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Medos Medizintechnik AG takes the plunge towards internationalization
Venture Capital Magazine, November edition 2006
Cardiovascular diseases are the most prevalent cause of death in the western industrial nations. According to the World Health Organization, this prevalence will apply to the rest of the world within only a few years from now. While early stages of cardiovascular diseases are prevented with slogans like “more movement”, “better nutrition”, “less smoking”, diseases at an advanced stage can only be treated by the usage of the scalpel. With its own products for heart surgery and support Medos Medizintechnik AG, based in Stolberg Germany, has evolved to one of the leading manufacturers in this segment.
From cannulae to heart-assist-systems
The product range of Medos, which was founded by the perfusionist Karl-Heinz Hildinger in 1987, has experienced a constant expansion during the last 20 years of company history. “Today, approximately three quarters of our revenues are made with components for extracorporal circulation (ECC), which find their application with heart-lung machines. This also includes Oxygenators for oxygen supply of the blood, reservoirs and tubing-sets”, explains Mr. Peter Inger, CEO of Medos. He states that “the rest of our revenues of 20 Mio. EUR in the past year is made with our extensive cannulae program, which includes approximately 200 different types of cannulae, as well as the innovative bloodpump and the VAD system (Ventricular Assist Device) for lasting support of the damaged heart.” The promising development of a new bloodpump in 2000 led to the financial engagement of the Aachen based SUBG-AG and the WGZ Initiativkapital GmbH based in Münster.
Mr. Martin Völker, manager of WGZ Initiativkapital recalls that “a third of the projected development costs of approximately 9 Mio EUR had to be backed with capital resources”. After the investors joined, Medos GmbH was changed into Medos AG, founded a French subsidiary , Medos France, in 2001 and took a 30% share in the Joint Venture enterprise Beijing Medos AT Biotechnology Co.
However, internal difficulties in adherence to scheduling- and development budgets as well as a fierce price battle led to turbulences, which prompted the investors to install a new management structure in 2003. “Furthermore, we had supported additional financial measures and adjusted the company to fit the market situation”, Mr. Völker comments. With a loss 2 Mio. EUR in 2002, Mr. Peter Inger managed to achieve positive results already in 2004 and 2005.
Fourfold value enhancement strategy
After the successful restructuring measures, S-UBG and WGZ as well as the family founders sold their shares of Medos Medizintechnik AG to Ventizz Capital Fund III, L.P., which is consulted by Ventizz Capital Partners Advisory AG, based in Düsseldorf. “Medos fulfils our criteria of a technology oriented growth company. Based on its high qualitative products and leveraged with the required growth capital, Medos has all chances to become an extremely profitable niche player”, Reinhard Löchner, Managing Partner of Ventizz, explains the investment of a two-digit Euro amount to fund the growth strategy. This financial investment took place in summer of 2006. Ventizz plan is “to position this new portfolio enterprise internationally as a market leader in heart surgery and to increase revenues as well as profits. Ventizz intentionally invests in a German company with local manufacturing.” Löchner and his team intend to reach these goals with four value enhancement tools: resource optimization, geographical expansion, product portfolio expansion and M&A transactions. Measures that were already initiated are the concentration of the Oxygenator production at the Radeberg location near Dresden, enforcement of the distribution team by hiring a new general distribution manager and export manager, the start of the FDA-approval process for the key product Oxygenator in the U.S., and the evaluation of various acquisition targets. M&A negotiations are in progress and can naturally be communicated only after closing. “Additional resources in combination with bank loans are sufficiently available”, explains Löchner.
Ambitious goals
“Within the next two to three years, we intend to increase Medos revenues from 20 to 100 Mio. EUR. 30 Million of revenues generated with today’s product line, the rest by M&A transactions” forecasts Mr. Inger and sums up the build-and-buy strategy of Ventizz. Mr. Löchner has no doubt that these goals can be achieved and names ErSol Solar Energy AG as a “blueprint for a successful increase of value process. After Ventizz took over in 2004, we have more than doubled the annual revenues of ErSol.”
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