Accelerating Growth in a Family-Owned Business
Seasoned automotive industry leader Rogério Gonçalves spends 80 percent of his time evaluating potential acquisitions as CEO of Automotive for Prevent DEV GmbH in Germany. The second-generation family-run business manufactures seating products for cars, airplanes, yachts, trains, buses, and trucks, as well as providing apparel and furniture textiles.
“I was hired to bring a private equity philosophy to their businesses — to get more diversification and financial returns,” recalls Gonçalves, the only non-family member serving in the C-suite. “I brought a lot of knowledge from bigger corporations and some intelligence on how private equity works, which is something they did not have. It was a good fit.”
Since joining Prevent, the Brazilian native has taken three Wharton Executive Education programs in the last three years, most recently completing Corporate Valuation, a program offering advanced financial tools to help executives determine the value of a potential acquisition or merger target.
“A key takeaway for me was learning about the financial and operational components of cost of capital,” says Gonçalves, who worked for five years as CFO in South America for Daimler Group, the parent company of Mercedes-Benz, and for a major automotive power train producer before moving to the private equity sector in Brazil. He was CEO or senior advisor for 12 automotive industry acquisitions in the South American market over a seven-year period with each making returns in excess of 25 percent a year.
“Cost of capital was something that I’ve always taken for granted over my entire professional life over the last 28 years. For Europe, we have been using a cost of capital of 8 percent for a while. Wharton has opened my mind to new ways to think about and assess the cost of capital.”
Wharton finance professor Michael R. Roberts is the academic director of Corporate Valuation and describes cost of capital as “often the black box in many valuations, yet it’s central to business planning.” The program is unique because it “unpacks the concept and provides the intuition behind it,” Roberts explains.
“It was an eye opener for me,” says Gonçalves. “I concluded that the 8 percent was too much of an average. Now, I am applying what Professor Roberts taught me for each one of the acquisition targets we are looking at, and I am getting very different results.”
Attending Wharton’s programs has already paid huge dividends for Gonçalves and his firm. Recently, the executive used the more accurate valuation method he learned to negotiate a 20 percent lower asking price for an engine block company. The transaction successfully closed in November 2017. Gonçalves recommends Corporate Valuation first to CEOs of medium to large corporations, and then to CFOs and COOs of extremely large corporations.
Gonçalves says his role at Prevent is a continuation of his private equity career — with some differences. “In a private equity transaction there are zero emotions. In a family business there are emotions — a lot of discussions, so you have to be a bit more focused on the relationship aspects.” The first Wharton program he attended, Executive Negotiation Workshop: Negotiate with Confidence, has proven helpful in providing insights into the emotional and psychological aspects of those discussions.
He is next enrolled in Wharton’s Advanced Corporate Finance program in late February 2018. “Wharton is definitely worth the investment,” he concludes.