Turnaround in the Mittelstand: Overcoming Crises and Emerging Stronger
by Dr. Thomas Bucksteeg, Head of Turnaround at BayBG
Medium-sized companies can run into difficulties for a variety of reasons, often through no fault of their own — especially when the general economic environment is challenging, as we have seen in recent years. Such a situation does not necessarily mean the end of a company, provided it acts quickly and decisively to implement appropriate measures. If a turnaround succeeds, many companies even emerge stronger from the crisis — for example through optimized processes, entry into new market segments or fundamentally transformed business models.
However, this requires what is known as turnaround capital — financing to close existing or imminent liquidity gaps, which may arise, among other things, from the very measures needed to overcome the crisis. Many medium-sized companies and their shareholders do not have sufficient capital to meet these financial needs on their own.
At the same time, increasing debt financing through banks beyond deferral of repayments is often not feasible. The risk of default is simply too high for many lenders in such situations, and regulatory requirements increasingly limit their freedom to act. As a result, companies may face an existential threat.
A financing alternative for companies in crisis
In such situations, BayBG can play a decisive role. For more than 50 years, BayBG has been providing equity solutions for medium-sized companies in various circumstances and has financed more than 4,000 businesses in Bavaria. With decades of experience, a broad network of experts, advisors and co-investors, and a long-term investment horizon without exit pressure, BayBG sees itself as an entrepreneurial partner and has successfully supported countless companies through crises and turnaround situations.
In the turnaround segment, BayBG offers customized equity solutions with an investment volume of up to €10 million. These solutions are tailored precisely to the situation and needs of the business. Depending on the case, BayBG invests via minority equity stakes, mezzanine capital or a combination of both. For the company, this means not only liquidity, but also strengthening of equity — stabilizing the balance sheet structure.
BayBG’s investments are designed for the long term. Depending on the situation, follow-on financing or increases in existing investments are possible. A BayBG investment — especially in crisis situations — also sends a strong positive signal to all stakeholders, including banks, and can act as a stabilizing factor during times of uncertainty.
Extensive experience in turnaround situations
To qualify for a turnaround investment from BayBG, companies must achieve annual revenues of at least €10 million, have a sustainable and viable business model, a convincing management team and a transparent, plausible restructuring concept.
In addition to classic restructuring or recovery cases, BayBG also finances underperforming companies with identifiable earnings problems, such as loss-making business units or unsuccessful product placements. BayBG also provides turnaround capital for transformation projects with earnings impact as well as carve-outs that generate temporary losses during implementation.
Furthermore, BayBG can provide solutions for banks seeking to exit commitments by partially restructuring the liabilities of a company through turnaround financing. Last but not least, BayBG can, in selected cases, support insolvent companies by acquiring them out of insolvency together with one or more investment partners.
In addition to capital, BayBG provides a team of experienced turnaround specialists who serve as sparring partners and advisors on strategic and financial matters. As a rule, BayBG does not interfere in the operational day-to-day management of its portfolio companies. This allows the business to act autonomously according to its culture and principles — while benefiting from the support needed to overcome the crisis and emerge from it stronger.