Transactions & Finance

Kai Engelhardt (Mahle): "We do not consider financial results a primary aim in the short term"

In 2013, Kai Engelhardt established a new corporate venture-capital unit within Mahle. The unit focuses on companies offering technology which either strengthens Mahle’s core business or enables new opportunities within the automotive sector outside of their main current areas of activity.

© All rights reserved

In 2013, Kai Engelhardt established a new corporate venture-capital unit within Mahle. The unit focuses on companies offering technology which either strengthens Mahle’s core business or enables new opportunities within the automotive sector outside of their main current areas of activity.


Leaders League. What have been the fruits of Mahle Corporate Venture Capital’s activity?  

Kai Engelhardt. The Mahle Corporate Venture Capital Unit (CVC) was founded in the beginning of 2013. Initially the main aim was to learn more about the world of venture capital itself and to set foot into this industry. By now, the core objective of this unit is to help Mahle identify and implement trends, develop innovative products as well as technologies and to maintain the company’s position as a top automotive supplier by meeting changing requirements and environments. The strategy thereby is to invest in different CVC activities which sum up to a holistic approach to reduce the risks and increase the chance of success.

In the past 4 years, our CVC Unit has successively implemented different internal and external innovation programs. In the scope of the Activatr Innovation Program, for example, Mahle’s CVC Unit launched two of its own startups this year. One offers an efficient online spare parts platform for which is based on a large network of suppliers and individuals, as well as customized production opportunities, e.g. 3D prints. The other, on the other hand, is a lifestyle brand whose primary product is a mobile scent diffusor which improves the air.

Furthermore, Mahle’s CVC Unit has acquired two startups: a producer of intelligent Organic-Rankine-Cycle Heat-Recovery Systems (ORC), and another start-up which redefines Thermal Management through innovative semiconductor technology. With this, batteries in electric vehicles can be cooled down while the interior temperature can be heated more efficiently.

Additionally, Mahle’s CVC unit has been investing in Emerald Cleantech Fonds III, a Swiss expert in VC which has already financed more than 50 organizations and represents various other large corporations. This has been creating Mahle a dealflow as well as support from investment managers. Furthermore, Mahle also invested in AutoTech Ventures, an investment fond in the famous Silicon Valley, opening the door to the American start-up scene.

Lastly, our CVC Unit is currently carrying out the pilot program Mahle Incubator in which we promote our internal idea generation and new business development. 

In general, Mahle offers its (applying) startups financial resources, strategic and operative expertise as well as a global network in R&D, sales and manufacturing. For this, we require anything from minor shares to a full acquisition of the firm.

For all our investment and innovation activities we do not have a defined funds volume. We understand ourselves as strategic investors rather than solely targeting for financial benefits. By intensively engaging within this business field, Mahle aims to discover promising future trends and to further develop its core competences. Thus, we only invest up to several million euros in growth capital which can also be used for subsequent investments after intense consideration.

 

As Mahle is already a pioneer in innovation, how can your corporate venture activity further play a role in this?

Of course, it is first and foremost the work of our development engineers that enables Mahle to continuously offer innovations to its customers throughout the world. Sometimes, however, it makes more sense to rely on external expertise and to buy-in new technologies or products rather than to develop them in-house from the scratch - depending on the time to market, costs, and unique selling points. Therefore, an important part of our strategic development is to observe the market and detect future trends that enhance the development within our core fields of expertise. Engaging in non-classic investments and considering collaborating with or acquiring start-ups thereby appears to complement our holistic innovation approach as it always must be our primary aim to maintain our status quo in a sustainable and profitable manner.

 

How do you discover potential funding targets?

Our Mahle CVC Unit initially audits the internal need for technologies and whether there are attractive trends which match our core competences. At the same time we track and analyze current market developments. We aim at continuously discovering start-up organizations which either strategically fit to us due to further optimizing our current product range or due to offering entirely new, innovative business models which match our strategic orientation. We focus on innovative technologies in the automotive industry as well as on future mobility trends. Thus, we are searching very broadly.

When we find interesting startups, we closely evaluate the start-up’s potential from multiple business aspects. In general, a startup must meet the following investment prerequisites:

- An ambitious and entrepreneurially spirited team, as well as a readiness to collaborate with Mahle. We do not only invest in the product, but primarily in the people we believe in.

