The Renk IPO - Defense from Private to Public - Susanne Wiegand and Christian Schulz (IPO Stories, Ep. 42)

It was for me, here, from the very first moment that we have to increase capacity, that we have to focus on defense, that we have to help. We found out that some investors, specifically in Frankfurt in Germany, were very hesitant. As hard as it was Susan, we pulled the black, even while we were addressing up to stock exchange in Frankfurt, which was certainly an unpleasant experience. The market is not cyclic anymore, but it's a structurally growing market. We came to the US, they said, "Forget about the civil stuff, let's talk things." 3, 2, 1. [BELL RINGS] Hello and welcome to IPO Stories, a podcast that explores the tracks to IPOs for companies and their stakeholders. Through interviews with professionals, we have led companies to public markets, we will learn about what it takes to IPO a business, the dues and the dons before, during, and after a listing process. I'm Gocci. I'm Pierre, co-founders of Almond S&E Investment Management, a Europe-based equity manager. [BELL RINGS] [BELL RINGS] [BELL RINGS] [BELL RINGS] Today we're joined by Susan Vegand, the former CEO of Reng in Christian Schultz, as former CFO, to the custody IPO journey of one of Europe's most important defense suppliers. Reng is 150-year-old German industrial company, specializing in high-performance transmissions for bell tanks and naval vessels, operating at the center of Europe's raw-rement and defense modernization. Reng listed in Germany in February 2024, after first failed attempt in October 23, is now valued at more than 6 billion euros, which shares having appreciated by more than 300% since the IPO. In this episode, we explore our Reng chose to go public, the challenges of listing a defense company amid shifting geopolitical sentiment, what went wrong with the first IPO attempt, what changed in the second, and the key lessons for leadership teams considering an IPO in today's defense environment. Before we start, we would like to remind our listeners that our discussion has not financial advice, nor an investment recommendation, nor a solicitation to buy or sell any financial instruments, or an offer for financial services to run it out of the transaction. The information contained in the recording has no contractual value, and are destined for an informational purpose only. Almond's and investment management, and the participants in this podcast, may have holdings in the company's being discussed. Jizan, thanks for joining us on the show today. We're very happy to have you with Christian. Maybe I'll start with you, Sizan. If you can tell us a bit more about Reng and the origins of the company, please. Yeah, absolutely. And great to be here. Thank you for the invite. Also, together with Christian, it's big fun. Yeah, Reng, great company. More than 150 years old, so the company did spec to 1873, very brow traditional company, and has always been taking care of transmission. Transmissions for defense applications, predominantly for tanks, but also for navy vessels. And what Reng is all about is special transmissions. So when power density is extremely high, when it's about high torque or high speed, so those applications are the specialities of Reng. And that applies to defense and individual applications. And when did you join as a CEO and at that time, when you joined, why is it exactly your mandate for the company and the shareholders? I joined back in May 2021, just for all recollection. This was the time when there was no war in Ukraine. There was no war in Gaza, so different times, the company came out of a big conglomerate, as a so-called non-core asset from the Volkswagen M&N environment. And my mandate was basically to grow, to transform, to bring agility into the company, to set an appropriate level of ambition, to find out what is the strategy and the full potential of the company to go international. So all of those things were on our agenda. And the revenues split was 50-50 defense and civilian applications. The company was for many, many years, not run by speed, ambition, and agility. So the big headline for the mandate was, wake up call, full potential growth. As you say, at the time, no war in Ukraine, but then one year after it actually happened, has the ambitions to be public and to IPO? Was it day one when you joined and you knew you'd be a big company or what happened in the geopolitics and the world actually has accelerated this IPO plan? That morning, I can recall precisely where it was when I heard the news. I think life has changed for all of us, honestly. And certainly also for ranks. So when I came in the morning in the office and there was the one Ukraine, it was for me, here from the very first moment that we have to increase capacity, that we have to focus on defense, that we have to help, and that this will also change the company dramatically. And nobody said straight away, let's prepare for an IPO, so the world has changed. I think this came out in the development of the company, of the transition of the growth, of also understanding the options and the new geopolitical situation, and it was clear then that the business would shift to defense. Defense would have more important role in the company, revenues increased much faster and significantly in comparison to the civilians. It became also clear that the company had a special time of growth in front of us, but it was also clear that we need to keep rank independent, to follow the business model, to serve all the primes for tanks, for ships, and not be, let's say, allocated in one corner, in one pocket. Interesting. So the idea was to stay independent, not go to strategic, what happens in the Ukraine and the world has accelerated, obviously the development and the growth of the business. And so you view the public market as a very natural route then for the exit for Triton. That was the only option you considered at the time. It was by far the best option, so to extend a PE phase was no reason