Since 1982, Business Creation Investments AG (‘Business Creation’) has been active in the field of creating jobs in the event of plant closures and in regions with high unemployment.
Business Creation manages and invests in plant closures or complex divestments by multinational corporations for which mainstream investors do not possess the know-how or tools to instigate further development. In these situations the only remaining alternative to divestment is generally seen as the closure of the operation entailing all the related costs and complications.
From a social point of view, the Business Creation approach contributes to a solution that ensures the satisfaction of all stakeholders involved.
Complex divestments normally find their root cause in the fact that an activity is no longer considered ‘core’ for strategic or technological reasons. A further complicating factor relates to the possible transfer of production to a lower cost off-shore location. In such situations, the employees and the real estate of the originating factory normally remain as redundant assets.
In practice, the management time required to address and resolve such situations represents a major burden to the parent company.
Business Creation’s solutions to these complex situations are characterized by a conversion process covering a combination of the assets: human resource, know-how, real estate and other assets. The prerequisite for any such conversion is that a real recovery can be achieved within an appropriate timeframe. Typically, Business Creation ensures the redeployment of all employees within 6-15 months.
Converting redundant assets, know-how and experience into new value from new prospects such as new business activities, new jobs and often new business parks, in the role of both investor and manager, has made Business Creation a unique player in the restructuring or turnaround market.
Business Creation has managed and invested in more than 150 complex divestments of over 90 multinational and large national companies: 120,000 jobs have been created or preserved, some 6 million square meters of industrial real estate converted and over EUR 55 million invested in fixed assets and in recovery programs. The fact that Business Creation co-invests in their projects and manages them always has been a strong convincing factor in favour of the Business Creation approach. Business Creation’s projects have encompassed businesses with employee bases ranging from 80 to 2,000 per plant or project.
Business Creation has achieved most of its success by focusing on multinational corporations active in the area of manufacturing. By managing and investing in complex divestments, on average Business Creation has achieved 30-50% savings on the restructuring budgets (normally based on plant closure scenarios) of Business Creation’s business partners. Since 1994, Business Creation’s investments in industrial activities have achieved an average IRR of 53% per annum.
In most cases, Business Creation’s solution to envisaged plant closures consists of a multi-user site which can be used to house a number of new larger and smaller worksites.
Business Creation also carries out regional job creation projects in regions with high unemployment. In such cases, Business Creation works with local or regional governments who create a framework for its projects. This may result in the creation of a centralized business center combined with an accelerator/incubator center for young entrepreneurs or community-based projects that are focused on small local enterprises.
Business Creation uses more than 100 employees and freelancers as project managers, all of whom have professional backgrounds as successful entrepreneurs, investment managers, interim managers, CEOs, CFOs, plant managers, architects, and so on.
Business Creation maintains active contact with more than 12,000 companies and institutions worldwide. This network is vital for Business Creation to create the most appropriate solution for any redevelopment process.
Business Creation has developed a number of template solutions, mainly in the field of renewable energy, waste management and recycling. In many situations these can be applied as a basis for a new perspective for a plant and also, thereby, for the local community.
Small and medium enterprises form the majority of Business Creation’s solutions for plant closures and job creation projects. Many of them are local to the plant or project.
Examples of projects carried out by Business Creation:
1. Factory closure in Italy
The lighting division of a multinational corporation decided to relocate its incandescent lamps operation from a small town in Italy to Poland. This encompassed a workforce of 410.
The corporation had been present in the town since the 1920s and had played a prominent role in the community. A withdrawal was likely to be very poorly received by the workforce, trade unions and the public sector. For the corporation, the production volume was critical; the company had no back-up capacity at other locations and it was vital that the ongoing production was not disturbed.
A ‘Job-for-Job’ redeployment program for all 410 employees was developed. The plan involved the recycling of the redundant property and other assets. The plan focused on a controlled withdrawal without social upheaval and at a substantially lower cost than a traditional closure.
To manage the downsizing and redeployment program, the parent company and Business Creation created a joint venture. Redeployment focused on companies starting activities on the site and absorbing all redundant employees.
Today, more than 750 people are employed at the site. The company was able to save more than 30% on its closure budget and the investors in this project on the Business Creation side have realized an IRR of over 40% per annum
2. Factory closure in the US
A large automaker decided to divest a large part of its manufacturing activities in Flint, Michigan. In the case of one parts-manufacturing factory, approximately 450 employees became redundant.
Finding inward investors, willing to take over (some of) the activities or willing to start new ones in a depressed region such as the Flint/Detroit area, was highly unlikely. Other routes for the redeployment of the workforce had to be found.
Business Creation proposed the establishment of a business park especially intended for small business development. Three redundant buildings close-by seemed suitable for this purpose. The Flint Industrial Village for Enterprise was established.
Redevelopment of the buildings resulted in a variety of spaces for all kinds of small businesses.
The community, and the corporation, were highly satisfied with the results achieved: preservation of economic activities and of jobs in the Flint region.
3. Factory closure in Spain
A small village in northern Spain was shocked by the closure of the local traction motor plant, which resulted in the loss of 150 jobs. The location was so remote that it seemed unlikely that the village would be able to attract new investors. Following extensive market and company research, Business Creation acquired the plant from the parent company, re-equipped the entire production department to specialize in the manufacture of wind turbines, and sourced and developed a number of key customers. In addition, the redevelopment team identified sufficient customers to continue the plant’s traction activities. A major challenge occurred when a principal newly developed customer was declared bankrupt. This led to Business Creation’s entry into the wind industry as it purchased this customer, a wind turbine company, from the bankruptcy estate and developed it into a successful business. As a result, all 150 individuals were re-employed and, two years later, the company was sold to a large Spanish wind energy corporation. An IRR of 67% per annum was achieved. The plant currently employs more than 300 workers.
Business Creation follows a three-phased approach:
Phase 1: Solution Definition. Within the space of a few weeks, the alternative scenario options to closure or for job creation are identified. The status of the workforce, technology, the available real estate and regional dynamics are all analyzed and initial contact with investors and potentially relocating enterprises are established.
Phase 2: Business Plan Definition. Once a solution scenario has been selected, a business plan is developed for its implementation. This plan must be acceptable to all stakeholders involved in the redevelopment process.
Phase 3: Implementation. Business Creation or third parties lined up by Business Creation acquire the relevant assets or business activity. In all cases, Business Creation manages the process of the establishment of new activities and of job creation.
Some interesting statistics with respect to Business Creation’s projects are:
- Approximately 20% of the projects taken on to date by Business Creation have been abandoned during phase 1 because the feasibility of the projects was too limited.
Only 7% of all phase 2 projects did not reach implementation.
- More than 85% of all jobs created during the implementation phase were still in place two years after their inception.
So, the Business Creation approach offers sustainable job creation solutions with fairly mitigated risks and substantial benefits for all stakeholders and a high return on investment.