Corporate Development Spotlight

Spotlight Q&A:

Lion Equity had the pleasure of working with Jelena and her team to acquire the Canadian motor repair business of Siemens in 2018. Jelena – Thanks for joining us for this issue of Corporate Development Spotlight! To kick it off, can you provide a quick flyover of the Siemens Energy Corporate Development team and the approach to M&A?

At Siemens Energy, our mission is to empower our customers to meet the growing global demand for energy while transitioning to a more sustainable world. Our technologies, extensive energy experience, and an ambitious strategy to decarbonize global energy systems are all central to our efforts to be the partner and driver of the energy transition. Our top focus areas are in ESG, innovation, and transformation with sustainability at the core of all actions. We are actively looking for targets that would complement our portfolio to fulfill our mission.

At the same time, we are continuously optimizing our portfolio which creates an opening for other Strategics and Financial Investors to acquire our noncore assets which are excellent opportunities for investment due to the high standards that SE has on our people, ESG, engineering, manufacturing, compliance, and all other business and operations processes.

Our acquisition and divestment targets will mostly be evaluated by our internal Strategy departments in every respective division – as they are highly specialized for particular technologies in each industrial segment and have the best overview of the competitive landscape as well as internal needs; however, our dedicated M&A team will help evaluate the transaction and then drive it once approved internally.

Being a “recent startup with 150 years of experience” after the spin off from Siemens AG, we are focused on optimizing our M&A processes and tools to make ourselves even more agile and efficient.

We have a lot of corporate responsibility towards our customers, employees, suppliers and all other stakeholders. We thoroughly prepare our targets, and we conduct comprehensive Buyer’s due diligence to make sure that our companies remain successful after Change of Control.

What are some best practices you’ve learned and deploy as a Corporate Development professional?

As a large Strategic and a publicly traded company, our risk appetite is rather low. We rely on very thorough due diligence preparation and execution to make sure that we haven’t missed anything substantial. This means that we would have up to 21 functional workstreams (and several highly specialized professionals on each, potentially even more expanded if the contemplated transaction has presence in multiple countries). While this adds complexity and slows us down a bit, on the other hand, we run multiple transactions simultaneously which enables our Due Diligence teams to continuously learn and become more efficient.

What’s the biggest challenge you face as a Corporate Development professional? How have you learned to overcome and excel in these scenarios?

The companies that we acquire become permanent parts of our portfolio – as opposed to Financial investors who are usually looking for an exit in the next couple of years. Hence, it is very important for us to very carefully evaluate the companies that we acquire especially from the technological and cultural fit perspective with associated synergies, dyssynergies and other risks – as we will be “stuck” with the results on a long run. Here again, thorough due diligence becomes key.

The targets in the digitalization, IOT, and automation spaces enjoy premium valuations these days as they are highly sought after by strategics and financial investors or go public with SPACS – which presents us with valuation challenges. We exercise discipline, and sometimes introduce earn-out components in order to bridge expectations on both sides regarding technology, regulatory milestones, and revenue developments.

What is the most rewarding aspect of your career in Corporate Development?

Corporate Development / M&A is a very dynamic strategic field that relatively quickly produces tangible outcomes. I am fortunate to work with sophisticated professionals on our transactions inside and outside from Siemens Energy – from Buyer’s and Seller’s to advisors and of course our own C-Suite and cross-functional experts. Each deal is unique and provides with plenty of opportunities to deep dive on specific issues, learn about new technologies and solutions as well as uncover creative win-win solutions for all parties involved.

M&A creates great opportunities to take companies with what they offer to sometimes exponential next levels or set them free for better opportunities under different ownership. It is very rewarding for me to drive these deals while directing multi-functional internal and external teams to successful completion. Not only are we able to answer changing climate challenges with streamlining and accelerating our portfolio development, but we are also able to preserve and further develop critical technologies, save and create more jobs while giving companies new opportunities for expansion within or outside of our organization.

Predictions for the next 12 months in corporate M&A:

We had record M&A deal-making activities worldwide for many years now which could hit a record $6 trillion by the end of the year as fueled by cheap financing and the pandemic recovery. Global M&A volumes have surpassed $4.3 trillion in 2021 – up from the $3.6 trillion in 2020. The technology, financial services, industrials and energy sectors produced most deals in 2021, which are being led primarily by corporates, private equity, and followed by SPACs.

My current view is that the established pattern of deals surging after an economic downturn should continue in 2022, with companies actively exploring all types of M&A transactions. While the economic environment is generally strong and there is access to capital, there will be appetite for investment which will continue driving high valuations for many assets. It’s a good time for the Sellers to look beyond challenged businesses and proactively optimize portfolios to identify divestitures. On the buy-side, the focus on value creation with capabilities fit is critical to deliver better returns in today’s environment of high multiples.

I believe that deal flow will continue to not only be focused on consolidation and growing scale but also on transformation involving obtaining digital capabilities and more acquisition of technology by non-tech buyers. Some reevaluations of business models will continue resulting out of the COVID-19 pandemic – from shifting customer preferences to aiming to improve resilience to supply chain disruption and cyber-attacks.

All in all, I believe that there will be plenty of deal opportunities at least for the next year – unless there are new unexpected surprises; however, on a buy-side, in light of high valuations, achieving positive results is becoming more difficult.

Most memorable M&A story (can be most successful, funny, best learning experience etc):

Each deal is dear to me; however (and truly not just as lip service here), I very much enjoyed our Siemens Motor Repair Services divestiture deal with Lion Equity Partners a few years back. While it wasn’t a very large transaction for us – it was quite a complex process. We realized that we had to deal with a variety of issues spanning across the entire border of Canada where the centers were based – and restructure the transaction a few times accordingly. What I really liked, however, was how agile, creative, and solution-oriented Lion Equity Partners acted. They are true professionals and excellent negotiators. As I mentioned earlier, Siemens is very choosy when it comes to our transaction partners as we want to ensure our companies to be in good standing after change of control. From the very beginning, Lion Equity Partners convinced us that they are the right partners on this deal. After a successful closing, they added another Canadian company to the business, ran a successful rebranding of the business to NorthPoint Technical Services while growing the business effectively – up until a successful exit to another strategic few years later. Frankly, this is the ultimate goal for our transactions – to have a win-win-win-win scenario for all parties: we were very happy to divest the business that wasn’t core for us, the business got a great second wind before successfully being picked up by another strategic that was a better holder for it than we would have been, and Lion Equity profited as well. Everyone won. I would love to do more deals like this! I very much enjoyed working with Lion Equity Partners, I learned a lot through the process, and would love to do another deal in the future with them again!

About Lion Equity Partners:

Lion Equity is a Denver-based private equity firm founded with the core purpose of helping companies meet strategic divestiture objectives. The Partners of Lion Equity have significant experience acquiring corporate divestitures and the overall M&A process.

Why do corporations divest non-core divisions to Lion Equity:

• Proven track record of executing complex carve-outs from sellers, including Bed Bath & Beyond, Siemens, Pitney Bowes, Sodexo, The Washington Post and others;
• Demonstrated ability to execute time-sensitive carve-outs requiring speed and certainty of closure;
• Committed to flexible structures that meet seller’s divestiture objectives;
• Dedicated to seamless transition through a unique understanding of the specific issues involved both during due diligence and post-closing working with Seller, employees, customers and suppliers.

To discuss a corporate carve-out transaction, please contact: