Kurt Zech has made several highly risky but ultimately profitable business decisions in the past. But his latest venture, the purchase of Imtech, could prove his most challenging.
In the middle of the financial crisis, the Bremen real estate developer built and financed two major Düsseldorf projects, the Kö-Bogen and the Vodafone campus – and subsequently sold both properties at a substantial profit.
In 2014, he unexpectedly found a willing buyer, the Turkish Rönesans Group, for his power plant construction division. The division, patched together from two bankrupt companies, Heitkamp and Alpine, could have become a problem in the wake of Germany’s shift away from nuclear power and toward green energy.
The 58-year-old, whose company just ousted Hochtief from the top spot in a ranking of German project developers, has now used the proceeds to acquire the largest share of Dutch building-technology firm Imtech.
“It is in the interest of Germany as a business hub that construction be completed promptly and the airport put into operation soon.”
After declaring bankruptcy in August, Imtech has been the subject of a judicial inquiry into corruption offences in connection with construction of the scandal-ridden Berlin-Brandenburg Airport, BER.
Mr. Zech’s expansion into the building-technology business, which is likely to cost him a purchase price of €40-50 million ($43-53 million) and about the same in initial investments, has two catches. First, the deal will bring together two different cultures, a corporation and a family-owned business, which will not be easy. And second, Mr. Zech is also inheriting a portion of the troubled BER construction site – along with its unpredictable risks.
Working in tandem with Munich-based building services company Caverion since 2009, Imtech was responsible for the construction of the BER’s fire protection systems. It was primarily the deficiencies in these systems that led to BER not opening on schedule in 2012.
After describing Imtech as a “particularly troublesome part of the BER problem” in an interview with the business magazine WirtschaftsWoche, Mr. Zech is now adopting a more patriotic tone. “It is in the interest of Germany as a business hub that construction be completed promptly and the airport placed into operation soon,” he said.
The portion of Imtech purchased by Mr. Zech, now known as ROM Technik, no longer has anything to do with the fire protection systems at BER. Nevertheless, 150 ROM employees are currently installing power cables in the main terminal and the North and South piers.
Mr. Zech is unwilling to assume responsibility for Imtech’s past offences. “We are not assuming any old risks, provided they are known and uncontrollable,” he said, referring to 4,400 maintenance agreements and 360 Imtech projects being taken over by ROM, including other problematic projects such as a new hospital in Bremen and the renovation of the Cologne Opera.
ROM is reducing its risk through the use of liability clauses, in which each respective customer lists its known claims against Imtech for “defective and delayed performance,” thereby discharging Mr. Zech from any liability.
However, ROM is liable for claims that are still unknown. If these claims are incalculable, based on Mr. Zech’s analysis, ROM will not take on the respective projects itself but will have them assigned to it by the Imtech bankruptcy administrator, which will act as an intermediary. The administrator is then responsible for seeking recourse.
But even if ROM were burdened by preexisting BER issues or new problems, the actual Zech Group, with 6,500 employees and sales of about €1.6 billion excluding Imtech, wouldn’t be affected, because ROM is connected with the Gustav Zech Foundation. So far the foundation has only managed Mr. Zech’s private real estate holdings.
The benefit Mr. Zech derives from the deal is that ROM, a relatively small player with about €350 million in annual sales, will assume the number two spot in the building-technology sector in Germany, next to French competitor Cofely.
However, Mr. Zech said he also intends to acquire Imtech’s Romanian subsidiary and “another Imtech subsidiary.” ROM Technik, he added, “will grow organically and through acquisitions.”
The biggest problem could be to integrate the 2,300 Imtech employees, accustomed to corporate structures and lavish facilities, into a down-to-earth culture with short decision-making procedures.
“We have a big job ahead of us, getting people to change their way of thinking,”Mr. Zech said. “ROM Technology is managed like a medium-sized company.”
A former BER employee allegedly received €150,000 in bribes from Imtech.
This article originally appeared in German weekly WirtschaftsWoche. To contact the author: email@example.com