Here Prof Dr Hans-Josef Vogel of leading international German law firm Beiten Burkhardt talks about the 400 million Euros acquisition of a long-time German motorcycle accessories retailer by one of America’s most successful entrepreneurs. It was the German lawyer’s handling of this deal which led to his being awarded our title of ‘Deal Maker of the Year, Germany – 2015.’
What was the deal?
The sale of German motorcycle apparel and accessories retailer Detlev Louis Motorrad-Vertriebs GmbH to a direct subsidiary of Berkshire Hathaway. The latter is a US holding company with business interests in various sectors. Finance was forthcoming from US billionaire investor and successful entrepreneur Warren Buffet who has been in charge of Berkshire Hathaway for more than five decades. The acquisition was worth around 400 million Euros ($456 million).
Detlev Louis Motorrad-Vertriebs GmbH went into the deal with gross revenues of around EUR 270m a year, 70 outlets and more than 1500 staff in both Germany and Austria. The GmbH part of the company also had a successful trading division in more than 25 countries worldwide, selling both online and via catalogue.
What made the deal so important?
There is no doubt that this was a landmark deal for the already successful US entrepreneur Warren Buffet. His company Berkshire Hathaway – the third largest acquirer in the whole of the US – were looking to make a direct investment into a ‘small’ish’ European family-type firm, thereby giving Buffet a foothold in those overseas markets he’d had his eye on for so long. Prior to the deal he is reported as saying: “The U.S. is my first love, but I see terrific possibilities for us in Europe.” He added that acquiring the motorcycle accessories retailer was a real “door opener” and that he like the fact they had effectively “cracked the code in Germany.”
The German motorcycle accessories business will retain its original name and its headquarters will remain firmly located in it native Hamburg. This strategy is in line with the entrepreneur’s common practice of buying an entire company and keeping the same management structure and staff.
Buffet, 84, has invested outside the US in the past – the American also has $6 bn of metalworking business in Israel. Six years ago he made the world aware of his love of motorcycles when he bought debt worth £300 million to keep Harley-Davidson afloat after it was facing financial troubles.
What was your role in the deal?
I acted on behalf of Ute Louis, the sole heir of the late Detlev Louis, her husband. Zypora Kupferberg of Kupferberg Transactions GmbH (which whom I’d worked closely before) put the deal together for Ute and I was able to utilise the network of contacts I’d amassed over the past two decades while serving on the Association for Corporate Growth.
Another major advantage for Beiten Burkhardt and Detlev’s widow Ute (who had inherited the business in 2012) was the expert knowledge we received from having a CPA/tax adviser on our team.
Unlike many other deals there was a big emotional compartment to this deal since Ute Louis was selling an empire which had been a labour of love for her late husband to the extent he had devoted his entire working life to building it up. She was keen to ensure that the company continued in its present form (if possible) and that the staff didn’t suffer in any way through restructuring or changed management ethos. The allure of Warren Buffett was his willingness to retain the existing team and winning structure.
The deal began in the fall of 2014, was signed in February 2015 and closed in April 2015. It wasn’t a particularly difficulty transaction to carry out thanks in no small measure to the fact there weren’t too many individuals or companies involved or numerous competing interests on the table.
How do you see the M&A market in the next year?
Germany will remain in the focus of foreign investors. The impending changes in inheritance tax will make a sale more attractive, as the tax breaks for a continuation of the business will have higher hurdles. The backbone of the German economy, the Mittelstand (mid-cap), will see a seismic shift in the next years, as .many founders and majority shareholders reach the age where passing the baton is more than just a distant idea. This change will open a number of investment opportunities. As Germany’s fundamental data is sound, the opportunities are great. One caveat: especially the mid-market German companies are traditional in outllok and behavior. Striking the right tone, understanding concerns and alleviating them will be a required element in such deals.
Beiten Burkhardt employs more than 277 lawyers, tax consultants and auditors in 10 locations worldwide. These include Beijing, Berlin, Brussels, Moscow and Shanghai. The company specialises and advises in a number of different sectors from advertising and public relations to healthcare and non-profit organisations.
About Prof Dr Hans-Joseph Vogel
Prof Dr Hans-Joseph Vogel joined leading German international law firm Beiten Burkhardt as a partner six years ago. This is a firm which encourages individuality in its staff to the extent it boasts that its practice is about “competence with personality.”
Prof Vogel works for family offices, private clients and corporations, emphasizing corporate and transactional expertise. In addition, he maintains a niche practice for clients in the leisure industries (tour operators, travel technology companies, OTA’s.
A graduate of the universities in Saarbrucken, Bonn and Bad Honnef (where is an honorary professor in the dept of Tourism Management lecturing on National, International and Tourism Law) he is served on the Global Board of the Association for Corporate Growth. He is also counsel of the VIR and sits on the editorial board of the journal Travel Law Quarterly as well as penning articles for the magazine BizTravel.