When Gerhard Kleinmann and his wife Erika were producing their first products using a bucket and a funnel in the cellar of the family home, little did they realise how far the business could take them. Gerhard (as general manager) has just sold the company to US investment firm ITW, marking a major turning point in the firm’s 27-year history.
It’s a classic story of a home-grown business, a lot of hard work and exploiting a niche in the market which now sees Kleinmann sitting at the top of new developments in cleaning products.
Sounding relaxed and very pleased with the deal, Gerhard explains how the family found the perfect partner to match its aspirations for the business. "We are growing so fast, we have invented new products, moved further into OP and installed new representatives in foreign countries. We need the money, space and the machinery to grow. An investor was the obvious answer… I’m happy with the deal, it could not have been better."
Kleinmann specialises in cleaning products for the office, automotive and medical industries and recently joined up with molecular chemists, Nanopool, to develop nanotechnology products.
These are products that will soon be available on the shelves at local supermarkets – Lidl in the UK and similar discount chains in Germany and France – as the company makes the difficult leap into the consumer market.
Indeed, it’s this prospect for growth that prompted eager investors to hold discussions with Gerhard, but the compromises wanted by most – including job cuts and relocation – were compromises he was not prepared to make.
"Kleinmann is a family company, with 75 employees including our kids. We obviously want to save jobs and stay in control of our own company. ITW enables us to stay as we are, it allows us that control. In addition, we lose the risk and, if we meet ITW’s targets, gain the financial backing."
Chicago-based ITW specialises in manufacturing equipment and components and recorded sales of $11.7 billion last year. It owns more than 650 decentralised, mid-sized companies in 45 countries worldwide, including Kleinmann competitor Techspray. Employing approximately 49,000 people, ITW focuses on the development of new products and technologies and as a result holds around 16,000 patents.
"In the beginning we only wanted to sell 50 per cent, but ITW only buys all or nothing. It offered to be a silent investor and the decision was taken in the family. It was hard. There have been tough times and easy times in the past and now we are doing pretty well, but our growth is too strong to finance it ourselves," Gerhard explains.
Kleinmann, which registered revenues of €12 million ($14.5 million) in 2005, has grown at a rate of between 20 and 40 per cent annually over the past few years and aims to move into triple digits with the nanotechnology side of the business. "We are leading the field with this technology in the consumer products industry. We expect it to be at least three times higher than our existing business in, let’s say, two to three years. Because it is a new product nobody has it, but everyone is talking about nanotechnology at the moment. If you type it into Google you get about two million hits."
To understand why the company is so excited about this new technology, it’s useful to have a quick lesson in supramolecular chemistry. Nano particles have an enormous surface area which means that a greater number of atoms lie on the surface. This allows them to better chemically and physically interact with whatever surface they are applied to.
Kleinmann buys expensive ‘real nano liquid’ in bulk from the Institute for New Materials in Saarbrücken, Germany, and Nanopool’s scientists manage the liquid and make it marketable for Kleinmann to put into its products. After just three months into the carefully chosen partnership, Gerhard is very pleased with the way this important relationship is progressing.
"Nanopool is at the top of the market in Europe in research and development in the area of surface coatings and additionally, it’s a family company like us. It’s going very well. We are leading in this field and we’ve got our first big orders," he says.
Using this technology, Kleinmann can make outstanding claims as to the effectiveness of its products, like the Nano-windscreen sealant, which Kleinmann confidently states is easy to apply, will prevent rain and snow from adhering to the screen and lasts up to one year per application.
The authenticity of its nano products is important to Kleinmann, and the company questions claims made by many other products already on the market which it says are based on a "very low" concentration of nano particles – making them less durable. The company even has a guide on its website to help customers spot products which may be exaggerating the existence of this technology.
This interesting and innovative business is a massive potential money spinner, but it’s very costly to set up. The nanotechnology prevents dirt and dust from attaching itself to any surface, but each surface – from computer screens to upholstery – needs a different liquid.
"For textiles, like on office chairs, or your sofa or a keyboard and a computer screen, they all need different liquids. We are only at the beginning with this technology because it isn’t very easy to use," says Gerhard.
Kleinmann has held training sessions for commercial customers in the jan/san market using scientists to explain the technical know-how. But the company hopes the products’ practical uses around the home in addition to the obvious futuristic selling point will prove to have mass appeal and help give the company a slice of the highly profitable consumer cleaning products market.
"We train our sales staff and also our customers up to four times a year. We explain the products and, using a big screen, we show how to apply them. We have 12 to 15 different nano products that we have developed, and we will develop more in the future. There are different markets we are acting in, not only office products. This is our main focus, but there is also the possibility to expand… this is why our investor was interested in us because [it too is active] in many different fields of business."
Kleinmann employs around 50 workers at its factory in picturesque Sonnenbühl, Germany, where it develops and manufactures all of its products in both small quantities using hand filling machines and large quantities with fully automatic equipment. Here, the company’s experts can invent new products in the laid-back atmosphere which Gerhard and his family are keen to protect. The family’s commitment to its German home could be seen from the way it conducted the sale, as Gerhard reiterated in a statement shortly after the deal was signed: "It should be noted that we have agreed long-term ‘locational’ security in Germany with ITW; this component is important with respect to my responsibility to my employees."
This willingness to remember its roots does not mean the company has failed to look past its own driveway. Kleinmann has gradually built up representatives in 40 countries including sites in India and Taiwan which it signed up last year. ITW arrived with its mighty financial backing at a crucial time for the company, with Kleinmann now planning to go after its own acquisitions, most likely in the OP cleaning market.
"We can now invest in new machinery, new warehousing, new facilities and new machines, and expand our business very dramatically.
This is an extremely big opportunity for us – 85 per cent of our existing products are going outside Germany. It is also exciting to be at the forefront of this market and for the next three years we will lead it."