to do so, probably on excel sheet, it would have worked, but was transition, which we have done with rank was so fast, so there was now a key lead that we have to enter the next phase of development, a strategic buyer would have somehow blocked rank from following the business model, which we had, and the market share is super high in rank, so I would say the IPO was the natural way for independence but also to finance the growth with equity and not with debt. And any potential concerns you had when you took this decision to go ahead with the public route, I can understand the benefits that you mentioned for financing and for independence, but when it comes to concerns of being public as a defense company. My first initial thought was we have a tough way in front of us to make such a company, capital market ready in terms of governance, in terms of processes, in terms of transparency, and also in terms of managing the business, according to quarterly results and forecasting, which was not at all the process before neither under M.A. and Volkswagen, nor in the PE world. It was a big job for all of us to give the company a clear strategy, clear profile. We had lots of work to do with respect to communication, internal and external, and prepare the entire company for capital market readiness. And I have just seen this mountain in front of us of work, and this only works with a great team otherwise you are lost. And so, Christian, when you joined two years after in 23, was the company the IPO ready? As Susan just mentioned, the work was done. I wouldn't say the work was done. I wouldn't say without Susan, the company wouldn't have been ready to IPO, even if you would have been technical ready. When I came in, we set together Susan and me. She found me in ClubGuard on a rainy day. She said, "Defense is important. Wouldn't you want to join the team?" And that's what I did. She's a very convincing person. And then we were sitting together and we had a view and since I've done the trade in IPO before, I suddenly knew what to look at. And let's differentiate two perspectives. One is the pure technical readiness. That means accounting, reporting the compliance side, internal control over financial replying. This kind of things that you just need as the mandatory things to be listed. There was progress. We needed to accelerate that. We got some external help on the accounting side. We hired a new head of accounting, which is now my successor, Anjemy and C.P.H. She's running the company as CFO to take great hire. Investor relation was something which didn't exist, and which we also have taken the decision to take Ingo from the analyst side and we're happy to get him on board. So from the perspective, technically, we were good on the way. We were able to do this until October 1st attempt of the listing. And the second part, which then, when the market turned against us, was a little bit a problem, was the structure of the investors that the banks have introduced to ranks. So usually you start, let's say, six to nine months early on. You have a proper position of long-own lease. And of course, a certain portion of hedge funds, which you need for liquidity. But if you have many, many hedge funds and not so much long-only demand, combined with what you have said good here on the ESG topic, then you basically depend more on the markets, and which we then, Susan, experienced directly around the days of October 5th in 2023. So, company was ready in a good part. We needed to accelerate and we were completely ready by October 23. But on the investor side, we would have left to have two or three moments to build up the shadow book, which we then did in the second attempt. Exactly. You had two attempts. You first attempted in October 23. Are you saying that it was a lack of engagement from the right investors that forced you to pull the IPO at the time? I think it was a combination. The company didn't have the money. to the IPO before. So they went to see investors that were proposed by the banks. It was over the summertime. Usually you have Swedish loan only spending some time in the vacations. Then you have the Germans looking on ESG. So what I want to say is you end up meeting hedge funds. And hedge funds are like they are when you then come into difficult waters. Marketwise, which we did in October 23rd. We were on Rocho, then over the weekend, the U.S. Congress stopped the aid for Ukraine. Then you've got an interest rate move on Monday and on Tuesday night, the evening before listing, McCarthy was chopped in the house. And on Wednesday morning, investors in the US started withdraw from their inputted orders. And the owner would have been in the decision to say let's do a 5 or 10% free flow kind of exercise and Susan and me. And also the owner, Treeton Byteside said, this is not worth doing it. And as hard as it was Susan, we pulled the black even while we were addressing up the stock exchange in Frankfurt, which was certainly an unpleasant experience. Very interesting. There was your first experience with the public market and the change in sentiment, I guess, and volatility as well of expectations, how you would perform in the event as a peace agreement or the U.S. stop obviously funding Ukraine as well. I guess I expose you to the news flow in the defense sector. And the other way around, because two days later, as Susan has said, Hamas went into Israel, stock market for defense when 20% happened and the same people conserved. Why didn't you list? And please come back fast. And please come back, which you did because you came back in February. So four months after, what was the approach when you decided to release? What did you do differently here? And when you work with your advisors and as a management team, what did you decide to do differently? We took a deep breath and decided after 48 hours either we come back fast or not. This was the learning curve of what do we have to do to make us more resilient against market moves. This was fast, the learning curve, because all went