Completely new motives for the sale of an elevator company

A headlong change in the market for company transactions is observable: those who currently want to sell their lift companies are doing so for completely different reasons. Simultaneously, there is also a fundamental reorientation on the buyer's side.

Why the seller’s market is threatening to turn into a buyer's market and why the water does not get warmer when you wait before jumping in.

An analysis by Dr Lars Watermann

It used to be quite simple: if a lift entrepreneur wanted to retire after a long working life, he looked to see if he could find a successor to continue his life’s work, whether this was from the family, management or from outside. If this was not the case, the company was sold. There were practically no other reasons to jettison the company.

But in the meantime, entrepreneurs are opting for such transactions with quite different motivations. On the personal side, it is often a question of enjoying life and taking time for themselves, the family, friends, travel and hobbies. Moreover, the Corona pandemic made many aware that you only live once and there is no guarantee of lasting health.

On the business side, there is a whole host of challenges and changes, leading many to reconsider whether they can responsibly lead their company with adequate probability into the future.

Attention is focused on four points:

1. Order book: Order books are still well-filled but at the same time groups are reporting a 50 percent decline in new lifts due to the slump in construction. Many SMEs are also complaining about a significant downturn. This leads to interest in partial modernisations and complete replacements of the older 831,000 existing lifts in Germany. The unavoidable consequence is that the prices in these segments are coming under pressure. Anyone who manages their company according to operational criteria would counter the slump in new orders and the decline in margins through personnel adjustments. However, most react by accepting the losses, even pumping in even more money if necessary and hoping the crisis is temporary.

2. Loyalty: Family companies always stood for mutual reliability and loyalty. The latter has increasingly declined among the employees. Part of the zeitgeist is that employees increasingly seldom feel themselves under an obligation to companies. Consequently, entrepreneurs also feel less responsible and a company sale is no longer a taboo.

3. Lack of skilled labour: The frequently arduous quest to find experienced fitters, technicians and designers is accompanied by a phenomenon of the "brave new working world": the labour market increasingly supplies low performers with original ideas regarding payment and working hours.

4. Digitalisation: Groups with their personnel and financial resources can react differently to the demands of digital transformation than small and medium-sized companies. Moreover, since the lift industry has many opportunities to offer in this respect, a growing number out-of-sector players are moving into the market and grabbing relevant slices of the pie.

Seller’s market is becoming a buyer’s market

This hotchpotch confronts currently changing motivations on the buyer side: due to declining demand for new lifts, the "Big 4" are shifting their focus increasingly to partial modernisations and complete replacements. However, their successful implementation depends less on the installation of "off-the-peg" solutions than expertise in special lift construction. Companies with corresponding profiles are rare and therefore in great demand. Moreover, they hold out the prospect of the needed engineers, fitters and design and production capacities.

If such companies then have a large number of service agreements, there is a prospect of strategic purchase prices. By contrast, lift companies with "normal" profiles are already no longer achieving the valuations of the preceding years. This trend will continue. The seller’s market is becoming a buyer’s market. Even entrepreneurs who just a few years ago categorically ruled out a sale now insist on an advisor in view of these perspectives.

However, this also means that an increasing number of companies are coming on the market – which in turn pleases strategic buyers, since the greater the supply, the lower the price. Recently, an entrepreneur, who was still able to get a very good price, told me, "I always knew the water wouldn’t get warmer if I waited before jumping." And he proved to be correct.

The author is managing director of Watermann Agens GmbH and specialised in company transactions in the lift sector. In the last 19 years, he has advised numerous lift entrepreneurs on their company sale, including Marohn, Colonia, MS Aufzugbau, Grädler Fördertechnik, Eggert Group, Janzhoff, OSMA (Munich, Stuttgart, Leipzig branches), M.S. Aufzüge, ATB Aufzugtechnik Berlin, fb Aufzüge, Aufzugteile BT, Dralle and A.S. Aufzug + Service.

More information: watermann.ag