Private Equity Minority Investments - Universität St.Gallen

Part Three: Case Study – SimilorGroupSwitzerland’s water tap and water control systems industry. Secondly,Madison undertook a brand repositioning and merged the Similor andKugler brands, which enabled the Company to realize considerable salesand marketing synergies. Arwa was positioned as an architecture brand inthe upper-price segment. With the clear positioning of its brands, Similorgained further market share. Moreover, the Company benefitted from adiversified customer base as it sold both reasonably priced fittings for rentalaccommodations and condos, and also extravagantly decorative items forluxury villas. Prestigious institutions, such as the Tinguely Museum inBasel, the University Clinic in Innsbruck, and the Frankfurt Towers wereamong Similor’s customers. In 2003, the Company was awarded the City ofGeneva Industry Prize. Thirdly, Similor’s business activities were streamlinedby selling the non-core building water tap division. Moreover, uponMadison’s request, IFRS accounting standards were introduced along witha stringent forecast and budgeting process. Controlling and reportingprocedures were professionalized and decision-making processes mademore objective. Finally, the private equity investor was closely involved inselecting new board members as well as recruiting a new CEO and CFO.Madison also improved the quality of staff and fostered a strong corporateculture via regular personnel training sessions, seminars, and companyevents. As a result of these value-enhancing measures, during Madison’sminority investment period, net sales increased from CHF 70 million in2002 to CHF 102 million in 2004, an increase of 46% over two years;EBITDA increased by 49% between 2002 and 2004.DStructuring of the Business Cooperation1 Legal Documents1.1 Legal ArrangementsThe principal legal documents used to regulate the relationship between theowner family and Madison, as well as to regulate corporate governanceaspects included a share purchase agreement, a shareholders’ agreement,the Company’s articles of association, and organizational regulations.The shareholders’ agreement, concluded between A. Kräuliger andMadison, regulated the size and composition of the board of directors,business policy, and the parties’ management involvement; it set rules onthe financing of add-on acquisitions and profit distribution, informationpolicy, veto rights against resolutions of the general meeting and board ofdirectors, transfer restrictions and exit rights, conflict resolution procedures,and ancillary provisions. The shareholders’ agreement was concluded for408