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Jupiter League

  Ten Cate Advanced Composites (TCAC) is being sold to Toray in Japan for € 930 million. It’s good news for the current shareholders. But less so for the Netherlands. Because it means another high-potential company is falling into foreign hands after a brief interlude under Dutch control.   A consortium of Gilde, Parcom and ABN Amro Participaties acquired parent company Royal Ten Cate, including TCAC, in early 2016 for € 714 million and delisted it. The swift sale of the division for a considerably higher price confirms the view of the former shareholders who pointed to an undervaluation of Ten Cate’s future value at the time of the acquisition bid in 2016. The rapid sale furthermore demonstrates that promises about keeping companies together in the event of a sale are taken with a pinch of salt even if they’re made by Dutch investors.   Royal Ten Cate was for many years a sterling example of Dutch enterprise. Under the leadership of CEO Loek de Vries, the company developed from a struggling textiles producer into a highly promising producer of composites for aviation, protective fabrics, geotextiles and synthetic turf. The company based in Almelo, the Netherlands competed at a world-class level. Who could have imagined this when De Vries took over the helm in 2000? But the lack of cohesion, factory underutilisation and perhaps De Vries’ unconventional personality placed pressure on the stock market valuation and made the company vulnerable to an acquisition.   It was agreed at the time of the sale in 2016 that the company would remain intact for at least three years. Now, two years later, the first crown jewel is already being sold. CEO Jan Albers announced in January of this year that the company was looking for a strategic partner to achieve the required scale. 'We’re now examining the strategic options. It is premature to say we are looking exclusively at a sale because that would limit the strategic options from the outset.'   The fact that the sale has gone ahead anyway is perhaps indicative of the Netherlands. Or to use football metaphors: The Champions League seemed within Ten Cate’s reach, but it got stuck in the Jupiler League, which has become known in recent weeks as the Jupiter League. It’s a competition in which talented players can develop their skills. Talents are spotted by scouts who have contacts with agents who sell them to the big clubs. They’re first sold to clubs in the Netherlands, but are then transferred to international clubs as quickly as possible.   Talent used to be given the time to develop; now they leave for international clubs at an increasingly young age. That is, after all, where the big money is. The consequence is that football talent is more and more concentrated among a small group of leading clubs. But most of these talents end up sitting on the bench at these clubs. They’re paid big salaries, but their development stalls, which in turns makes the competition boring.   Representatives of private equity firms made it clear at a recent private equity summit in Amsterdam that they are aware of their role. Sustainability, diversity and social responsibility are crucially important to them. The question is whether contributing to a sustainably successful Dutch business community also plays a role in this regard. Talent development calls for a long-term vision. There are plenty of examples of how private equity firms have positively contributed to this development. But the role played by the three Ten Cate shareholders is not yet one of them.  

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Jupiter League

  Ten Cate Advanced Composites (TCAC) is being sold to Toray in Japan for € 930 million. It’s good news for the current shareholders. But less so for the Netherlands. Because it means another high-potential company is falling into foreign hands after a brief interlude under Dutch control.   A consortium of Gilde, Parcom and ABN Amro Participaties acquired parent company Royal Ten Cate, including TCAC, in early 2016 for € 714 million and delisted it. The swift sale of the division for a considerably higher price confirms the view of the former shareholders who pointed to an undervaluation of Ten Cate’s future value at the time of the acquisition bid in 2016. The rapid sale furthermore demonstrates that promises about keeping companies together in the event of a sale are taken with a pinch of salt even if they’re made by Dutch investors.   Royal Ten Cate was for many years a sterling example of Dutch enterprise. Under the leadership of CEO Loek de Vries, the company developed from a struggling textiles producer into a highly promising producer of composites for aviation, protective fabrics, geotextiles and synthetic turf. The company based in Almelo, the Netherlands competed at a world-class level. Who could have imagined this when De Vries took over the helm in 2000? But the lack of cohesion, factory underutilisation and perhaps De Vries’ unconventional personality placed pressure on the stock market valuation and made the company vulnerable to an acquisition.   It was agreed at the time of the sale in 2016 that the company would remain intact for at least three years. Now, two years later, the first crown jewel is already being sold. CEO Jan Albers announced in January of this year that the company was looking for a strategic partner to achieve the required scale. 'We’re now examining the strategic options. It is premature to say we are looking exclusively at a sale because that would limit the strategic options from the outset.'   The fact that the sale has gone ahead anyway is perhaps indicative of the Netherlands. Or to use football metaphors: The Champions League seemed within Ten Cate’s reach, but it got stuck in the Jupiler League, which has become known in recent weeks as the Jupiter League. It’s a competition in which talented players can develop their skills. Talents are spotted by scouts who have contacts with agents who sell them to the big clubs. They’re first sold to clubs in the Netherlands, but are then transferred to international clubs as quickly as possible.   Talent used to be given the time to develop; now they leave for international clubs at an increasingly young age. That is, after all, where the big money is. The consequence is that football talent is more and more concentrated among a small group of leading clubs. But most of these talents end up sitting on the bench at these clubs. They’re paid big salaries, but their development stalls, which in turns makes the competition boring.   Representatives of private equity firms made it clear at a recent private equity summit in Amsterdam that they are aware of their role. Sustainability, diversity and social responsibility are crucially important to them. The question is whether contributing to a sustainably successful Dutch business community also plays a role in this regard. Talent development calls for a long-term vision. There are plenty of examples of how private equity firms have positively contributed to this development. But the role played by the three Ten Cate shareholders is not yet one of them.  

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Green as Grass

The majority of Eneco’s shareholders wants to shed the shares but management is resisting a sale. As emotions ran high, the Supervisory Board refused to get involved. Thanks to a mediator, the parties are now speaking with each other again, but the question remains how things came to this and what lessons need to be learned.   Eneco’s shares are held by municipalities, with Rotterdam and The Hague as majority shareholders. The unbundling in which Eneco split off the network company changed the company’s risk profile in a competitive market. Shareholders are obviously aware of this as well. So they started asking themselves whether the position of a municipality as shareholder continues to be justified and sensible.   Questions asked during a protracted period of consultation included the following: is being a shareholder important to safeguarding municipalities’ energy interests? (do we need this for energy supply), is it important in financial terms? (what is preferable: a lump sum or annual dividend) and how much say do shareholders have from a legal perspective? (do you have any influence, as a shareholder, on the company’s policies).   Weighing these interests is a democratic process in which each municipal executive reached a decision in consultation with the municipal council. Based on weighing up local interests, as that is the basis of voters’ mandate. In the end, municipalities representing 74.55% of the capital decided to sell their interests, while 24.77% stated they wanted to hold on to their shares (for the time being). Whether that will remain so after the municipal elections in March remains to be seen.   The sale (or flotation) of Eneco itself is a next step. But that led to a conflict: while Eneco reproached the shareholders for wishing to cash in on their interest only for the highest possible price, Eneco’s stance, those shareholders claimed, was too demanding by setting conditions relating to employment and sustainability. The shareholders also complained that the Supervisory Board supposedly did not sufficiently take account of their interests.   Eneco’s management wants to be in control of its own future. There’s nothing wrong with that in itself, but the emotions this has unleashed do give pause for thought. This has every appearance of a coordinated campaign. On social media, the municipal executives opting to sell are being branded moneygrubbers, profiteers, greedy and much worse.   A rainbow coalition of political parties and environmental groups is propagating a hard-line stance via the website www.enecoblijftvanons.nl. And professor of transition management and sustainability Jan Rotmans never misses an opportunity to loudly condemn the municipalities’ decision to sell.   But the question is why emotions are running this high. After all, municipalities surely cannot be expected to remain shareholders ad infinitum of a commercial enterprise that is no longer directly connected with their inhabitants’ energy supply. The more so as the dividend is uncertain in a competitive market and shareholders’ influence is limited.   Eneco’s green future does not in fact depend on the municipalities. A strong partner can offer extra scope for green investments and agreements can be reached on sustainability as part of the sale. A buyer who is not looking for this can best turn elsewhere. That much is clear.   But whichever buyer may step up, an international company, institutional investors or private equity investors, they will not allow themselves to be bawled out as severely as the municipalities have been in recent months. This is a learning opportunity that needs to be grasped by the management and Supervisory Board members. Communication with shareholders must be improved. Eneco’s management is green in this area as well. As green as grass.

