One down, many to go…

As one of Germany's largest OP wholesalers, PBS Deutschland, buys another in the form of Georg Kugelmann, the spotlight is cast on a rather overcrowded sector.

The coming together of PBS Deutschland and Georg Kugelmann, effective 1 December, marked what’s widely regarded as the beginning of a renewed and much needed period of consolidation among the German wholesale community. 

The deal, which saw PBS Deutschland – the German wholesaling subsidiary of Austria-based parent PBS Holding – buy the “sales and distributions structures” of competitor Kugelmann, came as no great surprise to the country’s OP community at large. And, while it may not have far-reaching consequences for Germany’s OP industry as a whole as several resellers told OPI, it nevertheless puts the spotlight on two companies with a variety of challenges, as well as a wholesale sector that is overcrowded and oversaturated.

Kugelmann is a longstanding German business, dating back to 1840, and a sizeable company with about 120 employees and 2013 sales of €23 million ($38 million). But over the past couple of years it has seemingly lost its way a little. 

This is partly a result of too strong a focus on its own brand PAPERheart – own brands still don’t quite enjoy the same popularity in the German market as they do in, say, the UK – especially in the school supplies sector, as well as an oversized and overstocked warehouse.

Rumour has it that the firm was in dire financial straits and would not have seen out this past year. 

As such, the bait was allegedly thrown to a number of potential candidates, including Berlin-based Iden Group, southern Germany’s soft-carrier and of course PBS Deutschland. 

Leadership

Each get-together would presumably have had some merits, but the latter was clearly regarded as the best way forward for Kugelmann’s Managing Director Klaus Danne.

And Danne himself has landed one of the top jobs at new owner PBS Deutschland. He is now Managing Director of the wholesaler, jointly with Martin Kunow who also holds a Managing Director role. But, according to PBS Holding CEO Richard Scharmann, Kunow in fact occupies more of a CEO position. 

Again, the rumour mill suggests that Danne’s appointment comes at a time of a seemingly rudderless direction at PBS Deutschland following the departure of Jörn Lambertz in 2012, so it will be interesting to see who takes charge in the weeks and months to come. 

Danne brings with him good credentials in the areas of field sales and distribution, areas where PBS Deutschland too hasn’t shone over the years.

In terms of customer base, the two companies are fairly well aligned. They can both be described as nationwide operators and the acquisition essentially means one eliminated competitor, although the new entity is also hoping for a more comprehensive B2B as well as B2C coverage. Scharmann told OPI: “Kugelmann is servicing the whole German market with a strong focus on B2C retailers. Integrating its structures into the PBS Deutschland network will strengthen our position significantly, in terms of field reps and customer coverage.”

He added that the acquisition should increase his company’s market value considerably, forecasting total sales approaching €100 million. “PBS Deutschland will be by far the dominating B2B/B2C wholesaler focusing on a comprehensive field organisation, fully integrated service models, including ERP and ordering systems, and finally state-of-the-art logistics services.”

New Germany focus

The acquisition comes only a few months after Biella’s wholesale operations in Poland were signed over and integrated into PBS Holding’s PBS Connect Polska, and just over a year after the multichannel operator acquired certain assets of OTTO Office in the Czech Republic and Slovakia. Indeed, the company has mostly recently focused its attention on Central and/or Eastern European markets – Slovakia, the Czech Republic and Poland, for example. 

In Germany meanwhile, activities have remained largely under the radar over the past couple of years. There has only been one small acquisition of regional wholesaler Härtel since PBS Holding’s spending spree several years ago when it bought regional wholesalers Kanzenel & Beisenherz, R&S, Hermann & Meyding and Alka and then, back in 2008, book and OP wholesaler Schreyer.

Now is clearly the time to change that again, with several industry peers agreeing that the need for consolidation in Germany, particularly in the wholesale sector, is ever increasing.

One of them is Thomas Apelrath, Managing Director of fellow wholesaler and major competitor ADVEO. He said: “I believe this is just the beginning of wholesale consolidation in Germany. It will be interesting to see the effect this consolidation will have on purchasing groups like InterES of which Kugelmann is a member. It’s high time the wholesale scene in Germany was newly defined.”

Büroring’s Managing Director Ingo Dewitz added: “It is always regrettable when an industry player has to give up its independence, especially one that has such strong roots and traditions in the German OP wholesale sector. I’m particularly sad about this loss of independence because Kugelmann has always fought very hard the cause of independent dealers. 

“That said, this is the kind of market development that will continue. I am sure that changes are afoot in the wholesale sector and that we will see more action over the next few years.”

Dewitz in particular had more than a passing interest in Kugelmann. The wholesaler had in fact been the chosen partner for Büroring’s recently announced virtual warehouse because of its focus on school supplies. As a result of the takeover, however, the partnership came to a sudden halt, with Dewitz assessing all his options, including presumably a straightforward swap to the new PBS Deutschland/Kugelmann entity. 

Staff uncertainties

As always with any M&A activity where the various parties complement and overlap each other rather than adding a completely new facet, it must be a difficult time for staff. We can only assume that there’s no way PBS Deutschland will need a further 120 staff, nor a big under-used warehouse. 

Answers to those questions will no doubt come over the next few months as the integration process gets under way and is completed – within about six months, according to Scharmann.