well, but the market at the end of the day in the last 24 hours weakened our book. So we understood what we need to do. First, we looked for Connorsdorn investors, policy, Connorsdorn investors, which I think changed part of the resilience to the better of the book. Then we were sitting together with with Ingo, our head of investor relations and we said, okay, what is our target book looking like? What should it look like? So with respect to a proper balance of regions, so a good mixture of continental Europeans, no day, US investors. What is the right balance between long-only fundamental hedge and hedge? And then what are the names behind? Because in the course of the last weeks, I think we had quite a big fan club. And we said, so let's build the target book and let's very consequently and dedicate it work into that target book to make it happen. So this was the point when we said, okay, we secure Connorsdorn investors, which we didn't have before for the first attempt. And we build up that target book, which was less US hedge fund heavy, I would say. And then we decided to take out the risk of the public market and the time where you have after the ITF, the book opened for 10, 12 days. So we reduced the market risk down to two days. I think this entire setup then was the success factor for a fast second attempt, which we did honestly in the team without considing to the advisors. Because all the advisors said, no, it's not possible. Within three, four months, you can't come back, you cannot open the IPO market with rank as a defense asset in the first week of February. This is all not possible. And also, I think our own as our financial sponsors were very much influenced by the advisors and the banks. And everybody told them, this is not possible. And we said, we believe in it. We think we can make it. So we got that chance, so to say, and it happened. And it worked out. And I think it's what Susan said is also a sign for the good relation between the management and the owner because it was non-pleasant experience for treatment as well, being exposed, not doing it. And we were sitting together. The advisor said, look, earlier, you can go and let's say, ultimately, next year, the market is not there. Or you need to do a restructure deal with less prices. And then they might do it. And we basically, what Susan has said, we've done a non-deal road show. So the locals were on polls. We've got helping hand from one financial advisor, but mainly Susan Ingo and myself, we met around the 160 investors in 10 weeks time. We also then are driven by Susan's relation to Frank Hound, the CEO of K&S by the time wanted to secure the shadow book of fans with a strategic corner investor, which we found there. And this was also the argument that Susan has referred to before. If we would have waited another year, it would very well easily could have happened that the strategic buyer comes in, gets the asset, the financial sponsor would have sold out of the experience of an IPO. And then basically the independence, which we still believe even today, when we are not part of the management anymore, would have been done. It's very unusual as an IPO story, because obviously management here has led the effort in the in the second attempt. Fundamentally, I will assume that nothing has changed in the business between October and February. I mean, I remember I think that you were communicating with five billion euro backlog, right? So five years of revenue news. That doesn't change. The only thing what has changed is confidence of investors, because as Susan has said, after 48 hours, we said we might do a quick return. So we just reported our Q3 financials as if we would have been listed. So we made a call, we invited analysts and investors. Some even came driven by the events of October 7. And basically we showed them, look, we have a third quarter. Then in the prospectors, we we got a result estimate and the result outlook for the next year, which gave them confidence on how the order book as you have said could she would have transferred into revenue and with the, let's say, support of actuals. It's the best credential you could have. Susan is a natural forces to see you. So she really rattled the cage also in the financial community. I will never forget one big meeting with a couple of hundred invited guests and the big bank and the people were saying, you put the IPO, why wasn't it? And Susan was saying on stage, look, you guys here are a risk to our security. If you are a defense startup, you cannot even open up a bank account. It is right. The equity store didn't change, but the confidence and the comfort for the investors to see us one more often, to see that we deliver what we tell them, what we promise, what we forecast can't actually into figures. I think this was valuable in that time in between. I think investors always buy not just the equity story and the colorful power points and the nice financial KPIs, but also in combination with the team. So and we had a few weeks more time to familiarize and to get to know each other better, which I think was valuable. Then also, I think we need to be fair with the attack of Hamas and Israel, specifically I would say in Germany, perception with respect to defense has also changed. So the ESG argument was much lower and less in issue on obstacle than in the first attempt. What also was giving confidence to the investors was the behavior of the owner, the PE fund, because what they've done is they did not meet the expectations of the equity investors that they screw the case and then squeeze the sitrin. So what they basically said is we got an exchange of people on the board, we get independence in, which is a sign towards equity markets. Secondly, they settled the shareholder loan with us. We just paid half of that back. The rest was contributed in equity. So they strengthened the balance sheet of the company. And the third point was there was a decision taken to leave the price from the first time, which was the 15 euros stable, even