The Sixth Phase: The Tsunami Begins

In many periods of history there are defining years, whether they be crises, turning points, or moments of high fashion. In our story of the private equity experience in Germany, there can be no question that 1997 marked a sea change, when major corporations awoke to the potential of divesting under-performing businesses. Overnight, the deal-flow increased, and the deals which flowed were larger, more global, and of considerably higher quality. Some of the new sellers were no longer owner-managers of medium-sized firms, but senior executives in publicly traded companies. André Mangin, who at the time was working as an investment banker in Barings and Merrill Lynch, remembers: It was around 1997 that private equity really started gaining ground. It was at this time that the large German corporates realised that private equity houses made up an interesting group of buyers. They had never really been considered to be serious before. That’s not to say that large German corporates didn’t retain their doubts about whether private equity houses could execute large deals. But Merrill, Goldman, and Morgan Stanley were touring around, explaining to the German corporates that they needed to clean up their portfolios, and convincing them that private equity houses were viable partners to help them do this. Banks were still hesitant to provide financing, but even they were beginning to warm to this new kind of asset class.