soudronic in Bergdietikon where Doughty Hanson’s participation in an earlier MBO was purchased by two Private Equity Houses and the management.

Another large deal, involving 500 workers, was the takeover of the carpet production business by a group of employees of the Forbo Teppichgeschäft in Eglisau.

SECA and The Corporate Finance Group believe MBOs are becoming a viable alternative to a trade sale. “Currently, one quarter of all sales of firms are sold to a group of employees or, in some cases, a single member of management,” says Unernäher.

The statistics gathered by SECA and The Corporate Finance Group are based on publicly available information, as well as primary research. The totals do not include sales or MBO of foreign subsidiaries of Swiss firms.

by Valerie Thompson