Ersol Solar Energie AG: Cutting edge thanks to private equity

Dynamic, cosmopolitan, future-oriented - the history of ersol Solar Energie AG is one of the greatest success stories amongst young German innovation companies. From solar wafers, cells and modules to turnkey solar energy plants, former ersol, now part of Bosch Solar Energy, produces every type of photo-voltaic product needed for converting sunlight into electricity. Just six years ago, the company was still small. But with the help of the right strategic acquisitions and internal company growth it grew extremely quickly, proving that competent management and clever investment can lead to global success.

Everything started with insolvency proceedings. In September 2004, the ersol majority shareholder Umweltkontor became insolvent, and the company, which previously had only produced solar cells, lost its most important provider of growth capital. Another difficulty was that the company had an extremely large and heterogenous group of shareholders with voting rights. After three months of difficult negotiations, a fund advised by Ventizz Capital Partners Advisory AG finally managed to acquire a 79.7% majority share in ersol. This was a first step in the right direction. It was the first investment of Ventizz Capital Fund II L.P. (‘Ventizz’), established in 2004.

Ventizz convinced ersol’s management with its newly defined growth strategy: the existing production capacities had to be expanded, and a new business model was developed for the company. The once small solar-cell manufacturer was systematically restructured into an international photovoltaic group. But ersol and its shareholders first had a lot of work cut out. The company generated EUR 38 million in sales at the end of 2004. In the same year, it achieved positive net profit after interest and taxes (EBIT) of EUR 3.4 million for the first time. Horizontal and vertical integration were the key to success: the aim was for the company to carry out all strategically important production steps itself and not to subcontract any orders, so as to achieve the largest possible profit margin. Ingot and wafer production has an extremely high profit margin, ASi Industries in Arnstadt near Erfurt was acquired in 2005 for this reason. At the same time, ersol negotiated long-term supply agreements for silicon and entered into long-term purchase commitments with renowned module manufacturers.

Expansion because of IPO

A company expansion aiming the international market requires a lot of capital. Ventizz and the other shareholders decided in September 2005 to list ersol on the Frankfurt Stock Exchange. The IPO was more than 50 times oversubscribed and became one of the most successful IPOs of the year in Germany. This provided ersol with additional financial funds of EUR 116 million – giving the company even greater financial flexibility. In order to obtain silicon at short notice, the company used the revenues generated from the IPO for buying Silicon Recycling Services Inc. in Camarillo, USA, at the beginning of 2006. This company acquisition proved to be a very clever strategic move as it safeguarded ersol from commodity shortages – an extremely sensitive issue that the entire solar energy sector was worrying about at the time.

Competent management leads to success

Ventizz’s plan paid off: ersol developed into a leading global photovoltaic company with an injection of financial funds and conceptual changes to its business model. Staff numbers grew from just 100 at the beginning to more than 1,200 at the time of the final sale by Ventizz. During the time of Ventizz’s shareholding, ersol impressively increased EBIT to more than EUR 70 million, and sales also continued soaring: the group achieved around EUR 310 million in 2008.

In the same year, ersol welcomed a new strong partner at its side. The renowned Robert Bosch GmbH, an international leading technology group, took over the majority share in the company and since then has continued to advance ersol’s position on the international market. Ventizz Capital Fund II L.P. managed to pull off one of the most successful and most talked-about transactions of the year with this sale, which has transformed ersol into an extraordinarily successful photovoltaic group that has regained  a solid base again thanks to private equity finance.