#29 Become a powerhouse with the buy & build strategy

Strategy interview with Rainer Koppitz, CEO and co-founder of the KATEK Group

In this episode, let a unique start-up success story inspire you to think big. In this episode, Rainer Koppitz, CEO & Co-Founder of the KATEK Group, recounts the rapid development of the electronics company he co-founded - from its beginnings and growth to the leading role it plays in the industry today.

KATEK unites the champions from all areas of the electronics value chain to form a strong unit. Today, the company is systematically forging the new European market leader in a highly fragmented supplier market for B2B customers - and with great success.

In May 2021, the KATEK Group celebrated a successful stock market debut on the Frankfurt Stock Exchange with an issue price of over 34%. Last month, the turnover forecast was revised to over 635 million euros - astonishing growth. In this episode of "Hope is not a strategy", you can find out what well thought-out strategies Rainer used to make this possible for the KATEK Group.

Thanks to his many years of international industry experience, Rainer Koppitz knows the IT and telecommunications sector like no other. In 2013, he was a member of the German board of Siemens IT Solutions & Services. In 2005, he became a thriller author and wrote the thrilling business thriller "Machtrausch" before becoming Group Managing Director of Unify (formerly Siemens Enterprise Communications) in 2006. From 2009, he was Chief Sales Officer & Managing Director at Atos. This was followed by managerial positions at Dell, the BT Group and other companies, until Rainer finally became CEO of the KATEK Group in 2019, which he and his teams also want to lead to the top of their industry.

Christian Underwood Rainer Koppitz Underwood GmbH KATEK Group Book Machtrausch. A business thriller. Hope is not a strategy Pre-order the book Hope is not a strategy now

With bold positioning and a promising claim to the top of the industry

The KATEK Group's claim is: Lead the category. It therefore already contains part of the corporate strategy.

When the company launched in 2018, this claim was still "on the verge of megalomania". But that was entirely intentional. From the outset, this claim was intended as a North Star for all employees. The KATEK Group wanted to enter the market with a big bang and let everyone know that they were going to shake up the industry.

So the claim was not a bug, but a feature, as Rainer himself says. This concept is extremely well thought out, as it clearly points the way to success. The company had already decided on the motto when it was still in its infancy and the foundation had only just been decided - the first courageous step and the basis of the formula for success.

Where does the KATEK Group stand today after entering the market with a big bang?

For Rainer, it was clear from the outset: the KATEK Group was starting to build a leader in the field of electronics in Europe! This idea arose from the observation that there are both established and new, exciting European industries such as the automotive sector, robotics and medical technology, all of which need electronics. Electronics is at the heart of all these devices and systems and therefore offers a market like no other.

Rainer has deduced from this that the European industry needs partners who will work with it in the development phase to design electronic modules and functionalities, then develop the first prototypes and ensure that the right components are available on the global market in order to ultimately manufacture the electronics or even entire devices. A project that can hardly lead to success without the implementation of well thought-out strategies.

Without good and stable electronics partners in Europe such as the KATEK Group, the European industry would be reliant on electronics from Asian or American players, which would make the industry highly dependent. Accordingly, a new concept should be found.

The idea was to create a new and reliable partner for German and European SMEs in the extremely fragmented electronics market in Europe. With a turnover forecast of 635 million euros, the KATEK Group is currently making giant strides towards becoming precisely this partner. What a success!

Supply chain both a critical issue and the secret to success in the electrical industry

The KATEK Group would not have become so successful without its focus on the supply chain. Even in coronavirus times, this focus has ensured strong growth. But what exactly is the strategy behind it?

A buy-and-build strategy to become a major player in the electronics industry

Rainer was accompanied by the hypothesis that the market is ripe for consolidation. He also assumed that if the KATEK Group wanted to become the European powerhouse in the electronics sector through appropriate growth, the path to this could not be purely organic. A suitable concept for the path to success had to be implemented.

The KATEK Group therefore adopted a three-stage M&A strategy:

Stage: Acquisition of smaller electronics companies in order to quickly become visible as a player in the market and for suppliers and to reach a critical size of at least 250 million euros. Stage 2: Integration of a value chain, i.e. not only production but also development of electronics, in order to be a one-stop store for larger and more important customers and to cover the entire value chain. This was followed by the acquisition of companies in the industry that work in development and prototyping. Stage three: The third stage is based on two pillars:

Geographic expansion in order to be able to continue serving new major European customers in their business outside Europe. The aim is to follow the footprint of European customers and serve them exactly where they are. Strategic outsourcing: Taking over the electronics department of companies that, for historical reasons, still produce their electronics inefficiently and expensively themselves, even though it is not part of their core business. This is not just about establishing a customer-supplier relationship, but a strategic partnership.

