Kensington harnesses the power of digital deal sourcing
M&A activity in Switzerland and Germany has rebounded over the past few months, according to Jens Grasshoff, Co-Founder and Managing Partner at Kensington M&A. Pent-up demand in the wake of the covid pandemic and increasing digitalisation have boosted cross-border deals in these markets.
“The pandemic has had a significant impact over the past two years, and the start of the Ukraine war also had a negative impact on investors and sellers in the SME sector,” says Grasshoff. “But today, there is a relatively high demand from entrepreneurs who want to sell their companies, across all sectors – in my opinion, it’s even higher than shortly before the pandemic.”
In M&A transactions, cross-border boundaries are increasingly blurred as the use of technology such as video calling, social media platforms and online dealing solutions becomes more commonplace.
“National borders are perceived less and less,” says Grasshoff. “This morning, I had a Zoom meeting for an energy company from northern Germany that is for sale, with a real estate company from Switzerland that would like to acquire this business.”
Brand awareness is crucial to M&A success
M&A in the Swiss and German markets remains challenging. Success relies on creating strong brand awareness and achieving critical mass, says Grasshoff.
“There are more than 800 M&A advisors in Germany alone and the ones among them operating in smaller firms, are likely to struggle to gain traction in the years ahead,” says Grasshoff. “I expect consolidation within the next two to three years.”
His firm is part of the broader Kensington Group. Founded 15 years ago, the Konstanz-based company covers ten industry segments, ranging from art to commercial real estate. It even has its own lifestyle magazine so promoting the brand is second nature. The M&A business is relatively new, and it did not have the easiest of starts. Launched at the end of 2019, Kensington M&A focuses on the Swiss and German markets in projects ranging from 500,000 to 15 million euros.
“We started as the Covid pandemic began so a lot of clients put their sales on hold,” says Grasshoff. “But two to three months ago activity picked up and it is now stronger than ever. We have lots of new projects to manage.”
Digitalisation ramps up exposure
The Dealsuite platform has played an important role in expanding the reach of the M&A advisory firm, while its recently launched franchise system is also boosting market presence.
Grasshoff has been active in the M&A business for almost 20 years and has sold more than 120 companies during this time. Whether he is working with a large creche or a construction company, his process remains the same. He takes a pragmatic and goal-oriented approach, tapping into an international network of several thousand prospective buyers and investors and intensively supervising all projects to reach a quick conclusion.
During the Covid pandemic, achieving satisfactory deals in reasonable timescales was particularly challenging. Banks were reluctant to finance investments and German banks are often a lot slower to finalise agreements than their counterparts in other European countries. For one deal, Grasshoff was mandated to sell a beauty institute in the centre of Cologne. The school trained around 200 students in the field of cosmetics every year and generated above-average profit margins, with plenty of scope for expansion beyond the region. Changes in the administrative requirements meant that the school could offer new publicly recognised training and further education concepts. But he needed a particular type of investor that could realise this potential. That meant searching a wide pool of prospective buyers, and quickly.
That buyer was found on Dealsuite. A specialist in business processes concerning education companies, it purchased the company for €1 million, rebuilt it, and resold it for €2 million four years later.
Strength in franchise
The Kensington Group was built on a franchise basis. What began as a small real estate boutique in Mallorca with only four employees has grown to a large well-established company. Taking a leaf out of its parent company’s book, Kensington M&A launched its own franchise system nine months ago. In that time, it has already secured 16 partners and received more than 150 requests from M&A advisors who would like to join the scheme.
Working with the University of St Gallen, the company delivers comprehensive training on how to be an effective M&A professional. There is cross-networking too – one client whose company he sold is now looking to retrain and join the Kensington Franchise! The aim is to have 35 partners by the end of this year.
More deals in the pipeline
Dealsuite makes it easier to do cross-border deals, especially for the bigger deals of above €1 million in revenue, says Grasshoff. One of his current propositions has already received a lot of requests on the platform. The Germany-based company offers combined heat and power plants for the generation of energy throughout Europe and - with the recent rise in energy and gas prices - its products are in high demand.
“We put every deal, if it’s big enough, on Dealsuite,” he says. “It’s the perfect market maker. You will always need people to ensure the cultural fit between the parties, that will never disappear, but Dealsuite is a really good instrument to support the selling process.”