Private Equity - opportunity or risk for the organic industry?

16 February 2007 - Private Equity in the Organic Sector? – Opportunities and risks in the growing capital market of the thriving organic industry. A discussion at the BioFach 2007 (World Organic Trade Fair), with experts from the organics and international finance markets, highlighted that the organic industry’s rapid growth has created significant demand for capital. And, if long-term goals are shared, private equity investors can be strategic partners in these exciting developments.

The organic industry in Germany is characterized by small and medium-sized enterprises where capital is in the hands of partners, managing directors or owner families. “This is a recent and uniquely European phenomenon in many ways,” said Peter Blom, CEO of the Triodos Bank Group, in his opening remarks. “In the past, several organic food manufacturers and traders have gone public or sold to major market share holders from outside the industry.” The German financial market has also picked up on the success of these European businesses. The Deutsche Bank, for example, offers the “S-Box Organic Foods Index Certificate.” It includes interests in shares from eight organic manufacturers and traders including Royal Wessanen (Allos, De Rit, Tartex + Dr. Ritter, Molenaartje, Zonnatura, Natudis), Hain Celestial (Natumi, Lima) and Whole Foods Markets – all companies with strong reputations among national and international organic consumers.

With marked growth rates continuing, the capital demands of the organic industry can no longer only be met by conventional local bank finance. Alternative models, such as private equity, also need to be considered to meet regulations and increased credit authorisation guidelines for medium-sized companies. It’s important that organic companies maintain a strong identity and tradition which closely relate to their financial success. They demonstrate a high social responsibility to employees, customers, suppliers and, above all, the environment.”

Panellists at the event also included Ulrich Walter, Managing Partner of Ulrich Walter GmbH (Germany); Helmy Abouleish, Managing Director Sekem Group (Egypt); and Dr. Eike Zimbehl, Managing Director Triodos Finanz GmbH (Germany). Ulrich Walter estimated the medium-term capital demand of the organic industry to be up to 500 million euros and called for private equity investors to find out more about the industry. He encouraged them to explore measurable exit scenarios as high returns and guaranteed interest, found typically in the technology sector for example, cannot be expected in the organic industry. Nevertheless, he confirmed that private equity investors could be of interest to organic compa-nies in the future because, besides the demand for capital to strengthen a company’s capital for expansion or acquisition, the subject of follow-up regulation is also gaining importance.

Helmy Abouleish explained how the SEKEM Group finances capital demand. He emphasised that financial investors specialising in “green money”, who know the sector and its development, can support them in the long-term. The concept of integrating finance options offered by Triodos Bank and also GLS Bank, have played a central role and this strategic and long-term partnership will continue in the future.

Dr. Eike Zimbehl described the factors that secure successful co-operation with private equity investors. He emphasized the need for companies to be clear, in advance, about their real motives for attracting private equity and to agree targets and exit scenarios with financial investors. At the same time, there is an opportunity for organic companies to develop business strategies more clearly and to professionalise management information and control systems. The Bank, as a trusted partner, can develop sensible solutions offering a platform for successful growth.

About Triodos Bank
Since it was founded in 1980, Triodos Bank has followed ethical, social and financial goals according to the “three-way principle”:  taking the interests of people, the environment and the economy into consideration. It is a pioneer and innovative driving force in sustainable banking with branches in The Netherlands, Belgium, Great Britain, Spain and Germany. Triodos Bank offers short, medium and long-term credit and project finance and has been active in private equity for more than ten years. It will be represented for the first time between 15th and 18th February 2007 at the BioFach 2007 (hall 7/stand 431) to answer questions about sustainable finance.

 

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