Here Comes the Sun

Inventive and opportunistic M&A may get more opportunities in turbulent times, but CFOs should prepare for questioning from an investor community wary of surprises.

Amid dismal results and appeals for bailouts, recent news from car makers has been relentlessly bad. Why, then, would SolarWorld, a Bonn-based solar-panel manufacturer with few ties to the car industry, try to buy the German operations of Opel?

The bid baffled many investors, who drove SolarWorld’s share price down by nearly 20% after the announcement late last year. A trader quoted by a newswire said he checked to see if it was April 1st. “Recent escapades cast serious doubts over management’s credibility,” added analysts from Jeffries in a research note. The bid was rebuffed by General Motors, Opel’s parent company. 

Philip Koecke, CFO of SolarWorld, thinks that the markets misunderstood the company’s plan to create “the first green European automotive group.” The solar company offered €250m in cash and a €750m credit line, conditional on government guarantees. The surprise bid foreshadowed a subsequent report that made a case for an unexpectedly lively M&A market this year, with defensive consolidation and opportunistic punts leading the way. (See “Forced to the Altar.”)

SolarWorld’s main objective, Koecke says, was to capture the technological know-how of the 6,000 engineers working at Opel’s research centre in Rüsselsheim. “My feeling is that GM’s brain is actually in Germany, not Detroit,” he says, adding that it was an opportunistic bid in a unique situation. “It’s not as if we are going to go buy Chrysler or Porsche tomorrow,” he notes.

Nonetheless, with shares yet to recover from the post-bid plunge, recent weeks have been filled with “analysts shouting at SolarWorld, and at me,” Koecke says. Yet he has no regrets. “Why should a venture capitalist be more intelligent when they buy something they know nothing about?” he asks. “We actually know a little about the car industry and had a plan to organise and restructure Opel.”

Even so, regaining credibility after the episode is a key task for Koecke, who has been on a series of investor roadshows. In a climate where every investment must be rigorously justified, especially when it comes to big-ticket M&A, will more CFOs find themselves in a similar situation?

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