if market segments have been up 20%. And one could have easily said, now let's increase to 18, 1920 and investors have recognized that because as you know, after three months, the glucose have waived the lock up and then within a year basically a tree tone could sell down and also the markets then have taken credit for them and the giving credit to them in the further sell downs that they did it in the right way. So it was, how say, in a way, the second attempt was like a textbook. And at the end of the day, many people were happy, the new owners, the old owners, the management team, the people, the creator and even has a given payment to the people together with the unions or even people in production benefited. So it was all good. They're only winners in that game, only winners. There's probably a lot of flusons learn on the way, but there's one conclusion, which seems to be maybe you should have spent a bit more time or have more visibility before their first attempt in time of where they will demand, where they will invest or that they tied, having a cornerstone, as you said, before going out there without having much visibility is at fair or usually there's macro and geopolitical consideration. But to what extent you really had enough visibility about the investor's population and interest at the time. I would say here because I've done two IPOs and the same with Trayton and the second attempt in Trayton, as well. I don't know, it's me. Maybe always needing two attempts, maybe not just kidding. But I'm a big fan of cornerstones. I mean, if you talk to banks, some banks say that it's good. Others say, "Are cornerstones you don't need?" In both cases, in the case of Trayton with the Nordic investors, it was good to have them here with the strategic investor KNDS, who knew the company as well. And then thanks to Susan came on board and Vivanecken. So, they were assigned for others' investors to follow. The other thing is quite honestly, it's about the timing. You know, banks tell you that spring timing, the summer timing, the October timing, and at the end of the day, we came on the 7th of February, where everybody has closed the funds in the year before, has had interest to invest. People were overrunning rank in the second attempt. We were sitting there literally with a piece of paper and said, "How much longer only do we want to have which of the hedge funds do we want to have?" And there, if we would have had six more months, Gucci in the beginning, I think that we would have had a better attempt, but even if you are in October, and if you have, let's say, the third most important man chopped in the house in the US, and this all on one weekend, you're still in high weather. That's the nature of IPOs. Of every IPO. And especially when you are rank and you are small, a company that is towards 1 billion revenue, which is a can-have for an investor. I mean, this was not the Porsche IPO where every big lung only needed to participate in. Now that's a paradox. I mean, you have a long history, industrial, player with highly profitable and very long, large backlog and long visibility as well, right? So it's surprising suddenly you get code by the market. Yeah, and with here, when I came at the time, 21, 22, and you googled rank, there was nothing. The company was not known. Nobody spoke to the company, although 150 years old, even in the city of Augsburg, where we were headquartered, I met people who said, "Of course, we knew this company rank, but we have no clue what you do." And I think within two years, we build up a level of visibility of people knowing rank and you also what we do. So I don't know, became a little bit the face of rank even so that people spoke to me and said, "Not my name," but they said, "Mrs. Rank." And yeah, all of this happened within short period of time. So if we reflect all of this together, I think at the end of the day helped us over the line, but I would say the crucial success piece was definitely the team. If I can, I would like to add one point on what Susan has said. Look, also, we could see that investors have grown a diet when it comes to their role to securing security. I mean, when we did the trade in IPO by the time, all our investor advisors, banks, and lawyers, and everybody said, "Sell off rank." Because rank was part of them, I didn't empire. It was listed, but you know, we have another very liquid share. And we owned rank as we owned diesel trouble. Evolence now also in Oxford. And by the time advisors said, "Thanks, main battleships." Nobody will buy your share whatsoever. So we sold it off for book where used to Volkswagen and Volkswagen finally now kept evidence so far and they sold off a rank to it, to treat on and on. In the first attempt, as Susan has said before, when we were in Frankfurt, we got only one or two investors talked to us with big concerns, as you have said, "Gutje, on the ESG, when we went to the UK, it was better. They still wanted to understand the civil business and the win." When we came to the US, they said, "Forget about the civil stuff. Let's talk tanks." Let's talk tanks. This was the sense in we afford 100 times. And this has changed, and also we've taken the opportunity driven by Susan's network also into the defence and geopolitics community. We've basically organised independent calls for investors to educate themselves, not listening to us selling the company and the shares, but really to independent institutes to get rid of all their questions and get educated on what's getting on in the world. From today's perspective, this is normal, because investors are two and a half years, let's say, lived their knowledge in the market by the time it was appreciated. And I think this is also something one needs to keep in mind. If you see the new owners as your new owners, like your old one, not like some investors buying your shares and selling it off, that makes a huge difference between the relation, between investors and the management team, I would say. The investors had to understand