Case Studies

What applies to automotive manufacturing is also gaining importance in the world of large engine production: demand for energy-efficient systems is growing. For example, gas engines are not only keeping greenhouses in the Netherlands at the right temperature for plant growth, but are also fertilising young tomato plants with filtered waste gas. Motoren-Werke Mannheim (MWM) plays a leading role in the development of these integrated systems with a high-performance engine at their core. The traditional SME recognised the growing significance of special gases, such as those generated by mines, landfill sites and biogas plants, earlier than others in the industry. With the private equity firm 3i on board, MWM has grown into one of the global market leaders for efficient drive systems in the energy generation and combined heat and power plant segments.

‘Our engines are equally interesting for natural gas as well as for biogas applications. The performance of MWM gas engines is almost the same, whether they are powered by natural gas or biogas,’ says Peter Grosch, CEO of MWM. The company has over 1,100 employees around the world and generated sales of approximately EUR 345 million in the 2009/10 financial year. The mechanical engineering firm from Baden-Württemberg is already among the leading suppliers of standalone power generation plants today. For example, MWM plants provide a decentralised, reliable energy supply in hospitals, shopping malls and computer chip factories around the world.

DEUTZ Power Systems becomes MWM

 But MWM wasn’t nearly as well positioned until three years ago. Not only did the company lack a competitive international sales structure, but the former parent company was also reluctant to invest in the Baden location. On the contrary: DEUTZ AG from Cologne, which had acquired the company once founded by automobile inventor Carl Benz in 1985, had to implement strict reorganisation measures itself and offered its Mannheim subsidiary DEUTZ Power Systems for sale in the spring. ‘Employees here at the parent plant in Mannheim faced a situation that scared them. Everyone first had to learn how to handle that,’ recalls MWM joint works council member Michael Klatt. More than 30 buyers indicated their interest in the engine specialist.

Eventually the private equity investor 3i was chosen, thanks to a concept that convinced both management and employee representatives. In the face of rising raw-material prices, growing energy consumption and increasing scarcity of crude oil resources, the private equity firm recognised the potential of MWM. In order to build a strong position for MWM in the renewable-energy sector, the new owner not only promised to make significant investments in the production facilities but also committed to the development of global sales structures. In addition, 3i granted a site guarantee to the employees along with codetermination via the supervisory board and excluded enforced redundancy until the end of 2011. The employee representatives unanimously voted in favour of taking the financial investor 3i on board.

Investment capital finances innovations

The SME has been flourishing ever since. An old tram depot was converted into a workshop for EUR 1.7 million while sales and service branches were founded in places such as Austria in order to develop the lucrative markets in Central and Eastern Europe. Since the acquisition of MWM by 3i, the number of employees has grown by 28%. In addition to capital, the private equity firm 3i also provided MWM with access to its international network and assisted in the process of contacting potential overseas cooperation partners.

Today, MWM is extremely well positioned with 11 subsidiaries in China, Singapore, North America and other locations. The company enjoys excellent prospects around the globe. ‘Our efficient gas engines and systems, which promise outstanding customer benefits and unbeatable efficiency in excess of 90% for energy generation, are very popular among our customers,’ says Peter Grosch, CEO of MWM. ‘All of this was realised thanks to our successful cooperation with 3i.’

Strategic buyer offers platform for further growth

3i announced the sale of MWM to the US company Caterpillar on 22 November. 3i sold MWM for 2.2 times the invested capital, corresponding to an annual yield (IRR) of more than 25%. The transaction is expected to be closed over the coming months, subject to final approval by the regulatory authorities. ‘We are very pleased with the development of MWM over the last three years. By working closely with the management and employees of MWM, we developed and implemented numerous strategic and operational improvement initiatives. We also made significant investments in production facilities, the company’s research and development platform and the sales network. Today, MWM has highly qualified and motivated employees and excellent products as well as a highly efficient sales organisation and production facilities,’ says Peter Wirtz, partner and CEO of 3i Germany. ‘After successfully completing our mission of repositioning MWM, we are firmly convinced that the company will be successful in the long term under the ownership of Caterpillar,’ Peter Wirtz added.