Patrick Molemans | Grandeco

Balta sold the company to GIMV in 2007. Why?

Patrick Molemans: Grandeco’s activities were not compatible with Balta’s core business (floor covering). Balta therefore wanted to divest it. At the time of the sale to GIMV Grandeco was certainly a profitable company. GIMV is only interested in SMEs with good prospects for the future and opportunities for growth. Guiding this process along is one of GIMV’s basic competences. GIMV holds 91 per cent of the shares. The minority is held by myself and several members of the executive board.

It is ten years later now. What was the proven added value of GIMV? What have you learned besides figures, keeping tables up-to-date and thorough checking?

Patrick Molemans: To understand everything perfectly you must make a distinction between the first period (2007 to 2013) and the second. At the end of 2013, I was recruited by GIMV to become CEO and roll out a strategy. The problem with Grandeco was that it had a subsidiary in Vosges that was not profitable. At the height of productivity, this subsidiary employed 150 persons. Grandtil (the name of the French company) had been choosing wrong channels and offering the wrong products for too long. It also took our French subsidiary too long to understand that the market, and particularly the distribution aspects, was changing at lightning speed. In the end, Grandtil was completely insolvent. Nevertheless, GIMV’s confidence in Tielt remained unwavering. Proof: GIMV injected 3 million euros in fresh capital in the firm’s head office and provided further assistance through strategic guidance.

Can you tell me more about this?

Patrick Molemans: A legion of measures were adopted, such as a new management and shifting the focus from pure production (push the market) to a more market-driven approach (pull the market, or in other words: developing a sixth sense for what the market demands). Under the leadership of GIMV we paid more attention to our own brand, opted for renovated and modern offices and ultimately adopted a more marketing-driven approach, which included better internal as well as external communication. All in all, this was a turnaround.

Growth thanks to capital

Is GIMV a shareholder that directs business operations with a wagging finger?

Patrick Molemans: Not in the slightest. GIMV is neither a know-it-all nor patronising, but a highly driven social partner in our development. As a CEO, I can hardly imagine a better parent company. Koen De Jonckheere, CEO of GIMV, has assured me more than once that we – and no one else – are the captain of our ship. If there is too much interference, we should always let him know. That says everything, doesn’t it? GIMV has nevertheless appointed a chairman of the executive board: Tom Van de Voorde. His only concern on behalf of GIMV is: to help us attain our growth ambitions.

Which concrete agreements apply between you as a manager and your management board, on the one hand, and GIMV on the other? In other words: how independently can you operate?

Patrick Molemans: There is plenty of room for independent operation. A concrete example: decisions regarding all smaller investments are taken autonomously. Cases above 250,000 euros are put before the executive board. Our autonomy is substantial. Several years ago, we compiled a business plan that provided for growth. Having started with a turnover of 50 million euros in 2013, which was increased to 64 million in 2017 we intend to achieve 75 million in 2019. Profits should also grow from 5 million to over 10 million. I have entered into this engagement together with my management board, and so shall it be. We are still identifying plenty of opportunities for growth, both in terms of territory and products, or new distribution channels. To make a long story short: the general lines have been clearly set out, we compile mid-term reviews and are pretty much left to ourselves with regard to the rest. You can hardly imagine a better partner.

Mutual engagement

Normally speaking, a private equity player will not remain on board this long. This seems to be exceptional, or doesn’t it? Why is GIMV still a permanent anchor?

Patrick Molemans: Considering the difficulties in France and the economic crisis around 2009, it could hardly be otherwise. GIMV will probably remain on board for some time. I have made a commitment to make the company greater and stronger by 2019. We are well on our way to achieving this goal.

If a new shareholder steps in, will this have to be a private equity player, strictly speaking?

Patrick Molemans: What every business needs, and this applies to Grandeco as well, is a good home base, regardless of whether this is a private equity player or an industrial partner. No matter how satisfied we are with GIMV as a financier, our preference goes out to an industrial partner in the next phase, one that speaks the same language we do in all facets of the business.

Learning lessons

How did you bridge the crisis years together? And which lessons have both of you learned from this?

Patrick Molemans: The company in Tielt has always demonstrated tremendous resilience. GIMV has even given this new impetus by asking us to respond quickly in the event of a malaise or an impending problem. The ship was, so to speak, also pushed gently in another direction during the crisis years: from a pure volume player to a company that focuses, in the first place, on added value. This was achieved by innovation, for example, which is enabling us to upgrade wallpaper and increase the number of possible applications. The focus on sustainability and digitalisation has also contributed to a decisive turnaround. We are the only ones in our sector that can offer digital printing at the right price-quality ratio.

In your opinion, are there any disadvantages to private equity? Can’t banks do what private equity does?

Patrick Molemans: Banks cannot think along with you in the same terms. They want security, above all. However, I think there are two possible disadvantages to private equity. One: you have no control over an exit scenario. The one who has the money calls the shots; that’s only logical. We are lucky that GIMV has continued to have confidence in us. Even when things were going poorly in France, the plug was not pulled and GIMV demonstrated a great deal of patience and confidence in us. Two: a private equity does not have the same business, product and brand knowledge that the management has. But except for these two points, I see primarily benefits.

How do you envision the future of your company? Would you ever consider a buy-out, for example? Or is it once private equity, always private equity?

Patrick Molemans: Certainly not. In a next phase the company will benefit most from attracting an industrial player that focuses, in the first place, on profitability and further growth. GIMV was primarily interested in making an investment in order to get the ship ready for battle again. So, you see, each business passes through various stages, and each stage requires a different solution. If a good candidate appears, GIMV will be given the credit it deserves and look back at its achievements with pride.

Private Equity/BVA
Author: Karel Cambien