The ability to listen and learn from one another has always been vital in parliament, in business and in most aspects of daily life. But at this particular moment in time, as national and global events continue to reiterate, it is uncommonly crucial that we forge new channels of communication and reinforce existing ones. The following article from Capstan Capital Partners is an attempt to do just that. We would welcome your thoughts on this or any other Parliamentary Review article.
Capstan Capital Partners
Rt Hon The Lord David Blunkett, MP
Rt Hon The Lord Eric Pickles, MP
THE PARLIAMENTARY REVIEW
Highlighting best practice
36 | CAPSTAN CAPITAL PARTNERS
Konstantin Krebs, managing
Founded with the backing of two mid-sized corporate groups
in 2009, Capstan Capital are specialists in corporate finance
for mid-market corporations. Successful mergers and
acquisitions (M&A) advice in the European mid-market depends
on very different factors to that in large-cap advisory. Selling
or buying a stake in a mid-sized company most often requires
a solution driven, rather than a process driven, approach.
Managing partner Konstantin Krebs discusses how Capstan
Capital have built on their ability to deliver tailor-made solutions
in M&A and financing transactions.
The sale of a mid-sized company is usually driven directly by individuals who
control those firms as shareholders. In many cases, some of those individuals
also form part of the management board, which includes private equity funds
who tend to take at least one board seat in their portfolio companies. This is in
contrast to large exchange listed companies where the sale of a controlling stake
or large acquisitions typically require approval from a great number of different
shareholders some of whom are institutional investors themselves. Large-cap
transactions thus have to follow strict due process.
Mid-market companies differ from large-cap companies, and this is where we
offer expertise. Except for regulated financial institutions, there are no strict legal
or regulatory definitions for this segment. In the UK the Alternative Investment
Market (AIM), a sub-section of the London Stock Exchange for companies that are
too small for the main segment, is often used to describe the mid-market. AIM only
contains a tiny fraction of the UK’s mid-market, however, and a few constituents
that are too large to be mid-sized. To include private companies as well, corporate
financiers broadly refer to small and mid-sized companies as those with annual
revenues of up to £250 million.
Other European countries apply the same principle, but with different revenue
thresholds. What the UK and all European countries have in common is that the
number of small and mid-sized companies represent over 99 per cent of their
economies and employ on average around two thirds of the entire workforce.
Those over £22 million, often highly specialised firms, are the backbone of the
European economy, and M&A allows them to grow and compete internationally at
a faster pace.
We believe shareholders of mid-sized companies would be well advised to select
M&A firms that best fit their objectives rather than the biggest firms available
to them. We compete with many other boutique investment banking firms, the
M&A teams of the biggest global accounting firms and international banks. What
differentiates us as a small firm is our unique team of senior partners with diverse
AT A GLANCE
CAPSTAN CAPITAL PARTNERS
»Managing partner and co-
Switzerland: Steffen Bassler
»Managing director, Germany:
»Established in 2009
»Based in London, Zurich and
»Services: Specialists in corporate
finance for the mid-market
»No. of employees: 15
»Best in Mid Market Corporate
Finance 2016, 2017 and 2018
37CAPSTAN CAPITAL PARTNERS |
BEST PRACTICE REPRESENTATIVE 2018
backgrounds and track records, and a
flexible set-up that allows us to provide
a client-specialised advisory service.
Most our clients are private companies
with a relatively small number of
shareholders whose opinions can often
diverge over decisions. Every M&A
deal is by nature a unique transaction.
If shareholders fail to sell a company
in a competitive bidding process, the
company might be tainted for several
years following the aborted attempt.
No robots in M&A
At the World Economic Forum in Davos,
which Capstan attends every year,
it is notable that big tech firms are
increasingly pushing investment banks
off the most prominent locations in
the village. Automation in the service
industry and the use of AI have been
the hot topics of debate in Davos in
recent years. Robots, however, are
unlikely to become M&A bankers for a
very long time to come.
An M&A transaction is of great
importance to the individuals involved.
When facing major surgery, one will
look for a doctor who is highly trusted
for their expertise. Latest software is an
essential tool for us to keep costs down
and become more efficient as a firm,
but people do not trust software to sell
their companies with optimalresults.
Trusted networks are key
Capstan’s business model focuses on
building trust and offering complete
discretion with our clients. Together,
our partners have access to a very
large and deep network of trusted
corporate relationships, especially in
Europe, which allows us to assess the
potential of a transaction at the outset
with high confidence. Mutual honesty
with our clients about our assessment
and the client’s intentions in return
are the basis for our successful
M&A deals. Every transaction is run
and overseen by one of our senior
partners through to closing. In order
to maintain such a high level of
involvement in all our transactions,
we tend to take on no more than 12
sell-side mandates across our three
European offices at any time.
Incentives need to be aligned
As is the case with advisory firms,
pressure on fees pose a major threat
to growth and ultimately the business
model. Thanks to the introduction
of the MiFID II regulations, aimed at
ensuring greater cost transparency,
there is a growing awareness among
management boards of commissions
and advisory fees in the investment
We work with individual fee structures
that provide the greatest alignment
of interests with our clients. It is best
practice to adapt the fee structure to
each transaction and we make our
fees proportionate to the results we
achieve. To allow for this flexibility,
we strive to keep fixed overheads at
a minimum and reward our staff for
success. Being a pure advisory firm,
we bring additional alignment with
clients. As opposed to full service
investment banks, we are free from
conflicts with other divisions such
as capital markets, lending or FX
trading. We don’t have minimum
transaction sizes, as what matters
is that the economic benefits to our
client are sufficient to allow proper
compensation for ourwork.
Head office in Mayfair
industry and the
use of AI have
been the hot
topics of debate
in Davos in
bankers for a
very long time
The Rt Hon Theresa May MP's Foreword For The Parliamentary Review
British politics provides ample material for analysis in the pages of The Parliamentary Review. For Her Majesty’s Government, our task in the year ahead is clear: to achieve the best Brexit deal for Britain and to carry on our work to build a more prosperous and united country – one that truly works for everyone.
The right Brexit deal will not be sufficient on its own to secure a more prosperous future for Britain. We also need to ensure that our economy is ready for what tomorrow will bring. Our Modern Industrial Strategy is our plan to do that. It means Government stepping up to secure the foundations of our productivity: providing an education system that delivers the skills our economy needs, improving school standards and transforming technical education; delivering infrastructure for growth; ensuring people have the homes they need in the places they want to live. It is all about taking action for the long-term that will pay dividends in the future.
But it also goes beyond that. Government, the private sector and academia working together as strategic partners achieve far more than we could separately. That is why we have set an ambitious goal of lifting UK public and private research and development investment to 2.4 per cent of GDP by 2027. It is why we are developing four Grand Challenges, the big drivers of social and economic change in the world today: harnessing artificial intelligence and the data revolution; leading in changes to the future of mobility; meeting the challenges of our ageing society; and driving ahead the revolution in clean growth. By focusing our efforts on making the most of these areas of enormous potential, we can develop new exports, grow new industries and create more good jobs in every part of our country.
Years of hard work and sacrifice from the British people have got our deficit down by over three quarters. We are building on this success by taking a balanced approach to public spending. We are continuing to deal with our debts, so that our economy can remain strong and we can protect people’s jobs, and at the same time we are investing in vital public services, like our NHS. We have set out plans to increase NHS funding annually by an average by 3.4 percent in real terms: that is £394 million a week more. In return, the NHS will produce a ten-year plan, led by doctors and nurses, to eliminate waste and improve patient care.
I believe that Britain can look to the future with confidence. We are leaving the EU and setting a new course for prosperity as a global trading nation. We have a Modern Industrial Strategy that is strengthening the foundations of our economy and helping us to seize the opportunities of the future. We are investing in the public services we all rely on and helping them to grow and improve. Building on our country’s great strengths – our world-class universities and researchers, our excellent services sector, our cutting edge manufacturers, our vibrant creative industries, our dedicated public servants – we can look towards a new decade that is ripe with possibility. The government I lead is doing all it can to make that brighter future a reality for everyone in our country.
British politics provides ample material for analysis in the pages of The Parliamentary Review