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DEAL NOTES TIMETOACT GROUP

An investment of time

Equistone partnered with TIMETOACT GROUP’s founder-management team to agree an off-market primary buyout, writes Equistone’s Christoph Wüstemeyer.

Christoph Wüstemeyer

THE WEEK AFTER we announced our investment in TIMETOACT GROUP in June 2021, I took a number of calls from rival private equity firms asking how we had managed to pull off a deal for a company of this size outside of a broad adviser-led auction. The deal was a primary buyout negotiated in a bilateral process and, while nothing is truly ‘off-market’, for a c.€100m business, this was as close as it gets. 

I joined Equistone in the summer of 2020 and in my interview process I expressed my interest in sourcing deals outside of institutional processes, and I had been struck by Equistone’s willingness to invest in developing off-market situations.

As soon as I was in place, Marc Arens (who has since become our DACH/NL Country Head) arranged meetings with contacts in the firm’s network to discuss investment opportunities in the technology sector. It was during this market-sounding process that we came across TIMETOACT GROUP.

I was immediately attracted to the opportunity as it presented a unique situation involving a sizeable asset in a fast-growing technology vertical, with a repeating revenue base. The company offers a range of IT services to medium and large businesses, operating under nine specialist brands at the time. The business is headquartered in Cologne and employs more than 700 people across 16 locations in Germany, Austria and Switzerland.

We were referred to an independent adviser, Frank Fuchs, who had been helping TIMETOACT GROUP’s management team prepare for a partial sale. We spoke to Mr Fuchs on a video conference call in the autumn of 2020. At the time, I had the sense that the call with Mr Fuchs had gone really well, and this was swiftly followed by a second video call, this time with the management team, including co-CEOs Felix Binsack and Hermann Ballé.

Mr Binsack founded TIMETOACT in 1998, and in 2001 the company merged with a business that Mr Ballé had founded. Together, the CEOs remained 100% shareholders and had periodically considered private equity involvement, but a deal never came to fruition. Even now, there was no kind of formal sales process underway.

LEFT TO RIGHT: TIMETOACT GROUP's co-CEOs Felix Binsack and Hermann Ballé with CFO Frank Fuchs.
LEFT TO RIGHT: TIMETOACT GROUP's co-CEOs Felix Binsack and Hermann Ballé with CFO Frank Fuchs.

First steps

Leander Heyken and Dr Marc Arens.
FROM TOP: Leander Heyken and Dr Marc Arens.

After two video conferences, I travelled to Cologne with my Equistone colleagues, Leander Heyken and Marc Arens, to meet the management team. This meeting was an important personality test, and the positive chemistry between us and the company’s leaders was quickly evident.

In the first meeting in Cologne the management team explained they wanted to work with an investor to grow the business, but on the right basis. Valuation was of course important to them, but their objective was not to maximise price but to find the right long-term partner.

After that meeting, we kept in regular contact and worked hard to show that we were committed to putting a deal together. Every time there was an important topic to discuss, we got on a plane and went to Cologne to meet the management team. That commitment paid off and just before Christmas 2020 we signed a Letter of Intent with the business.

Trust and personal relationships are always important in deals, but in a bilateral situation, they are imperative. Other suitors had been introduced to the business by Mr Fuchs, but the founders ultimately agreed to go with us. They could see that our team understood the management team’s values. TIMETOACT GROUP has a down-to-earth culture and the management team appreciated that we recognised this and respected what the company stood for.

Putting in the work

After signing the Letter of Intent, the due diligence process began in the new year, and it would take until May to sign the deal.

The experience was instructive. There is much talk of proprietary deals in private equity circles, but not only are they highly unusual, they also require much more work. In a bilateral process, information gaps have to be filled the hard way. It takes time and some heavy lifting, and sometimes there are still gaps that you, as an investor, have to make a judgement on. There tend to be certain metrics that are very telling, and TIMETOACT GROUP scored very highly in terms of customer references, the very sticky customer relationships, a strong growth with the existing customer base and its strong position to take advantage of trends, such as the digitalisation of the German Mittelstand and the shift to cloud computing.

It is also important to be respectful to management and understand that going through a due diligence exercise for the first time can be unnerving and a bit overwhelming at times.

As private equity investors, we will want to look at the key aspects of the business in forensic detail during diligence, and that can feel imposing for a management team that has never faced that kind of scrutiny before. Equistone is sensitive to this, having faced many such situations before – and so we don’t simply charge forward because for us, it’s never just ‘another deal’. It is part of the Equistone culture to recognise that a company founder is selling part of a business that they have built from scratch and put their heart and soul into.

Part of the deal involved lifting all of the minority shareholders of the subsidiaries into a single holding structure, draw up new work contracts to facilitate that and ensure that the incentive structure was aligned. Finding solutions to such complexities, while supporting management through every step of the process was hard work, and immensely rewarding.

Besides strong organic value creation potential, the investment case saw buy-and-build as a key growth driver for the business and it has been very exciting to see that come to fruition.

A good start

TIMETOACT GROUP's logo and image

It has been almost one year since Equistone completed the investment in TIMETOACT GROUP and I am more excited about the company’s prospects than ever.

Besides strong organic value creation potential, the investment case saw buy-and-build as a key growth driver for the business and it has been very exciting to see that come to fruition.

The business has already signed two add-on deals since our investment. (The management team had completed some M&A prior to our investment, and it has been very satisfying to help them expand that capability and tackle larger targets.) The company has been skilled at finding the balance between bringing new acquisitions into the fold at the same time as retaining the heritage and identity that has made those companies successful. This will go to value when time comes to exit.

Our investment in TIMETOACT GROUP shows that Equistone is a reliable partner and a good match for entrepreneurs and owner-managers, who want to bring in third-party capital to grow a business and implement strategies like buy-and-build, but also stay involved in the company and reinvest.

I am looking forward to meeting more management teams and finding more businesses like TIMETOACT GROUP. There is so much more to go for and that is really exciting. 

A full version of this article appeared in PLATFORM 07, Summer 2022