CEO Connect – #18 Im Gespräch mit Alexander Kutsch

Rödl & Partner would be the perfect match for this transaction. We have been the market leader for the premium Mittelstand for decades, especially for topics like transactions, M&A. We can handle the whole process not only legally but also from a tax perspective and with our team of Transaction Valuation Services. So our argument for the CEO would be that we can support the transaction holistically, from the LOI to the implementation of the entire transaction. If the company to be acquired also has locations abroad, we can naturally conduct due diligence worldwide from a single source. We can examine the company for risks, for any showstoppers, and we can offer everything with a standard, holistic, uniform report, thus significantly minimizing the risk for the transaction. In my niche, antitrust law is certainly also an issue. Of course, how are we positioned there? Given the size, antitrust law is always a challenge, and we naturally have our own team that would take care of antitrust compliance worldwide, and we can also conduct antitrust reviews and filings worldwide. As a Swabian global market leader, I naturally have a lot of equity, having distributed little over the past decades, but for this transaction I would still need to consider debt. Can you support us there? Certainly, especially in structuring acquisition financing, whether through bank capital or involving additional private equity. First, we can access our network, but also optimize the legal and tax structure. It is quite common nowadays to include debt in the transaction, and therefore we can draw on a wealth of experience, both nationally and internationally.

For the premium Mittelstand, there are currently various challenges being brought to us. One is the increasing regulatory requirements domestically and abroad, such as compliance with the Supply Chain Due Diligence Act, or the challenge of ESG, which also pose global challenges. These are all topics that affect the compliance area of companies and for which external support is sought. Secondly, there is the current development with various geopolitical changes and crisis-related topics. The financing environment has changed significantly, with interest rates adjusting sharply upward, presenting companies with challenges in how to restructure their financing. Not least, supply chains and supply routes that were previously stable are now being questioned, so companies must look for alternatives globally and adapt their supply routes. These are the major aspects. Not least, in the current environment, many companies are also facing the question of whether restructuring is necessary, especially in the area of employee development, and there are sometimes serious decisions to be made. These topics are also being brought to us very strongly at the moment. And then there are also the classic topics that always play a big role in our practice: the issues of entrepreneurial families and family businesses, such as succession. As consultants to the Mittelstand, our core clientele includes the large family businesses of Germany. Family businesses are particularly affected by these regulatory challenges. It is often the case that regulations intended for large corporate groups also affect the German Mittelstand, but they often lack the resources to deal with them. Furthermore, family businesses face the question of business succession. Many family businesses fear a tightening of taxation on internal family succession and are already considering various ways to prepare. Many companies are potentially bringing forward the business succession now to take advantage of the still positive environment, and in some cases, they can still transfer the company to the next generation free of inheritance and gift tax. However, many family business owners are also confronted with the challenge that the younger generation within the family, under today's circumstances, is no longer necessarily willing to continue the business. So many founders and the following generation face the decision: will internal succession be the future, or will the company be sold to external parties, such as private equity or investors?

I think it is part of the German tradition in the Mittelstand that a company should generally be passed on to the next family generation. It was good form to continue the family tradition. Selling to external parties was actually more of a special deviation from the original plan. But things are changing in the 21st century. Family members are asking themselves what they want to do with their lives. The automatic assumption of stepping into the shoes of the previous generation as an entrepreneur is no longer as pronounced. The younger generation asks themselves what they want to do with their lives, and that increasingly includes the decision not to take on the entrepreneurial role but to set other priorities in life. The consequence is that the company is passed on and sold to external parties, and the capital generated may be used for other new ventures, perhaps venture capital or startups. I think we are also very experienced in advising entrepreneurial families on family office matters. That is often the case while the company remains in the family, diversifying private assets, but certainly even more so after the company sale, so there are interdisciplinary advisory topics. Definitely, yes, especially in the last 5 to 10 years, companies have been very successful and have built up very high cash reserves. Family offices had great freedom and great opportunities to invest anew. We have been and still are advising and supporting them with new investments and new asset classes to diversify their wealth within the family office.

We are certainly on the verge of a revolution in legal advisory in terms of how we work. The legal advisory of today and the legal advisory in 10 years will be massively different. AI has initially made strong inroads in number-based processes, but increasingly also in language-based models like legal advisory. The development is just beginning, but it is unstoppable and I believe it will accelerate. In the first step, we can use AI supportively in our consulting – that includes classic apps, project management tools, but also analysis tools that help us identify red flags. In my understanding, the profession of lawyer will not be replaced by AI. I see AI more as an option to optimize our working methods, work much more efficiently, and relieve us of repetitive tasks. Therefore, I see AI for us at Rödl & Partner as an opportunity, and we are particularly well positioned. We have a certain size, we have the necessary prerequisites, including our internal IT consulting and management consulting, to leverage these advantages. To come back to my initial example: If I put myself back in the role of the CEO of a 1 billion euro Mittelstand global market leader wanting to take over a competitor, I would much rather work with consultants, lawyers, tax advisors, auditors made of flesh and blood, with their own thinking, experience, empathy, and human decision support, than be advised by an algorithm or a combination of algorithms. If someone wants to learn more about legal advisory, transactional advisory, family offices, AI at Rödl & Partner...

Many companies already know us because we are the caretaker, and through myself or my colleagues as caretakers, we can naturally pass on questions on specialized topics to experts domestically and abroad. But also for companies that are not yet our clients, we are easily findable on the internet, with our expert areas such as Compliance, ESG, AI consulting, or transactional advisory. So you can quickly find us and the relevant consultants both domestically and abroad, and we can respond relatively quickly to inquiries. Of course, ultimately, I am always available for my clients and interested parties. That is, if you want to find me, Alexander Kutsch, you can find me. I would then pass on the inquiries to you in your area. Thank you.