Mutares, the investment company, ladies and gentlemen, buys everything that others no longer want, renovates it, and then naturally sells it at a profit. Sounds simple, but in practice it's a bit more complicated, because nowadays it's no longer about small deals, no, it's about billion-dollar deals, a record exit pipeline, and a growth target of 25% per year until 2030. Reason enough for us to ask questions.
With us is the Chief Investment Officer, Johannes Laumann from Mutares. Yes, I put it a bit bluntly. If you could briefly explain the business model of Mutares in, well, let's say two sentences.
I think it was started quite well. We buy divisions from corporations that the corporation no longer wants, the unloved children, where we see potential for improvement both operationally and on the balance sheet, and then try to realize that and sell it again at a profit.
If you then ask, yes, buying what others want to get rid of, where does your value ultimately lie in that?
I believe essentially in the operational value creation, that we reposition a company, restructure it, right-size it, as they say nowadays, and also focus on it. Yes, in a corporation, a division is often uninteresting, neglected, doesn't belong to the core business, and therefore not in focus. And we put a focus on it and turn the thing around.
As Chief Investment Officer, you are the buyer. What would be a typical Mutares case where you say, yes, we have to get involved, we want to have it like that?
Well, we can give a very concrete example. We recently bought a 2 billion revenue business from SABIC, Saudi Aramco. They decided they wanted to give up their polycarbonate and polypropylene business in Europe and the USA. The European part wasn't so interesting for us, but the American part was interesting for us, the polycarbonate business, and we acquired that. It was a strategic decision by the corporation, and then it came onto the market, and we ultimately won the deal.
Is it ultimately just about buying cheap, cheap, cheap, or also being good operationally on the other side?
I believe one doesn't work without the other. We buy companies that have a need for restructuring. That means, if you only buy cheap and don't change anything operationally, you don't create value. And if you buy expensive and make the thing worse operationally, that doesn't help either. So, I believe it's the combination of both.
We talked about it last time, a big topic, Steyr Motors. Was that a story that challenged you the most personally, or where you said, no, I still had something there and it was really difficult?
With Steyr Motors, when we buy a company, 70-80% goes as we planned. 10-15% goes significantly better due to external influences that we can't necessarily account for, and then 5-10% goes worse. And Steyr Motors was certainly also driven by the overall economy and the global economy. We honestly didn't foresee that so much at the time of purchase. So, therefore, it wasn't a challenging deal. I believe the SABIC deal, for example, or the deal with Wärtsilä that we did shortly before Christmas last year, those were significantly more challenging from the deal itself.
Okay. What was difficult about it when you look back?
I believe the difficulty in the transaction is always actually three things. The first is the complexity, that we buy companies that are part of a corporation. They are part of the whole, there are usually no clear contacts, no clear organization. This construct. The second is that it's losing money. I always tell my people, at the end of the day, the window opens, money flies out, the window closes, and that happens every month, we have to stop that. And I believe the third is the cultural challenge in the deal. Making a deal today with a Japanese seller, tomorrow with an American seller, the day after with a French seller. I believe this cultural aspect is also a big challenge in the transaction.
The topic of the USA is very high on your list. We'll get to that in a moment. But looking at the domestic market in Germany, when I look at the number of insolvencies coming our way daily, that should be a paradise for you to say, we can, we can, we can...
Insolvency isn't necessarily what we look at, for several reasons. We like to buy spin-offs from corporations with a strong balance sheet, which are also fundamentally healthy, have a product or a market that makes sense. I think especially if you take the automotive industry, where many insolvencies are happening nowadays, there is simply overcapacity in the market, and it's also healthy for the market that some companies disappear, meaning capacities disappear, to ultimately be competitive as a market.
That means the market's own cleanup, which it ultimately carries out itself.
If you think buy, renovate, sell, where does Mutares really make money?
I believe, and the beauty of our business model is in all three phases. They say so nicely, the profit is in the purchase. That's also true in the transaction, not just when you buy products. And after the transaction, we go in with our own team, have consulting fees, have dividends when the companies are running. That's the second step, renovate, and then of course sell, hopefully an exit with sales proceeds.
Then we have to ask, what can Mutares ultimately do better or differently than private equity investors?
I believe we have our own consulting team, we have our own operational people. That means we come from the equity side into the restructuring. We don't hire consultants, the typical consulting firms that everyone knows, but we do it with our own people. And then you are faster in implementation, faster in decision-making, but also faster in revising. When you make a decision, see that it doesn't work, simply your man, your woman stands there and says, it didn't work, we're doing it differently now. That is, I believe, a big advantage over classic private equity firms.
And this year seems to be going really well. 2026 is supposed to be the big topic, the exit pipeline, the largest in the company's history.
Absolutely. We've already made one or two exits. Just last week we sold a heat exchanger business to a Korean strategist for over 100 million. And yes, we have until mid-September, so still a bit of time, more is coming our way.
Can it still happen that a company is ultimately too big, they had interest, but it's too big and you ultimately have to pass and rather forgo it?
I believe for us it often doesn't depend on size, but on complexity. A company with 100 million in revenue can be significantly more complex in the matter than a company with a billion in revenue. That's something we look at, where we say, okay, is it from a complexity standpoint, and actually the more complex, the more interesting for us, but is it so complex that within our investment horizon of 3, 4, 5 years, we can't turn the company around, and then it's also uninteresting for us.
That means there's also a certain risk involved sometimes, of course.
Always. We make entrepreneurial decisions, we buy a company that doesn't work, and we have an idea of how it can work. And as I said earlier, in 10% of cases the idea was wrong or external factors hit us, whether it's Corona, the semiconductor crisis, or the wars now. Those are all things that are hard to predict, they hit the companies, and if the company is already struggling and that comes on top, then sometimes it's also not possible to hold on.
What's interesting right now is the AI crisis, as we're experiencing it a bit, the question is to what extent it will continue. How do you see that? How do you assess this topic, especially in the United States?
We invest in classic industry. We see it from two perspectives. One is, of course, we want to use AI in our holdings. We also use it in transactions, in due diligence, and so on. I believe we are keeping up with the times there. Absolutely. And the other is what we find incredibly exciting right now are the companies dealing with the energy topic. We have companies that make transformers. If you want a data center, you need a transformer. And without that, it doesn't work. And the companies dealing with the energy topic for us, you wake up with a smile in the morning.
But is it a bit like the Gold Rush back then? Where first everyone made money with the picks, shovels, and pans. And not even in the semiconductor area?
I believe so. Yes, I believe especially in that area, if I take the transformer topic we have, today it's not about, it's also about quality and price, but primarily it's about availability. And those are the pans, the picks you need first, otherwise you can't mine any gold.
America is currently top, very interesting for you. What attracts Mutares to the market in the United States right now? Just the energy topic?
