Balancing Rhineland versus Anglo-Saxon Investment Approaches

Shurman has positive experiences collaborating with Private Equity firms. Nevertheless, we frequently observe that founders hold biases towards PE, mainly due to a lack of differentiation between the Anglo-Saxon and Rhineland private equity and growth capital ecosystems.

In numerous instances, the differentiation between the two is somewhat subjective as Anglo-Saxon practices can also be present in the Rhineland area. At Shurman, our primary consideration is the management team's personal, strategic, and financial goals, and only after evaluating those, we can determine the best-suited sponsor. Balancing the demands for a financial or strategic partner is always crucial.

Nonetheless, as a generalisation, the following categorisation can be made:

The Rhineland and Anglo-Saxon environments represent two different approaches to private equity and growth capital. The Rhineland model is associated with continental Europe, particularly Germany and the Netherlands, while the Anglo-Saxon model is primarily associated with the United States and the UK.

The Rhineland model:

In the Rhineland environment, the role of private equity and growth capital is more limited. Companies are often owned by founders or family, and there is a greater focus on long-term relationships and continuity between companies and their stakeholders, including employees, customers, and suppliers. Private equity firms in this model tend to take a more collaborative approach to work with companies, with a greater emphasis on building relationships and long-term strategic planning.

Pros:

• Greater emphasis on collaboration and long-term relationships can lead to more stable and sustainable growth.

• Focusing on stakeholder relationships can help companies build strong reputations and foster greater trust with customers and employees.

• Founder- and family-owned businesses may have a greater sense of responsibility to the communities in which they operate.

  
  

Cons:

• A more limited role for private equity and growth capital may make it more difficult for companies to access the capital they need to expand.

• A greater emphasis on long-term relationships and strategic planning may make it more difficult for companies to respond quickly to changes in the market.

• Founder and family-owned businesses may be more resistant to change and less willing to take risks.

  
  

The Anglo-Saxon model:

In the Anglo-Saxon environment, private equity and growth capital play a much more significant role. Companies have a greater focus on short-term financial performance. Private equity firms in this model tend to take a more aggressive approach to working with companies, with a greater emphasis on achieving quick (3 -7 years) returns on investment.

Pros:

• A more aggressive approach to private equity and growth capital can lead to faster growth and higher returns for investors.

• Shareholder-driven companies may be more responsive to changes in the market as they face more significant pressure to meet short-term financial targets.

• Private equity firms may bring valuable expertise and experience to the companies they work with.

  
  

Cons:

• A greater focus on short-term financial performance may lead to a lack of investment in long-term growth.

• An aggressive approach to private equity and growth capital may lead companies to take on too much debt or engage in risky practices.

• Shareholder-centric companies may face more pressure to prioritise investors' interests over other stakeholders, such as employees and customers.