This strategy helps KATEK to be the number one contact on the European market when it comes to the sale or acquisition of family businesses, limited liability companies or investor groups. In some cases, 10 to 15 new companies are added every week. An astonishing growth.

1 billion euros turnover - already a reality in 2025

How successful is it now? At the beginning of 2021, the KATEK Group was already the number two electronics market leader in Germany. The company currently ranks third in Europe behind Zollner Elektronik AG and the Scandinavian Scanfel Group.

Zollner already has a turnover of 1 billion euros, and Rainer is certain that the KATEK Group will also reach this target by 2025 at the latest. Incredible growth, but nevertheless a factual reality.

KATEK has already proven that growth of 10% per year is possible even in difficult times - thanks to the strategy implemented.

What integration strategy holds KATEK together?

With all the acquisitions and the rapid growth, the question remains: What significance does the team have within the company and what welds the KATEK Group together?

Part of the success is guaranteed by buying up functioning companies with good management. These are companies that are at the heart of the market and can make quick decisions. If all these companies are added together to form a group, the motto is not to let this dynamism disappear from the individual units, but to keep it going. This requires a concept that encourages the addition of strengths, which creates the necessary synergies.

The solution was to view KATEK as a fleet of speedboats. This means that there are strong managing directors in the individual divisions who specialize in their customers, markets and geography. A small headquarters group of less than 20 people then concentrates on the topics that generate benefits across the Group.

Rainer's motto is: "We are a non-corporate group". KATEK only harmonizes and standardizes areas that benefit the entire company. For each sub-area, the focus is on synergies in the respective areas such as purchasing, operations or sales. Based on real-time business intelligence software that precisely identifies demand and shortages, fast and fact-based decisions are made for the entire group, from supply chain management to finance. As a rule, this also means that a PMI, a post-merger integration workshop, is held immediately after the completion of a merger, in which all key topics are discussed and possible challenges and strategies are discussed in order to perfectly integrate the newly acquired company from day 1.

Rethinking the corporate form

The KATEK Group's strategy for success is to challenge the status quo and break new ground. Ultimately, it's a question of mindset. In his professional experience, Rainer has gotten to know both large and small companies, including their advantages and disadvantages.

Are large or small companies faster at implementation? Neither of them. That is precisely the problem.

Large companies take a long time to make a decision. Once it has been made, there are usually many resources available for implementation. In smaller companies or start-ups, decisions are made very quickly, but if you then look for the person who can implement them, it often becomes clear that their capacities are already fully utilized. The size of a team is different, as are the strategies that are supposed to lead to success.

From the outset, Rainer's motivation was to create a market leader that combines the advantages of a large and a small company and attempts to master or even negate the disadvantages of both company sizes. Is this possible? This is an exciting experiment that KATEK is currently conducting - with great success so far.

The TeamBlue feeling: employee leadership and motivation par excellence A key part of the KATEK Group's success is its teams and employees, all of whom impress with their brilliance, objectivity and personality. On the one hand there are the speedboat commanders and on the other the employees who sit in the fleet ship. All are equal partners who all believe in the KATEK vision - a concept that should not be underestimated.

The guiding principle is that everyone must have all the information. That is why there is a relatively large senior management team that is in constant contact and holds an audio conference every Monday to bring everyone up to speed.

This involves updating each other on the most important changes in the M&A projects and explaining how the previous month has gone. A process that usually works very well.

When there is no news, the "Hit and Shit of the Week" is a popular format in companies. This involves discussing what went particularly well or badly in the past week. This keeps the management team together and creates a "TeamBlue" feeling so that everyone always keeps the common goals in mind and remains motivated.

What wishes does Rainer have for KATEK?

At the end of the interview, Christian asks Rainer what he would wish for KATEK if he had three wishes.

Rainer would have liked to have made important personnel decisions more quickly than he did. He never regretted changing management personnel, but he did regret not doing it quickly enough. Rapidly growing companies can quickly become too big for certain key personnel, meaning that certain positions can become inefficient. Rainer hopes that he and his employees will be in the best possible position to achieve the upcoming goals. Above all, this includes being well prepared for the 1 billion euro turnover in 2025. The KATEK Group is suffering from the shortage of materials and the collateral damage this is causing. Rainer wishes he had paid more attention to the duration and seriousness of the material shortage. Liquid funds are currently stuck in stocks that he could actually use more in other areas (such as M&A strategy). There was too much focus on acquiring new customers and not enough strategic thought for the development of loyal existing customers. Rainer is convinced that there is still a lot of hidden growth for the future. He incorporates these ideas into the implementation of his corporate strategy.

Rainer concludes by saying that the most important thing to really get to the top is to think big! Especially when you are still a small company. Think big and think about where you want to be in five years' time. Then focus everything on that. High goals give birth to high expectations of yourself. If you think small, you will remain small at the end of the day.