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In an ever-changing business world, investors face the challenge of redefining and adapting their role. Whereas they were once viewed as purely financial backers, today they are expected to serve as active partners and driving forces behind companies. In an exclusive interview, Harvey Gross, an industry expert and partner at Deutsche Unternehmensnachfolge, shares his insights on how the role of the investor has changed over time and why it is essential for investors not only to operate from the sidelines but to actively engage in day-to-day business operations. From the need for proactive engagement in value-creation projects to the importance of solidarity among entrepreneurs in uncertain times, Gross provides insights into today’s investment landscape and the challenges investors face.
DUB: How has the role of the investor changed over time, particularly with regard to active engagement in companies?
Gross: ReadingExcel spreadsheets and reports is important, but that alone is no longer enough these days. What I mean by that is that in the past, investors were often expected to play a rather passive role, in which they merely provided financial resources and observed and commented from the sidelines. Today, however, investors must increasingly act as active partners. It’s no longer enough to simply attend monthly board meetings. Investors who want to successfully navigate succession situations are compelled to proactively engage in value-creation projects and generate measurable added value for the company.
DUB: How can investors ensure that they do not remain isolated in their “ivory tower”?
Gross: Investors should constantly remind themselves that true value creation is achieved through active engagement and direct action. This means being on-site regularly, engaging with the company’s employees and leadership, and gaining a firsthand understanding of the challenges and opportunities. Investors must learn to think less like traditional investors and more like entrepreneurs. This includes finding creative solutions to problems and driving their own projects forward together with management.
Especially in such turbulent times, it’s important to have an operational partner by your side who doesn’t just focus on reporting but works with you to drive projects forward.
DUB: How do you evaluate companies given the current rapidly changing situation?
Gross: The most important factor in investing is a long-term perspective. There have always been crises that have shaken companies in the short term. What’s important, however, is that the company is managed sustainably. Fundamentally, the business model must be sound. After all, a crisis does not change our fundamental view of a company. It’s not just important that a company operates sustainably, but also how adaptable and innovative it is in uncertain times.
Last but not least, a company’s total value lies in the future, of which the next few months represent only a fraction—this crisis, too, will pass.
DUB: What advice do you have for entrepreneurs?
Gross: Entrepreneurs should focus on their core business and take care of their employees. Beyond that, solidarity among entrepreneurs is very important during times like these. When it comes to transactions, entrepreneurs should specifically seek out partners who do not act opportunistically but who have a clear set of values. Entrepreneurs need to be particularly vigilant about this right now.
In addition, entrepreneurs should be prepared to adapt their business models or strategies if necessary in order to respond to changes in the market or the broader environment.
DUB: What type of investment makes the most sense right now, and are investments even being made at all at the moment?
Gross: That depends on the specific circumstances. However, companies with a long-term focus remain attractive. Furthermore, flexibility in the investment structure is important so that, for example, liquidity can be made available to the company quickly. Short-term uncertainties and risks should be fairly shared between the buyer and seller—“earn-out structures” can serve this purpose.
DUB: What kind of situation will emerge from the crisis regarding the purchase and sale of insolvent companies?
Gross: The crisis will lead to an increased number of insolvencies, and certain types of investors have exploited such situations in the past. Here, we believe creditors and administrators also have a responsibility to keep the long-term well-being of the company in mind within the broader societal context.
DUB: Mr. Gross, thank you for the candid conversation and the fascinating insights you’ve shared with us. It’s always interesting to hear from someone with your experience. I hope we’ll have the opportunity to speak again soon. Thank you very much for your time.
