Deal in Focus: Callista drills into Kress-elektrik

In early February, Callista purchased troubled Kress-elektrik. The Munich-based investor has yet to raise a fund, instead following a deal-by-deal investment strategy using equity from its network of high-net-worth individuals and family offices.

According to Callista chief operations officer Marc Zube, Callista "fully supports" Kress-elektrik's recovery programme, which was eventually implemented by the previous owner, shredder and cutting machine manufacturer Krug + Priester. Callista will reposition Kress-elektrik in the B2B space, with the company delivering its products, as well as individual components, to original equipment manufacturers (OEMs).

"That was, from our perspective, the main error. The original owner was still trying to maintain the brand and image of Kress, in a market dominated by the big names such as Bosch and Makita – and where half the revenue is generated through OEMs," says Zube. "We're far too small to have our own, fully supported brand." Callista will re-focus the business on creating high-quality devices and parts for other power tool brands, increase the number of sales personnel and make distribution channels less complex.

Callista has allowed a maximum of two years for the completion of the turnaround process, and expects to see new sales in 2016. Although Zube would not comment on EBITDA figures, he confirmed the Mittelstand company currently generates around €12m in turnover. According to the GP's website, Callista invests in loss-making operations with a negative EBITDA margin, seeing turnover of between €10–200m.

The GP envisages a holding period of three to five years for the company, with an early sale in 2017 dependent on market conditions at the time. "It's a ‘made in Germany' company, with engineering knowledge. It would be a good asset for a buy-and-build strategy," said Zube.

Operating losses
Indeed, such a strategy was likely to have been the motivator behind Krug + Priester's acquisition of the business in February 2013. According to Zube, the Priester family believed the family-owned company, located only seven kilometres from their own business in Balingen, would be a perfect fit. Almost 100 employees were able to remain on board, with 31 part-time employees released by the administrators. Former owner Dieter Kress, who had filed for insolvency in September 2012, was installed as managing director. According to Zube, he continued the strategies that had led him to an administration process in the first place.

Around 18 months later, and a further year and a half before Kress-elektrik would be able to merge with Krug + Priester, the company decided to cut its losses. Raffel Corporate Development was hired to find a strategic investor.

"The company was not in the shape to be attractive to a strategic investor in my opinion. It was still loss-making," says Zube. "Once the old shareholder changed approach and began looking for a financial investor, we became involved in late November. This sounds fairly quick, but there was no complexity in terms of looking into old audit reports or tax issues. Due diligence was completed fairly quickly and we had a clean and clear approach."

The Priester family will provide support on daily operations to ensure a smooth transition during the first few weeks of Callista's involvement in the company, while Zube has been installed as interim managing director before a permanent replacement is found. The GP is also in the middle of establishing a board for the company.

Callista aims to complete a further two to three deals in the coming year. The turnaround house wholly acquired aluminium castings manufacturers MWK Renningen and MWK Schwäbisch Gmünd from Georgsmarienhütte in April 2014, selling the latter in a trade sale to Dutch Eurotech Group three months later. It also owns river cruise company Reederei Peter Deilmann.

Advisers
Equity – Core Legal (Legal).
Management – Raffel Corporate Development (Corporate finance).

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Turnaround/Special Situations
• DACH
• Deal in focus
• Top story
• Unq2015Mar