DEAL NOTES RENA

The right chemistry

Equistone’s recent investment in RENA Technologies was the result of seamless cross-border co-operation, local knowledge and a willingness to look beneath the surface, David Zahnd tells PLATFORM.

JANUARY 2020

IN THE SUMMER of 2018, on the terrace of l’Altro, a popular Zurich restaurant, two rival private equity executives sat enjoying lunch. One, from a Swiss fund manager located in Zug, told the other of a company over the border and across the Rhine. There, nestled deep among the dark green hills of the Schwarzwald, an innovative SME was changing the surface of materials. Now, after several years of successful ownership, Capvis was preparing RENA Technologies to be sold.

David Zahnd, an investment director in Equistone’s Zurich office, was intrigued by the description of RENA: a German business involved in cutting-edge machine manufacturing, with a diversified customer base, and with a well-regarded CEO who lives in Zurich. Any deal, thought David, would have a Swiss-German feel. Timo Knak, at KPMG Switzerland, and a former colleague of David, was running the process.

“At the very outset, we said we wanted to meet the CEO as early as possible, because company management is always key to us,” says David. The vendor agreed and Equistone was the only financial investor that managed to meet the CEO, Peter Schneidewind, in the first round of bidding.

Key to winning the deal was speed and trust. The relationship we built with the CEO… the relationship we already had with Capvis… and the relationship we had with the M&A adviser.

Two Munich-based Equistone colleagues, Stefan Maser and Tanja Berg joined the deal team in order to pursue the opportunity. Stefan already had deep experience in the machine building sector and a cross-border presence would be an advantage in the process ahead.

Equistone did not offer the highest valuation, and yet, by early 2019, Equistone had won the deal and the team presented themselves as the company’s new owners, backers and supporters.

“Key to winning the deal was speed and trust,” says David. “The relationship we built with the CEO… the relationship we already had with Capvis… and the relationship we had with the M&A adviser.”

This also meant the team was able to get up the curve fast in terms of understanding the company’s position.The Equistone team had identified several potential risks. The first was the cyclicality of RENA’s end-markets, in particular green energy and semi-conductors. They judged the business sufficiently diversified that the risk of all its customers’ markets declining at once was very small. In addition, during the process, RENA won a new customer in the glass and sapphire end-market – a new vertical. “This was a game-changer for us, because it further diversified the business, and also demonstrated management’s ability to enter new markets.

The next concern: four years earlier the business had gone into insolvency.

“A lot of potential investors did not really dig into the business as they couldn’t get past the insolvency.” But Equistone knew that the business had completely changed under Capvis. In addition, the insolvency came about after the previous owner made a non-core acquisition, which floundered, and for which RENA was liable. Meanwhile solar, RENA’s only end-market at the time, was slumping. Equistone undertook customer interviews and found customers remained well disposed towards the RENA brand.

Tech people

In addition, RENA is not just a manufacturing business, it is a technology company. Its ability to keep ahead on innovation was critical.

“RENA has more than 100 people in its R&D and engineering team, which is a lot for a company of its size. It has more than 80 patents, so it has a very strong intellectual property base. They have proven the ability to apply their technologies to different end-markets and verified that they really are a leader in German-style technological excellence.”

Finally, the Equistone executives were impressed by the CFO, the COO and RENA’s head of R&D, who turned out to be “a brilliant chemist with business sense and vision,” which was essential, given the importance of this role in further diversifying the business.

Finalising the deal

Rather than use typical buyout lenders, Equistone financed their investment using local Sparkassen savings banks, which knew the company well and had also dealt with Equistone previously. The terms of the financing were very attractive.

Before the transaction could be signed, a major customer in California insisted on seeing the prospective owners before giving their change of control assent. Peter and Stefan flew at short notice the four thousand miles to (successfully) present their case.

Now able to seal the deal, the team headed back to the company’s Gütenbach headquarters, to formerly introduce themselves to the workforce. “It must be one of the most beautiful headquarters for an industrial company I have ever seen,” says David. The building complex sits on a thousand-metre high plateau, looking west over the Black Forest, the surface of its panelling shimmering like a mountain stream. Inside, the workforce have a strong community feeling and took a great interest in their new owners. The Equistone team held a welcome meeting with all employees in Germany and video links to Poland and China.

RENA Technology’s high-tech headquarters overlooking the Black Forest.

The road ahead

RENA is now able to exploit numerous avenues of growth. It is a global business in terms of its customer base, and all its end-markets are growing. The team has also identified an opportunity to capture more recurring revenue from maintenance and repair – an area where RENA currently operates below benchmark.

Finally, there is potential for the company to expand its presence through M&A. “For instance, RENA probably doesn’t have quite the presence it deserves in the US market,” says David.

Supporting add-on acquisitions is Equistone’s bread and butter, but RENA has the additional advantage of a CEO in Peter Schneidewind, formerly a consultant with Roland Berger, and therefore has deep experience in integrating companies post-merger.

It is still early days for the investment, but, so far, the business is firing on all cylinders. “It is above what we had expected, and performing well,” says David. “It is a promising start.” ☐

A full version of this article appeared in PLATFORM 03, Winter 2019/20