- A proven product or concept that stands out from the competition and is on the verge of being launched or has already been successfully positioned on the market.

- A strong business model that is strategically relevant to Mahle and promises attractive returns.

Based on the  potential and  financial requirements of the startup, we decide how high the funding should be and which target to set on an ad-hoc basis. For this, we do not believe that a pre-defined fixed process would be effective.

 

How do you evaluate the success of an investment project?

As mentioned, we do not consider the financial results as a primary aim in the short term. Initially, especially the strategic fit (e.g. a product’s fit with our current or potential business fields) as well as the interpersonal fit (e.g. do we see the drive, motivation and ambition of the founders to truly work with us and to further develop their business and products?).

Additionally, we hope to be more innovative and agile by engaging within the start-up environment. A large benefit is to open our minds towards the outside and to get more insights into alternative solutions and changes all over our business world. In order to be successful in the long run, it is vital for businesses to initiate change and to really be responsive to discoveries and new ideas.

Lastly, we hope to learn from the startups and other players in the automotive industry and to apply this know-how to offer our customers exceptional products.

 

What sectors seem most promising to you?  

For Mahle new materials such as lightweight materials and innovative coatings e.g. to reduce friction are of high relevance. But also in the hardware area we see improvement potential: battery technology, the complex vehicle structure (e.g. the interplay between the powertrain, battery and electrics) and the perfection of our pistons are examples thereof. Nonetheless, we see great opportunities for us in the electrification of vehicles. An interim stage is the hybrid solution which is already of great importance today. However, we observe that most startups’ business models revolve around the development of apps, probably due to its limited capital requirements and high scalability potential. This type of business, however, is of minor importance for Mahle.

We are furthermore engaged in tech-scouting and we especially consider the requirements of our R&D departments. The aim is to discover supplementing technologies. Our strong venture-capital network is therefore indispensable.

In general, we are searching for promising solutions in two main sectors: First, as mentioned, future automotive technologies, including novel business models as well as the further development of current technologies in the automotive industry. Examples are products or technologies which reduce emissions as well as new or electrical powertrain solutions. Second, we are also looking forbusiness fields outside of our core business. These solutions could include topics all around process optimization, digitalization, non-automotive e-mobility, energy efficiency and other new business models.

 

 

About Kai Engelhardt:

In 2013, Kai Engelhardt established a new Corporate Venture Capital Unit within Mahle and is now the company’s Head of Corporate Strategy, M&A & Venture Capital. This CVC Investment Unit focuses on companies offering technologies which either reinforce and strengthen Mahle 's core business or enable new opportunities within the automotive sector but outside of current principal competencies.

During 2010 to 2012 Kai worked as Business Development Manager at Mahle, where he actively contributed to the continuous strategic advancement of the sector Mahle Non-Automotive and was additionally highly involved in various M&A projects.

Prior to joining Mahle as a Strategic Analyst in the Corporate Planning Department in 2008, Kai worked for premium OEMs within the automotive industry such as BMW and Daimler. During this time, he established a worldwide competitor network and developed several business strategy support tools.

 

 

Key figures about Mahle:

  • Top 20 Global automotive supplier
  • 77,000 employees
  • €12.3 billion in sales

 

Jeanne Yizhen Yin

 

Follow the publication of our 2017 International Corporate Finance - Transactions & Deals Report for more exclusive interviews & articles.

Read the full Special Report: Germany: The Power of Diversification

The economic landscape and working practices make this market totally atypical and complex, but the country still has a lot to offer. More than ten years after the arrival en masse of the British and American law firms, Germany is weighing its options and heading for greater stability.
Summary Global Firms Brush Off Brexit Fears Germany: the Power of Diversification
Summary German Startups Raised a Record €4.3 billion in 2017 The Rise of Activist Investing in Continental Europe Hassan Safer-Tebbi (Siemens Healthcare France): ''Our investments in R&D, about 8% of revenue, translated into four patents file Siemens Choose to List Healthcare Division in Frankfurt Allianz’s takeover of Euler Hermes a ‘logical step’ Daniel Hager: “Leadership is part of our strategic operational plan to achieve our ambitions” Another Record Year for the German Mid-cap LBO Market in 2017 European industrial rivals agree to merge KKR Expands in Europe With New Frankfurt Office

interview

Accenture's CEO and CFO interview by Leaders League Group

About us

Download