In 2024, around 100,000 Swiss companies were seeking a successor. The investment foundation Renaissance, led by Christian Waldvogel, invests in the most promising small and medium-sized enterprises (SMEs), known as "mature" firms, which require external capital to ensure a successful transfer of ownership.
Of the more than 600,000 SMEs in Switzerland, only about 10,000 are considered "mature." These long-established or family-owned businesses have often been active for decades in highly specialized or niche markets. They are characterized by solid foundations and an intact growth potential, averaging between 3% and 5% per year. However, some struggle to find a buyer, since the amounts involved can reach tens of millions of francs. The investment foundation Renaissance is the only investment vehicle in Switzerland dedicated exclusively to mature SMEs. It acquires a majority stake in the company, thereby enabling potential successors to join the shareholder base even with limited equity. This approach is financed by Swiss pension funds, as explained by Renaissance’s managing partner, Christian Waldvogel.
What type of companies does Renaissance invest in?
Christian Waldvogel: Renaissance targets Swiss "mature" companies with annual revenues between 30 and 80 million francs, across all economic sectors. Most employ between 50 and 200 staff. We also seek profitable companies with average annual growth of 3% to 5%.
Our criteria often lead us to focus on niche markets, where growth is both strong and sustainable. Our portfolio mainly includes companies with highly differentiated products such as articulated arms for operating rooms, MRI calibration systems, or high-voltage capacitors for power grids.
Why focus on this category of SMEs?
Waldvogel: We aim for attractive long-term investments. For that, an SME must have sufficient financial and organizational resources to cope with new challenges such as cyclical downturns or changing market needs. Smaller firms with just a few dozen employees rarely meet these conditions. In addition, the market offers many opportunities in this segment. According to SECO estimates, the Swiss economy includes around 10,000 so-called "mature" companies, of which roughly 50% to 60% seek external capital to secure succession.
Once Renaissance joins the capital, what does the company’s ownership structure look like?
Waldvogel: In most cases, 5% to 10% of the shares are transferred to management. The founding family retains 20% to 30% of the company for three to five years and remains involved in operations, often by serving on the board of directors. This period allows for the smoothest possible transition, without disrupting the company’s functioning. At the end of this phase, Renaissance acquires the remaining shares and holds between 90% and 95% ownership. In some cases, part of the family’s shares are purchased by management, which can thereby increase its stake in the company.
Does it ever happen that management itself asks Renaissance to help buy out the company?
Waldvogel: This does happen, and we also take on such cases. Some managers contribute their own equity and ask us for additional capital to complete the round. We always try to broaden management’s participation as much as possible, generally targeting a 10% stake from the very first transaction. Moreover, we favor scenarios where the group of successors consists of more than five people rather than just one or two. In general, the larger the community of interest, the better the company will be managed.
What are the advantages for the company and for management?
Waldvogel: Management’s participation in the company’s capital completely changes the dynamic. Those involved no longer see the company merely as an employer, but also as part of their personal assets.
As majority shareholder, what can you bring to SMEs in terms of governance?
Waldvogel: We encourage managers to excel not only in product and finance, but also in working conditions. It has also become very important to meet ESG criteria (the "environmental, social and governance" criteria establish an ethical normative framework for companies). In addition, we seek to appoint board members with a long-term vision and the ability to anticipate cyclical challenges. This proved, for example, to be very important during the strong franc crisis in 2015 or during supply chain delays in the Covid period. Currently, we are also launching a training program on artificial intelligence. Whether in administration, operations management, or machine maintenance, some industrial SMEs still need to become aware of the potential of these tools.
What returns can investors expect from mature SMEs?
Waldvogel: Over the past five years, investors have achieved an annual net dividend of 7% and growth of 5%, for a total annual return of 12%. The funds we invest come exclusively from Swiss pension funds. Companies do sometimes face structural challenges. For example, the IT market has become extremely competitive, not only on pricing but also in terms of talent recruitment. Switzerland has many highly attractive large employers, which can present a challenge even for mature SMEs.