that defence changed to a structurally growing market in the next 10 years. And there was lots of uncertainty in the beginning. So if there is a ceasefire or something is changing, then everybody goes back to the old world, stop spending or reduce spending again. And I think this geopolitically education of what's going on, not just the war is back on in Europe, but also the US position. The stability of NATO has caused lots of uncertainties still today, I would say, but there is less doubt in the fact that Europe has to put its act together, has to invest, and that you cannot, even if you put lots of money into the system, come back to a status within two, three, four, five years of 30 years' underspending. Structural underslending of 30 years need to be recovered and it will at least take 10 years to spend that money, we have to spend to re-equip the forces in Europe to a, I would say, minimum level of what we need to come back to credible deterrence and the ability to defend ourselves without the huge support of the US. I don't say it will go down to zero, but what we see actually every day is that the US are going out of Europe and concentrating on the Indo-Pacific on other topics. And that's why Europe has not just to catch up the underspending of the peace dividend phase of 30 years, but also have to compensate certain things which came in the last 30 years from the US. And if you put this together, this requires huge investments over a longer period of time and the market is not sickling anymore but it's a structurally growing market. And this was the peace which we had to also educate the market, the investors besides ring story, besides team and all of this. But market was, I think, not well understood. And it's probably in a occasion in which it's still ongoing to be fair, but I think there's a realization of that. Do you remember the share of German or European investor that the IPO of rank versus the US investors? Of the German share, I think, was less than 10%. I would say continental Europe to add on what Susan said. So Germany, the Nordic, some French were like 30%, 30% US and 30 UK-ish. In time of the benefit for rank as a company to be listed, this transparency does it brings more contracts, more business with defense and governments when you list it or there's no relationship? Maybe over a longer period of time, but procurement decisions by customers are not influenced by whether you are listed or not listed or something. I think what helped is clearly we were even more known also within the defense environment and clearly for everybody, a listed company is kind of a certificate of transparency, governance, proper processes, a professional anti-set up. And you never know if you make deals or business with private companies. What is the level of governance, transparency, compliance processes and the likes? So if you are listed and Frankfurt Prime standard, for example, I agree, so there is clearly a certain level which you have to achieve, otherwise you are not there. So I think it's a certificate for certain aspects, for quality and proof also that we are then this helped. And it helps to let the company grow adult as well. Because everything that Susan has just said brings more, let's say, commitment and more structure and more discipline for whatever you do in the company. Because your report quarter by quarter investors look on the conversion of the order book into your revenues. They see if you just collect orders or if you really let the company grow and this has then impact on the company. So Susan has hired Emelie Xilla from Mercedes who came from automotive in order to also help, let's say, structure processes in production that had us as well. And basically by this we were also attracting people that rank couldn't have get as a not listed PE company anymore. Because there are some people with the profile that just join if you are listed. And if you look on the current management team of rank, I think it's a great team. All have been hired under Susan's leadership by the time. And we've introduced them to the investors early on. So they knew the second level of management, the segment heads. We made a capital market stay Susan. I would say six months after listing where we have had big demands. 17 analysts who were and were supposed to cover rank and many investors and we did that on the Munich premises. And quite honestly, go to here. If they then see a 70 ton main battle tank coming around the curve with 70 kilometers an hour doing a full stop. And that's all done by the tank transmission because you break and you steer by the tank, you understand the precision engineering that is a clear advantage and which could not be copied by anybody else. And I think this was also important to keep on the investor communication after listing a bathed the normal level of a quarterly report for a 30 minute call. I mean, we knew that there will be rather soon ABBs and further cell dons from the financial sponsor exactly from Triton. And that's why so we never left the road honestly and interacted very closely with investors. And I think also one aspect to add with the listing, the independent board. Also, I think make a difference in the perception of a company. And in time of few rules, I mean, you both left the company since then. I mean, we all understand it's been an intense process. The listing done has been successful. You've been the driving force behind it. But do you think being Cion CIF of the listed company is very different from an unlisted company? And you felt that it wasn't for you the job going forward or there were other considerations where you didn't stay around. If I can't start soon because I left before you. So to answer your question, I mean, I was the overall listed company for three and a half years in Traton by the time. So it's not that I wouldn't have coped with the role quite honestly. So it was my daily life and I was used to that. In my case, it was very easy. I mean, it was an intense time as Susan has alluded to