#29 With the Buy & Build Strategy to the Powerhouse

Buy and Build Strategy

Strategy Interview with Rainer Koppitz, CEO and Co-Founder of KATEK Group 

The three steps of the Buy & Build strategy can be used to lead companies to great success in a targeted manner. Read now what exactly it takes!

In this episode, let a unique startup success story inspire you to truly think big. In this episode, Rainer Koppitz, CEO & Co-Founder of KATEK Group, recounts the rapid development of the electronics company he co-founded - from its beginnings, growth, and all the way to the leadership role it holds in the industry today.

KATEK unites the champions from all areas of the electronics value chain into one strong unit. Today, the company is systematically forging the new European market leader in a very fragmented supplier market for B2B customers - and doing so with great success.

In May 2021, the KATEK Group celebrated a successful stock market debut on the Frankfurt Stock Exchange with an issue price of over 34%. Last month, the sales forecast was corrected to over 635 million euros - an amazing growth. In this episode of "Hope is not a strategy", you can find out which sophisticated strategies Rainer used to make this possible for the KATEK Group.

Thanks to his many years of international industry experience, Rainer Koppitz knows the IT and telecommunications sector like no other. In 2013, he was a member of the German board of Siemens IT Solutions & Services. In 2005, he went among the thriller authors and wrote the suspenseful business thriller "Machtrausch" before becoming Group Managing Director of Unify (formerly Siemens Enterprise Communications) in 2006. From 2009, he was Chief Sales Officer & Managing Director at Atos. Manager positions at Dell, BT Group and other companies followed, until Rainer finally became CEO in 2019 at the helm of KATEK Group, which he also wants to lead to the top of its industry with his teams. 

SHOWNOTES:

With a grandiose positioning and a promising claim to the top of the industry

The claim of the KATEK Group is: Lead the category. It thus already contains a part of the corporate strategy.

When the company launched in 2018, this claim was still "on the verge of megalomania." But that was entirely intentional. From the beginning, this claim was meant to be a North Star for all employees. The KATEK Group wanted to enter the market with a big bang and let everyone know of their own claim that they will shake up the industry.

So the claim was not a bug, but a feature, as Rainer himself puts it. This concept is extremely well thought-out, because it points a clear path to success. The company established the motto when it was still in its infancy and the foundation had just been decided - the first courageous step and the basis of the formula for success. 

Where does KATEK Group stand today after entering the market with a big bang?

For Rainer it was clear from the beginning: The KATEK Group starts to build a leader in the field of electronics in Europe! This idea was born from the observation that there are partly established, partly new exciting European industries such as the automotive industry, robotics or medical technology and all need electronics. Electronics is the heart of all these devices and systems and therefore offers a market like no other.

From this, Rainer has deduced that European industry needs partners who will work with it in the development phase to design electronic modules and functionalities, then work on the first prototypes and ensure that the right components are available on the world market to ultimately manufacture the electronics or even entire devices. This is an undertaking that can hardly succeed without the implementation of well thought-out strategies.

Without good and stable electronics partners in Europe like the KATEK Group, the European industry would be dependent on electronics from Asian or American players, which would lead to a great dependence of the industry. Accordingly, a new concept should be found.

The idea was to form a new and reliable partner for German and European medium-sized businesses for the extremely fragmented market in Europe in the field of electronics. With a sales forecast of 635 million euros, the KATEK Group is currently making giant strides towards becoming just that partner. What a success!


Supply chain as both critical issue and secret to success of the electrical industry

Without the focus on the supply chain, the KATEK Group would not have become so successful. Even in Corona times, this focus has ensured strong growth. But what exactly is the strategy behind it?

Using the buy-and-build strategy to become a major player in the electronics industry

Rainer was accompanied by the hypothesis that the market is ripe for consolidation. He also assumed that if the KATEK Group wanted to become the European powerhouse in electronics through appropriate growth, the way to get there could not be purely organic. A suitable concept for the path to success had to be implemented.

So KATEK Group proceeded in a 3-step M&A strategy:

  1. Stage: Acquisition of smaller electronics companies in order to quickly become visible as a player in the market and for suppliers and to reach a critical size of at least 250 million euros.
  2. Stage: Integration of a value chain, i.e. not only manufacturing but also development of electronics, to be a one-stop store for larger and more important customers and to cover the complete value chain. This was followed by an addition of companies in the industry working in development and prototyping.
  3. Stage: The third stage is based on two pillars:
    1. Geographic expansion to continue serving new major European customers in their business outside Europe. The aim is to follow the footprint of European customers and serve them exactly where they are.
    2. Strategic outsourcing: taking over the electronics department of companies which, for historical reasons, still produce their electronics inefficiently and expensively themselves, even though it is not part of their core business. This is not just the establishment of a customer-supplier relationship, but a strategic partnership.

