GHK Management Consulting GmbH: The transformation-specialists from Frankfurt

In just under two years, 75 facilities and about 10 outpatient services, which were acquired in about 30 acquisitions, were successfully integrated. Turnover has increased more than tenfold as a result. At the same time, an IT-supported reporting system was introduced for the corporate management of important key figures.

In the past, as well as today, one thing counts above all for financial investors: the successful implementation of their growth and return case and the profitable exit of the investment within a manageable period of time. From the point of view of a private equity company, the timeline for the sale and accordingly the set goals regarding modernization, digitalization, growth and profitability must be met in order to achieve the desired selling price of the company / group. However, in order to be able to meet today's market demands, the company usually relies on external growth, i.e. growth through acquisitions - the faster, but also more risky form of growth strategy.

The idea behind external growth is to structure the potential of an acquired company (platform investment) by acquiring suitable companies in such a way that not only the acquisition itself, but also the synergies between the platform investment and the additionally acquired company divisions lead to turnover growth. It is not simply a matter of "buying together" as many companies as possible at the lowest possible price, but rather of putting together matching pieces of the puzzle to form a large, attractive overall corporate structure and thus achieving a profitable leverage effect.

The opportunities that arise for the investor from this approach are obvious and include:

• Setting a strategic goal and planning to achieve it,

• The favorable purchase of several complementary companies,

• The creation of a coherent and synergizing group of companies,

• the introduction of an integrated corporate management system to safeguard the groups objectives and

• the related creation of a profitable portfolio company.

The management consultancy GHK Management Consulting GmbH based in Downtown Frankfurt, at the heart of the city, the Eschenheimer Turm was able to acquire substantial knowledge in the sectors, relevant for corporate integrations, especially in the health care sector. The gained expertise has derived from six platform investments which have been and are being carried out with private equity groups in Germany, Austria and Switzerland since 2016.

In September 2016, the advisory board of a Frankfurt-based private equity company set the goal of increasing the turnover of the newly launched portfolio company tenfold within four years before the exit would be realized. The subsidiary, DOREA GmbH, is active in the healthcare sector, in the field of care for senior citizens. At the time, it consisted of six nursing care facilities and had a turnover of almost € 20 million. It was clear that the turnover target set could not be achieved by internal growth but only through acquisitions within Germany.

Each acquisition, whether run by individual operators or operators with several houses, meant the integration of at least one new site (usually a legally independent limited liability company) into the existing legal construct of acquired and integrated facilities. In order to successfully manage the sustainable growth and profitability of the facilities, areas such as accounting, IT, purchasing and HR had to be harmonized and organized and set up in a way that was transparent and comprehensive to investors. The integration concept developed for this purpose was designed to coordinate a large number of acquisitions - also in parallel - and also to handle them operationally. It was particularly important for the financial investor to install a company reporting system that functioned from the very beginning, in order to be able to evaluate and track the development of the constantly growing group.

The aim of the integration concept drafted by GHK Management Consulting GmbH, consisting of activities, responsibilities, interfaces and schedules was to secure the synergizing organization of all commercial processes as efficiently and seamless as possible.

However, the integration concept, the integration through the ERP system, the harmonization of the processes and especially the communication to all involved employees demanded an increased demand for personnel resources on one occasion. These project-oriented resources could not be made available by DOREA itself in this form and at that time. In addition - due to the "new start" of the company - the necessary expert knowledge and experience needed for the practical implementation in the post-merger integration processes of a conglomerate was lacking.

In agreement with the investor, GHK not only provided support at the conceptual level but also directly tackled the individual packages of measures. The hands-on mentality of the GHK Management Consulting GmbH team was therefore a great relief to DOREA. In the meantime, GHK also assumed the roles of Head of Controlling and Head of Accounting for a certain period of time. In addition, GHK supported DOREA's teams in the operative implementation processes such as master data maintenance during the introduction of the ERP system, the reorganization and digitalization of personnel files or the optimization of the administration in the respective care facilities.

A member of the advisory board of the investment company summed this up as follows: "How important it was that we had support not only at the conceptual level but also in the operational implementation of the individual building blocks, i.e. on site, is confirmed to us daily by our employees. After all, working together with the GHK team in the individual houses made it much easier for our employees to get a feeling for the joint approach and the introduction to the new digital approach.

Thanks to the agreed upon measures defined jointly between the investor's advisory board and GHK Management Consulting GmbH and the structured approach, the areas of accounting, controlling, purchasing, human resources and IT were coordinated in less than six months in accordance with the financial investor's guidelines. The turnover of the nursing home group has increased fivefold within 12 months from just under € 20 million to over € 100 million and tenfold within approximately 24 months. This enabled the private equity company to achieve its growth targets faster than planned over the course of almost two years and to sell the group very successfully to a French strategic investor group.

Due to the possibility of GHK to provide its employees on an interim basis during the transition phase described above, DOREA did not have to stock up its own staff for the integration, which saved both time and money for the company. On average, the harmonization of the commercial processes for each acquisition could thus be implemented in only four months.

Following the sale to a French strategic investor group, GHK Management Consulting GmbH continued to provide support for the transfer to the scope of consolidation of the French holding company with an IFRS reconciliation of the HGB consolidated financial statements to the IFRS consolidated financial statements of the parent company.

Summarized into five points, it is safe to say that all parties involved speak of a successfully completed project:

1. the timetable originally developed by the investor was shortened by a third and at the same time a higher return than expected was achieved

2. the process of selecting and implementing a new ERP system, which facilitated the integration of all further acquisitions, was successfully started at the beginning of the project and was used as a centerpiece for post-merger integration.

3. the group-wide reporting desired by the investor was introduced after only a few months - also thanks to the rapid and successful introduction of the ERP system - and controlling was implemented transparently.

4. the investor was able to focus on his core business during the entire project and thus on the search for possible acquisitions and a suitable buyer for the platform investment.

5. the employees of the nursing home group involved in the project were not only operationally relieved - through the participation of the employees in the activities - but also successfully trained and familiarized with the new activities.

In conclusion, it can be said that the nursing home group has successfully established itself on the market and has become a well-known player in the healthcare sector. The investor was so satisfied with the result of the cooperation with GHK that he approached the management of GHK directly for his nursing home project 2.0 and asked for an offer to also support the subsequent platform investment. This project got off to a promising start in March 2020.

Closing quotes:

In retrospect, I came to the conclusion that we would not have achieved the very ambitious goals, my financial partner and I set, in the form that we have without the support of GHK. The structured and partnership-based cooperation with GHK in the integration of various acquisitions into a uniform accounting, controlling and operational management system ultimately enabled us to achieve our targets, which were set for a period of five years, in less than three years.  
Axel Hölzer, Managing Director, DOREA GmbH

The cooperation with the experienced management of DOREA GmbH was a great advantage for us. The calmness and experience that the colleagues brought to the project put the project on the road to success right from the start. It was more than noticeable how motivated the people involved were in every step taken
Pascal Ulrich, Director, GHK Management Consulting GmbH