and I gained, I think 16 kilograms in this one and a half years working a lot and then basically just took the decision. I needed a break and look how I look today. I think it was the right decision. Perfect. So running a public company and Susan from your experience as well, was it very different from what you expected? I loved it. So I would never go back to another structure. If I would ever go back into a CEO role, which I don't know for me after 30 years in the front row of management positions and not just the rank journey was let's say exhausting and time consuming. Also the other drops and roads before honestly. So I said it's probably the right time to change the way of working. So I ended up now with board mandates, whether this is the better life I don't know. It was for me to experience and to find that out the way back I think into a CEO role is possible. If I want that, I got some offers which I refused. It doesn't feel like I need to go back into that but never say never. And that's why I'm learning also now some other industries like as you know, automotive industry. For example, and I think quite an interesting mixed portfolio of mandates and supervisory boards, which is a different way of working, which I wanted to find out whether this is my world. And at the moment it feels good. And my rank journey was honestly longer than initially planned. So Triton gave me three year contract when I joined back in 21. And then we were in the middle of the IPO preparations. Obviously I prolonged and said the IPO was the best experience in my life. So I don't want to miss it. I left it to be also CEO of a listed company, no doubt about it. But for me, a face in rank simply after more than four years came to an end. And I said, I would like to make that listing. I company that face for one year. So I stayed one year after the IPO. And it was simply time for the next new management team also to take over. They did it operationally a few months before and it worked super well. So I think it was the right decision also for me to give them the space and the scene to take over and to move on. And so far I don't regret that. And Triton, what Susan has said quite honestly, Gritty, we have contact to investors. They all happy with the new management team, Alexander Sargel, the new Susan Halt, him as the CEO, Emmerich Camino. So it's not that how say we left a crappy company in 22A. So there is continuity, investors are happy and the current management team under Alexander's leadership is just bringing the company to the next level, which is just nice to see. And I'm still shareholder of rank. So I have never left the company. Same, same. Well, the outlook is promising. I mean, obviously that's a good transition. The structural shift in defense budgets across Europe, NATO, UPA just at the beginning of this very super cycle. We see more defense companies considering to be public actually after you, thean, exosense in Europe listed. Do you expect more private, either industrial, own, family, own, or private, equity, own companies to become public in the defense space? Susan, when you talk into the ecosystem, I definitely expect more to come. Why is it so? Because all the non-listed companies, which typically have, let's say, a more complicated governance structure, they are less ed dry now in growing, in making partnerships, JVs, M&A, and the market specifically in Europe also need to consolidate. And I think the speed has caught up dramatically. So if you see how Reimital, for example, has developed within the last, let's say, two years in comparison to their peers of two years ago, if you take other tank builders like Candy S, for example, I think Reimital did a great development. And this also thanks to the fact that they are listed, that they have access to equity, and that they have a currency. I mean, you can look any day in your mobile phone, the shop price, and you are much more transactional than non-listed. And then you have families and governments, and I don't know what shareholders, and they have debates and emotions, and all of this. And I think in that listed environment is much easier to make no moves, and again to finance the growth also with equity and a quite healthy way. Okay, agility, speed, more growth and ambitions, I can understand as an argument when you public, there's also the challenge, though, in your sector, is you have to put forward some capex to furnish capacity expansion plans, right? With honestly, hundreds are tend to about will the orders eventually come for governments? How will they translate and when it is sequencing and timing all those orders of a time? How do you think those public companies can manage this mismatch risk around funding now, growth, and capex, versus where actually the revenue we start flowing in? Definitely, my experience is investors and capital markets don't like too much the capex numbers, compromising the cash flow. However, there is at the moment the growth need, and I think, mid to long term, it pays out. So if I were today, as CEO of a defense company, I would take the risk, I would spend capex, I would expand, I would buy and do it. And I think the one or the other players exactly doing that, and it pays out. The cash flows at the moment are good, and customers make down payment. So also the system in Germany has changed to the better. So I don't think we should be now too hesitant and somehow miss this wave of market of opportunity, but make that step into the capacity increase. Honestly, we all need that, and the one who is now able to deliver, and it's faster than the other is getting the orders. And time and speed is what matters, and that's why to be now hesitant and to look for the 100% safe deal, I think would be a big mistake. This is very well invested money if you spend some capex now. And there's also a European dimension to that, I would assume. I mean, being public, you get a currency, you can be a considerator, you can help shaping the European defense. Do you think that will happen as we