HAWE Hydraulik - investment capital strengthens family business

HAWE Hydraulik goes back a long time: founded in 1949 by Karl Heilmeier and Wilhelm Weinlein in Munich, the company has developed into one of the leading hydraulic manufacturers over the past 60 years. This did not change even when the second and third generation of the founder families took over operations. But even a successful family business is not immune to changes: in 1996 - almost 50 years later - one of the founding families decided to leave the company, and one half of the company was put up for sale.

Banks provided only part of the required amount – Deutsche Beteiligungs AG came to the rescue

‘I knew straight away that we were going to take over the other 50%,’ reports Karl Haeusgen, grandson of company founder Karl Heilmeier and current CEO. But as the banks were willing to provide only half of the required amount, the company had to find another source of capital. In his search, Karl Haeusgen hit upon the website of the German Private Equity and Venture Capital Association (Bundesverband Deutscher Kapitalbeteiligungsgesellschaften – BVK), where he researched ‘private equity firms that appeared to be sympathetic’ and made first contact. ‘We had no experience at all in these matters, and it took us some practice to find the right approach to such discussions.’

For HAWE Hydraulik, selling to a strategic investor or listing the company was out of the question. And regional private equity firms seemed unsuitable due to their investment volumes being too low. The company therefore needed to find a compromise. This is where Deutsche Beteiligungs AG entered the scene, whose spokesman of the board of management at the time was Dr Günther Niethammer. ‘We felt that DBAG has great understanding for typical German SMEs,’ remembers Karl Haeusgen. The decision to work together was made.

Unusual concept leads to success

The concept both parties agree upon was unusual at first glance. The Haeusgen family planned to acquire all shares in the company after a period of seven years. At the same time, DBAG wanted to achieve a return that appropriately reflected the risk related to being an equity investor. To combine these two goals, the company distributed comparatively high dividends over the years. Although this reduced liquidity, it gave HAWE the advantage of not having to transfer a large sum at the end of the period. Both companies also agreed upon a clause giving DBAG the right of acquiring a majority share in the company at a favourable price should the return not meet the agreed targets. ‘The stakes were certainly high, but we believed that we could do it,’ says Karl Haeusgen. ‘And the whole scenario had an extremely positive effect on the company as it motivated our staff.’ Another effect of the investment were the changes initiated by the investor within the company: ‘Deutsche Beteiligungs AG played an important role in increasing the professionalism of our business,’ concludes Karl Haeusgen today.

Impressive sales growth

The company realised its target return after only six years. The bank loans were repaid within 13 years. This positive development continued even once the investor left the company: sales climbed from EUR 110 million in 2002 to EUR 150 million in 2005, and three years later, in 2008, this figure went up to EUR 275 million. The investment paid off for HAWE Hydraulik.