East Germany’s top-selling company goes into British hands

Mr. Urbon, the East German company with the highest turnover will now be transferred to British hands by 2025. Is there a pain in the owners?
Of course, this is an emotional step, but in a positive way. Above all, the owners looked at what is best for Komsa and decided accordingly. Kerstin Grosse will remain Chairwoman of the Supervisory Board and I will also become Executive Chairman of Westcoast.

And how big is the pain in the workforce?
It is rather the opposite, many employees recognized that internationalization was overdue. Many have reflected to us that they work in an international context and also want to gain experience abroad. We can now offer you that.

Did you come to Komsa as CEO in 2020 to sell the company?
No, such an assignment would not have appealed to me. I came up with the idea of ​​internationalizing Komsa and building up the service business.

But it quickly became clear that there was not enough time for this?
There are two trends that have made us rethink the question of internationalization.

Which?
Firstly, some of our technology partners, i.e. manufacturers of smartphones, tablets and professional communication solutions, want us to take over distribution for them in the most important European markets beyond Germany.

Is that also a factor in expanding the circle of suppliers?
Other technology providers only work with European sales partners. This limited our accessible market because we never had a foot in the door of these technology partners. Second, the industrial logic has completely changed as a result of the pandemic. This accelerated the convergence of telecommunications and IT.

This means?
We know our market with telecommunications wholesale and, increasingly, service very well. Due to the enormous spread of mobile working, more and more companies need solutions for IT and telecommunications from a single source.

So the company laptops have to be networked with the mobile phones?
The technical requirements go far beyond connecting the smartphone to the laptop. The entire infrastructure must be set up in such a way that employees can work from any location as if they were in the office. Setting this up requires a high level of expertise in both IT and telecommunications.

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So at the end of 2020 you were not only looking for an international partner, but also one who offers IT wholesale and services?
At the end of 2020 it became clear that we would make faster progress with an international partner. The if was decided then, but the when was not yet decided. In the months that followed, it became increasingly clear that we had to expand our expertise in telecommunications to include IT.

But with the decision, was it clear that Komsa would no longer be striving for internationalization itself?
Yes, we initially focused on the German business.

With what focus?
We developed a strategy for our two business areas of distribution and services. In the services area, we have found that device-as-a-service, i.e. the rental and operation of mobile devices, is very attractive to us.

Hasn’t this been the case for companies for a long time?
It may feel that way to you as a user, but we found in a study that most companies still buy corporate mobile phones instead of renting them. And because they are afraid that sensitive data will remain on the devices, these devices are often scrapped after two years. It doesn’t have to be. This is neither economically nor ecologically correct.

And what is your solution?
Renting of hardware and full service instead of buying and running your own IT. The device data will be professionally deleted by us after the end of the term. Then the devices can have two or three lives. Our children no longer want new mobile phones. And just ask how often work colleagues wait for a repair or a replacement device. All of this can be solved faster if you get the service from a single source from a professional provider.

According to their own statements, they have Europe’s largest repair shop. How important is the refurbish market to your business already?
We are certified by all relevant smartphone manufacturers and technology partners and our 200 technicians in Hartmannsdorf only work with original parts in our 3600 sqm ESD-compliant workshop. (A special working environment and clothing that prevents electrostatic charging and thus damage to the equipment, note d. editor) We guarantee that the data will be irretrievably deleted. Thanks to our reconditioning, the devices can be used much longer.

But specifically: How many company mobile phones as Device as a Service do you already have under contract?
There are currently 600,000 devices, our goal is to double the number within the next two to three years. The market potential, including recycled mobile devices, is huge. We also want to significantly expand our cloud business. We have been a Microsoft sales partner since this year and want to grow here together with Westcoast. However, we do not operate the data centers ourselves.

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There is a lot of discussion about critical infrastructure right now. Should German system houses and their corporate customers network their mobile work devices via a British company in the future?
You have to differentiate: The distribution and the system houses are not part of the critical infrastructure. The technology that we sell is systemically relevant. Komsa and Westcoast can provide manufacturer-independent advice so that the best solution for the customer can be selected from Europe, Asia and America.

What should family businesses do?
You must choose the technology that is compatible with the existing infrastructure. After all, many companies have already invested large sums in their infrastructure, which should continue to be used as a result of the changeover. In any case, you can host them in this country.

There are overpowering competitors and regional players in your industry. Do you expect consolidation?
The market is fragmented. The smaller medium-sized companies concentrate on certain federal states or regions. Many are financed on a rather short-term basis. This is difficult in the current interest rate situation. From our point of view, a consolidation makes little sense. So there will be more exits from the market. International wholesalers and service providers with specialist knowledge will survive.

“Komsa now needed to take the step towards internationalization”

The Komsa owners might have made significantly more revenue if they had sold to their big competitors…
A 100% sale would have been easy, but the owners didn’t want that. They wanted a long-term perspective for Komsa with the culture of a family business. We found the needle in the haystack. Both companies are complementary.

When did the search for a strategic partner start?
earlier this year. In the past two years we have realigned Komsa and were able to close the last financial year with record sales and earnings. In order to continue the growth, this was the right time to look for a strategic partner.

Why did you deliberately forego the help of an investment bank?
You have to empathize with the wishes of the owners. For a family entrepreneur, such a process is of paramount importance. He has to be able to live with the result. I bring the experience from large industrial companies and the M&A business. Before I became a member of the Management Board of SMA Solar Technology AG, I worked in M&A consulting. At SMA, too, I have carried out numerous transactions without an investment bank, such as the investment by Danfoss A/S in SMA.

Did you have to do a lot of convincing with Komsa owners Gunnar Grosse and Jürgen Unger?
No, they have built the company for more than 30 years and want their baby to have a good future. Both have understood that we will marginalize ourselves if we don’t internationalize quickly.

But couldn’t Komsa have done it on its own?
Yes, but that would have taken too long. The market has changed too much since 2020. The owners have understood that speed is the strategic advantage of this partnership.

However, the deal is only inadequately described as a partnership: it is a takeover in installments …
The transaction structure we have chosen allows both companies the greatest possible stability, an orderly transition and the realization of market advantages. The shares of the Komsa founders will be transferred to Westcoast by 2025. It was always about the future of Komsa and secondarily about the continued existence as a family business.

Speaking of family businesses, were there no successors in the Grosse and Unger families?
Not at the moment, all children are successful in their jobs. Or far too young to lead a company of this size. But Komsa now needed to take the step towards internationalization and expansion. The merger with Westcoast is the best solution for Komsa.

“Headquarters will remain important”

But couldn’t the children have remained owners?
The founders were not concerned with their children remaining shareholders, but with Komsa’s expansion options.

Has Westcoast made a long-term commitment to remain a family business?
West Coast founder Joe Hemani has seen the benefits of a family business for the past 40 years. He thinks long-term and can – if necessary – make quick decisions.

What is the ownership structure at West Coast?
One hundred percent belongs to the founder.

He’s already in his 70s, is there already a successor plan there?
I can’t tell you anything about that.

Finally: Do you have problems attracting employees to Hartmannsdorf?
No, especially since many of our jobs are possible regardless of location thanks to mobile working. But like all companies, we are constantly looking for new employees. What I can definitely say: the Hartmannsdorf headquarters will remain important.

Mr. Urbon, thank you very much for the interview.

More: East Germany’s top-selling family business will become British by 2025