see more companies being public and probably be more ambitious to use balance sheet and currency? Do you expect consideration in the space, or do you think governments will be on the way? We know it's a sensitive topic, some probably countries are afraid to distant themselves from the US by allowing some consideration. I don't know what's your view on that. I would expect that we will see some consolidation in the market. Certain things have happened, some will happen, we are generally, I think, in Europe not fast enough with everything what we do. Also with respect to that, I think what typically consolidation is driven by the fact when there is pressure on the budget, not much money, and then companies are forced to join, which is not the effect which we have today, but this year, time pressure, and the amount of what they have to produce will also force them to somehow do something together. On all levels, so it can be JV, it can be a simple corporation that one company is sharing. It's a recipe to produce a certain type of ammunition under strong NDA, and we'll take advantage of the production capacities of another one, because otherwise you don't get 3 million rounds of something produced in one year. That's why the time pressure in combination with the extended amounts of whatever we need. I think this will force players together, and it's not about one nation is giving up a certain capability and is losing some of Renety and is making itself dependent on a neighbor or an Ellie, which is a problem. We all grow and increase, but we have to put things together, we have to align on specifications, we need to get rid of these hundreds of versions and configurations of be it platforms, be it types of ammunition. So we need to come to commonality, we need to come to speed to ramp up fast, and that's why you cannot just build a new factory, which takes 2 years. And until you have all the permissions and you actually get something out there, it's the third year is over, we need to be much faster. And this I think will bring players together, taking advantage of harmonization, of versions, model specifications, and create output, and make this on much higher level affordable with the price per piece, which needs to come down again, because what we have seen also in the last year, when the defense budgets actually were increased, a big inflation effect I would say. So things became just much more expensive, but if you really count output, so how many tanks have we built more, how many engines or transmissions or rounds of ammunition is much less than the price increases and the money spent, which we have spent more. So what we see is really inflation in that system at the moment, which needs to get out. And I guess the speculation, but you don't expand the change in that need in the event and hopefully there is a piece agreement at some point in Ukraine, but you don't expect that we slow down all those investment and CapEx, you just mentioned. No, because we have to rebuild still, and this will take time, and I would expect before piece agreement is maybe a ceasefire agreement, and the way from ceasefire to piece is a very long way. And that's why I think the word "Ease" everybody is using it every day. We need to be cautious. I don't. don't want to put too much water into the wine, but I'm not so confident we will have peace tomorrow and I'm also not so confident that the ambitions and the aims of the Russians have changed and I'm also not so confident that ceasefire automatically means that Europe is in a better place. This time where our German investors didn't want to take a meeting back in 2023, it seems long gone now, right? And the world has changed quite dramatically. And some of them are when we left the biggest investors in rank as well and not from a, let's say, only financial perspective also from the understanding that security is also part of the financial community of the equity markets and to that capital markets. And you can see it today with all the startups, with real working with Susan, they have more easier dealing with the banks than they had two and a half years ago. So I think we agree that likely going to be more companies, consulting a public listing in the defense base. I mean, what advice both of you, Susan, Christian, would you give to CEO, also, CFOs, considering a listing based on your experience? Next to the great equity story, which you need to have and tell you when it's from the market, you need to have a great team and a great team is consisting of comprising of two things. One is the team is experienced in IPO. So it makes a huge difference if you have Christian on board or somebody who's a great CFO or whatever, but has never done an IPO. It's a huge difference and also investors feel in the second you enter the door, whether there is a team play or not. And they also buy a team. And if a management team is not coming as a team, but individual is going to do. It's like a footballer. I mean, if they don't play together, nothing will come out, which is value other. So I think really team approaches important next to the good story and integrate and listen to people who have done it actually. Don't just rely on your advisors and the great banks, which you need and without them, it doesn't work, but they don't make the IPO. They don't make sure or guarantee that the whole thing will fly and is a success. And that's why I think listening to people who have done it already and to grade them into the team is one of the crucial elements. And my other learning is think early in the early phase of how should your book, which you have to build over time until IPO should really consist of in the balancing of investors coming from London, New York, Central Europe, Germany, wherever, Middle East, it depends. So think about the structure of your book and make meetings and dates and familiarize and meet the investors to fill target it in your book and not just meet somebody who had time by coincidence or who sits in a nice office, whether