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Green as Grass

The majority of Eneco’s shareholders wants to shed the shares but management is resisting a sale. As emotions ran high, the Supervisory Board refused to get involved. Thanks to a mediator, the parties are now speaking with each other again, but the question remains how things came to this and what lessons need to be learned.   Eneco’s shares are held by municipalities, with Rotterdam and The Hague as majority shareholders. The unbundling in which Eneco split off the network company changed the company’s risk profile in a competitive market. Shareholders are obviously aware of this as well. So they started asking themselves whether the position of a municipality as shareholder continues to be justified and sensible.   Questions asked during a protracted period of consultation included the following: is being a shareholder important to safeguarding municipalities’ energy interests? (do we need this for energy supply), is it important in financial terms? (what is preferable: a lump sum or annual dividend) and how much say do shareholders have from a legal perspective? (do you have any influence, as a shareholder, on the company’s policies).   Weighing these interests is a democratic process in which each municipal executive reached a decision in consultation with the municipal council. Based on weighing up local interests, as that is the basis of voters’ mandate. In the end, municipalities representing 74.55% of the capital decided to sell their interests, while 24.77% stated they wanted to hold on to their shares (for the time being). Whether that will remain so after the municipal elections in March remains to be seen.   The sale (or flotation) of Eneco itself is a next step. But that led to a conflict: while Eneco reproached the shareholders for wishing to cash in on their interest only for the highest possible price, Eneco’s stance, those shareholders claimed, was too demanding by setting conditions relating to employment and sustainability. The shareholders also complained that the Supervisory Board supposedly did not sufficiently take account of their interests.   Eneco’s management wants to be in control of its own future. There’s nothing wrong with that in itself, but the emotions this has unleashed do give pause for thought. This has every appearance of a coordinated campaign. On social media, the municipal executives opting to sell are being branded moneygrubbers, profiteers, greedy and much worse.   A rainbow coalition of political parties and environmental groups is propagating a hard-line stance via the website www.enecoblijftvanons.nl. And professor of transition management and sustainability Jan Rotmans never misses an opportunity to loudly condemn the municipalities’ decision to sell.   But the question is why emotions are running this high. After all, municipalities surely cannot be expected to remain shareholders ad infinitum of a commercial enterprise that is no longer directly connected with their inhabitants’ energy supply. The more so as the dividend is uncertain in a competitive market and shareholders’ influence is limited.   Eneco’s green future does not in fact depend on the municipalities. A strong partner can offer extra scope for green investments and agreements can be reached on sustainability as part of the sale. A buyer who is not looking for this can best turn elsewhere. That much is clear.   But whichever buyer may step up, an international company, institutional investors or private equity investors, they will not allow themselves to be bawled out as severely as the municipalities have been in recent months. This is a learning opportunity that needs to be grasped by the management and Supervisory Board members. Communication with shareholders must be improved. Eneco’s management is green in this area as well. As green as grass.

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Aegon invests in Dynamic Credit

Dynamic Credit, the Amsterdam-based alternative fixed income asset manager and Aegon have reached an agreement on a strategic partnership. Aegon will become a 25% shareholder of Dynamic Credit. The investment will be used to accelerate the expansion into new lending products, such as buy-to-let and SME loans. Furthermore, Dynamic Credit’s innovative LoanClear platform will be further upgraded and extended into an investment hub for loans from marketplace lenders.   According to Tonko Gast, founder and CEO of Dynamic Credit, the partnership reflects the position and reputation that Dynamic Credit has established: “As a company we have been able to build a leading position in creating and managing loan portfolios. This creates a strong basis for further expansion into new markets and market segments.”   For almost 15 years Dynamic Credit’s technology has connected institutional investors to borrowers faster, simpler and at lower cost. The company is a fast growing, fully licensed, asset manager in alternative fixed income, with its own proprietary direct lending activities and by managing loans of others. Since its formation in 2003 in New York, Dynamic Credit has earned the commitment and trust of a broad range of institutional investors and banks, who invest in its products.   With Aegon as a new shareholder in the company, Dynamic Credit secures the backing of a global strategic partner with a solid international reputation and network as well as a strong track record in ventures and innovation.    

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Boardroom bloopers

A boardroom full of smart directors and supervisory directors is no guarantee for smart decisions. The importance of communications is an underestimated and scarcely researched factor in this process. Board members run on routine and automatisms and often do not speak frankly. This can lead to costly mistakes.   Researcher Marilieke Engbers gave a glimpse into the research she is conducting for her doctoral dissertation in an article in the August 2017 edition of the MCA (Management Accounting & Control) trade journal. Her research focuses on the decision-making process in the boardroom. Engbers is the Programme Director of the new ‘Board Dynamics, leadership and communication’ executive programme at VU University Amsterdam.   She has been struck by the fact that research into boardroom decision-making has so far been focused primarily on tangible aspects such as governance, the composition of the board and the role of the chair. This is striking because, in her opinion, the quality of the decision-making is largely determined by the board members’ dynamics, behaviour and intercommunications. Engbers says this remains a black box for researchers.   The researcher notes that strategic and complex decisions must be made in the boardroom by a relatively large group of people. There is little time for an extensive exchange of information. The relationships among the board members also play a key role. Speakers decide themselves at the last second what they do or do not say. They also attune their remarks to the context in which they are operating.   Communicating in a group requires the willingness to take risks. You can place yourself or someone else in a vulnerable position by sharing information. The estimated risk is connected with the people on the team and the balance of power among the members (who has the formal and who has the informal power). This estimation can in turn be based on assumptions or speculations.   If supervisory directors do not have a shared vision of the objectives they are aiming to achieve, different supervisory directors may pursue different objectives. As a result there is insufficient time to examine each topic in depth and to tap into the existing diversity of knowledge and experience.   It is remarkable that the role of communications in decision-making processes has been paid so little attention. This is probably due in part to the fact that communications are wrongly associated with large groups and mass media. Communications are also often only deployed at the end of the decision-making process, so once the decision has already been made. This is odd considering that the effects of a decision depend to a large extent on the acceptance by stakeholders. Communications are crucial for the successful implementation of a decision.   One reason why communications are applied at such a late stage could be that the professionals in the field increasingly focus on the execution process rather than the content. Change processes are currently being completed at an ever-faster pace and are increasingly managed by super specialists. This is causing the gap between content and process in communications to become wider and wider.   This leads to tension in the communications and comes at the expense of the support for changes among internal and external stakeholders. The task of communications is to close that gap by focussing more on the content than the process and claiming a role at an earlier stage in the decision-making process. Also in the boardroom.

Read more...

Boardroom bloopers

A boardroom full of smart directors and supervisory directors is no guarantee for smart decisions. The importance of communications is an underestimated and scarcely researched factor in this process. Board members run on routine and automatisms and often do not speak frankly. This can lead to costly mistakes.   Researcher Marilieke Engbers gave a glimpse into the research she is conducting for her doctoral dissertation in an article in the August 2017 edition of the MCA (Management Accounting & Control) trade journal. Her research focuses on the decision-making process in the boardroom. Engbers is the Programme Director of the new ‘Board Dynamics, leadership and communication’ executive programme at VU University Amsterdam.   She has been struck by the fact that research into boardroom decision-making has so far been focused primarily on tangible aspects such as governance, the composition of the board and the role of the chair. This is striking because, in her opinion, the quality of the decision-making is largely determined by the board members’ dynamics, behaviour and intercommunications. Engbers says this remains a black box for researchers.   The researcher notes that strategic and complex decisions must be made in the boardroom by a relatively large group of people. There is little time for an extensive exchange of information. The relationships among the board members also play a key role. Speakers decide themselves at the last second what they do or do not say. They also attune their remarks to the context in which they are operating.   Communicating in a group requires the willingness to take risks. You can place yourself or someone else in a vulnerable position by sharing information. The estimated risk is connected with the people on the team and the balance of power among the members (who has the formal and who has the informal power). This estimation can in turn be based on assumptions or speculations.   If supervisory directors do not have a shared vision of the objectives they are aiming to achieve, different supervisory directors may pursue different objectives. As a result there is insufficient time to examine each topic in depth and to tap into the existing diversity of knowledge and experience.   It is remarkable that the role of communications in decision-making processes has been paid so little attention. This is probably due in part to the fact that communications are wrongly associated with large groups and mass media. Communications are also often only deployed at the end of the decision-making process, so once the decision has already been made. This is odd considering that the effects of a decision depend to a large extent on the acceptance by stakeholders. Communications are crucial for the successful implementation of a decision.   One reason why communications are applied at such a late stage could be that the professionals in the field increasingly focus on the execution process rather than the content. Change processes are currently being completed at an ever-faster pace and are increasingly managed by super specialists. This is causing the gap between content and process in communications to become wider and wider.   This leads to tension in the communications and comes at the expense of the support for changes among internal and external stakeholders. The task of communications is to close that gap by focussing more on the content than the process and claiming a role at an earlier stage in the decision-making process. Also in the boardroom.

Read more...