This strategy helps KATEK to be the number one contact on the European market when it comes to selling or buying up family businesses, limited liability companies or investor groups. In some cases, this amounts to 10 to 15 new companies per week. An amazing growth.

1 billion euros in sales - already a reality in 2025

What success is it now enjoying? By the beginning of 2021, the KATEK Group was already the number two electronics market leader in Germany. Currently, the company ranks third in Europe behind Zollner Elektronik AG and the Scandinavian Scanfel Group.

Zollner already has a turnover of 1 billion euros, and Rainer is certain that the KATEK Group will also reach this target as early as - and by 2025 at the latest. An unbelievable growth, but nevertheless factual reality.

Because KATEK has already proven that even in difficult times, growth of 10% per year is possible - thanks to the strategy implemented.

What integration strategy holds KATEK together? 

With all the acquisitions and rapid growth, the question remains: What is the importance of the team in the company and what welds the KATEK Group together?

Part of the success is guaranteed by buying up functioning companies with good management. This therefore concerns companies that are in the middle of the market and can make quick decisions. If you add up all these companies into a group, the motto is not to let this dynamism disappear from the individual units, but to continue to spur it on. This requires a concept that encourages the addition of strengths, which creates necessary synergies.

The solution was to think of KATEK as a speedboat fleet. That is, there are strong general managers in each area who specialize in their customers, markets and geography. A small headquarters group of under 20 people then focuses on the issues that generate group-wide benefits.

Rainer's guiding principle here is: "We are a non-group". KATEK only harmonizes and standardizes areas that benefit the entire company. For each sub-area, the focus is on synergies of the respective areas such as purchasing, operations or sales. Based on real time business intelligence software that accurately identifies needs and shortages, fast and fact-based decisions are made for the entire group, from supply chain management to finance. As a rule, this also means that a PMI, a post-merger integration workshop, takes place immediately after the completion of a merger, in which all the key issues are gone through and possible challenges and strategies are discussed in order to integrate the newly acquired company perfectly from day 1.

Corporate form rethought

The KATEK Group's strategy for success is to question the status quo and thus break new ground. Ultimately, this is a question of mindset. In his professional experience, Rainer has gotten to know both large and small companies, along with their advantages and disadvantages.

So are large or small companies faster to implement?
Neither of them. That is precisely the problem.  

Large companies take a long time to make a decision. Once it has been made, there are usually many resources available for implementation. In smaller companies or startups, decisions are made very quickly, but if you then look for the person who can implement, it often becomes clear that their capacities are already fully utilized. The size of a team is different, as are the strategies that are to lead to success.

From the very beginning, Rainer's drive was to create a market leader that combines the advantages of a large as well as a small company and tries to master or even negate the disadvantages of both company sizes. Is this possible? This is an exciting experiment that KATEK is currently conducting - with great success so far.

The TeamBlue feeling: employee leadership and motivation par excellence
A significant part of the KATEK Group's success is its teams and employees, all of whom impress with their brilliance, objectivity and personality. There are the speedboat commanders on one side and the employees who sit in the fleet ship on the other. All are equal partners who all believe in the KATEK vision - a concept not to be underestimated.

The guiding principle is that everyone must have all the information. Therefore, there is a relatively large senior management team that is in constant contact and has an audio conference every Monday to bring everyone up to speed.

Here, they update each other on the most important changes in the M&A projects and explain how the previous month went. This process usually works very well.

Whenever there is no news, the "Hit and Shit of the Week" is a popular format in companies. It involves discussing what went particularly well or badly last week. This keeps the management team together and creates a "TeamBlue" feeling so that everyone always keeps the common goals in mind and stays motivated.

What are Rainer's wishes for the KATEK?

At the end of the interview, Christian asks Rainer what he would wish for KATEK if he had three wishes free.

  1. Rainer would have liked to make important personnel decisions faster than he did. He never regretted changing management personnel, but he regretted not doing it fast enough. That's because rapidly growing companies can quickly become too large for certain key personnel, making certain positions inefficient. Rainer wants his employees to be in the best possible position to achieve their upcoming goals. Above all, this includes being well prepared for the 1 billion euros in sales in 2025.
  2. The KATEK Group suffers from the material shortage and the collateral damage it causes. Rainer wishes he had paid more attention to the duration and seriousness of the material shortage. Liquid funds are currently stuck in inventories that he could actually use more in other areas (such as M&A strategy).
  3. There was too much focus on new customer acquisition and not enough strategic thinking for developing loyal existing customers. Rainer believes that there is still a lot of growth hidden in this for the future. He incorporates these ideas into the implementation of his corporate strategy.

In conclusion, Rainer shares that the most important thing to really aim high is to think big! Especially in times when you are still a small company. Think big and think about where you want to be in five years. Then align everything with that. High goals give birth to high expectations of yourself. If you think small, at the end of the day you will remain small.