office, whether cookies are nice or something. I mean, I had the feeling retrospectively that we have met investors because of those arguments or banks could get on the phone, the one or the other and put schedule together. But there was no deeper logic and this is wrong. I mean, you just spend time on something which makes no sense. Yeah, but you have no experience. So you follow the advice, but I understand. I mean, I learned it later. I mean, they put the schedule together. It looks good to you if you have no clue. Somebody who has done all of this before looks one thing and says, okay, this makes no sense. Just here, where are these guys? So Christian knows exactly how to read a schedule for Rochelle. If you have not done it before, how should you know it? It's all great names which you have no clue what is behind and who it is. You don't even know what the difference is of along only an ad fund. We learned that I would say the hard way when we had to pull the night before and at least I learned it then. And I think we adjusted accordingly and said we can do it better even than the banks. We know what to do and with an angle being the perfect rock star person to orchestrate all of this for what do we need banks? You South Christian. Well, I mean, Susan has said a lot of right, right, right things. I would say at the end of the day, in the second attempt, also the banks supported them in the court listing. So we also need to say this. Now, what I would say is three things. Number one is get the critical functions staff with the right people. That's accounting. It's legal and it's investor relations. Those three. If you're approaching the submission of the prospectors, those three work with the CEO and the CEO for the end of the board because this is where it all condenses. We've all the people that are working in the back, but those three are key hiring. The second thing is have a full and close transparency to your owners and to your board because if you take them with them on the journey, they're not sitting in the room when you're on Rocho. They listen to the banks, but they give sometimes different feedbacks than investors give to management. So keep a close communication to both the old investors and that's the further wise to the new one. Don't do an IPO and say, good by honey, but continue not only with with calls, go to London every quarter for two days, meet the people, do a capital market stay six to nine months after listing to let them know what the company wants to do content wise on growth, on M and A everything. So that they really have an interaction and I think this is what I would say. And the last thing is always keep in mind to keep your humor. I remember when the things really got tough Susan, we were joking a lot because other than that, it doesn't help. And it also helps with the team and do not do a show and it's okay if you are tired as a CFO and you show these to people because they feel understood because they are the same and watch out to your team because an IPO in the last phase and it doesn't matter if it is a small company like rank or a huge company like Trayton or Porsche or whatever else, the work and the intensity is essentially the same. You shared already so many examples and experience and memories of the process. Any other one you wanted to share memorable moments during your process that you want to remind us. I mean, obviously if you have then somehow made it and you ring the bell, this is a special moment. Christian, you told me before and you said to Zanne, you don't understand that once you are there, you will only understand it and enjoy that moment. Don't ring the bell, really take your time and do it. I think this is one of the great moments absolutely, but also the team effort I enjoyed very much. I mean, this was a process with lots of uncertainties. This was the day and night process and the time consuming one and creating headaches, but also great moments of meeting good people and always relying back on the team. We had fun when we were traveling at least I had fun and enjoyed it and we kept you more and I think this is a very true and honest statement and those were my two greatest recollections of the process as such. So the team play which we had, we also really meet great people and other people and the moment of listing is an experience which is great. I underwrite everything Susan said. There was one moment which I liked as well when we have had our first annual meeting. Right, three months after the listing, so it was all a little bit dense and we said, one investor who basically said who came on stage via video was a virtue of one and said, I wouldn't have thought that a sponsored IPO from a PE company would work that well, I would like to express my gratitude to everybody involved. It was a high moment for me because usually you get a lot of questions and challenges, but this investor was a critic of one Susan. He seemed to be very pleasantly surprised but then edit, well, this is not enough appreciation, keep on working. You have shared today you experience with us. Thank you very much. That's the most important thing as well is that we learn from the people who have actually done it as you said and that's very appreciated. You share your experience today with us. So a big thank you Susan and Christian. It was a very interesting discussion. Thanks. Great for having us. It was big fun. Thank you, good to you. Thank you very much. You brought back some memories. Thank you, Pierre. Thank you for listening to IPO Stories and future episodes will host CEOs, CFOs, advisors, and other participants on the IPO process to learn from their experience. Like from Susan and Christian today. If you'd like to show, please follow us on Spotify, Apple Podcast and share the show with people around you. If you have questions about the IPO process, would you like us to address with future guests? Please get in touch at contact at IPOStories.com and follow our LinkedIn account, Almond Center Investment Management. [Music]