"We want to step on the gas and grow even faster!"
CEO, Mountain Alliance AG
Mr. Wild, Mountain Alliance AG is listed in the m:access segment of the Munich Stock Exchange. What sets you apart from other listed investment companies?
Daniel Wild: Mountain Alliance is a lean, transparent and value-oriented investor with many years' experience and an excellent network. We have a clear focus, investing in companies in four segments – Technology, Digital Retail, Digital Business Services and Meta-Platforms & Media – in which we currently hold 36 investments. Mountain Alliance has a symbiotic relationship with Mountain Partners, our major shareholder, and that creates tremendous momentum in both organizations. Mountain Alliance gives its shareholders easy access to a diversified portfolio of digital assets via the stock exchange.
In December, Mountain Alliance added six new investments to its portfolio by acquiring Mountain Technology AG. What, specifically, did the package include?
Daniel Wild: The companies we bought with the Mountain Technology move are an ideal complement to our existing portfolio and have raised it to a whole new level. Of the six new investments, I would like to highlight Exasol, a specialist for in-memory databases, movingimage, which boasts a leading enterprise video management solution, and mixxt, a provider of specialized intranet applications. Exasol, in which we have a stake of around 8%, operates as an infrastructure provider for big data in a very attractive market and was recently picked as one of the Tech Tour Growth 50 for 2019. Our 8% stake in movingimage, a leading European enterprise video content management systems company with key accounts such as Vodafone and Henkel, has similarly exciting prospects.
What do you expect of these new investments?
Daniel Wild: We acquired this portfolio because we see significant upside potential. I would again point to Exasol and movingimage as two examples: Thanks to its leading database software, especially with regard to big data and data analytics, Exasol is seeing its operations develop very well indeed and is also appearing on the radar of larger corporations – all of which means that a lucrative exit could well be on the cards here in the next one to two years. Due to movingimage's strong market position, it too could be a prime candidate for an exciting exit in the medium term. In the short term, we expect this company to continue its dynamic growth trajectory.
How do you expect the acquisition of Mountain Technology to affect your earnings?
Daniel Wild: We see this as an accretive acquisition. So despite the higher number of shares due to the capital increase through non-cash contributions, we expect a positive effect not only on the net result, but also on earnings per share for the current financial year. We will see a significant leverage effect if we are able to sell the first of these mature investments at an attractive price.
You talk about potential sales. What does your exit strategy look like?
Daniel Wild: Our objective has always been one to two exits per year, and that is what we have delivered in recent years. In the next few years we are aiming for larger exits, possibly in the mid to higher seven-digit range. That will also give us more leeway for new investments. Successful exits are an essential pillar of our business success and our ongoing expansion.
You want to become the "leading investor for digital companies" in Germany. Apart from the acquisition of Mountain Technology, what other progress have you made recently?
Daniel Wild: Even before Mountain Technology AG, we had already taken over another promising portfolio in the shape of Mountain Internet AG. And then there are investments such as promipool, which we launched and developed ourselves. If you include Mountain Technology, the value of our portfolio has now risen to over EUR 40 million. Ultimately, though, that was nothing more than a successful milestone along the way to a portfolio worth at least EUR 100 million.
How do you intend to reach the medium-term target of a portfolio value of EUR 100 million? Does your major shareholder Mountain Partners have any other investments that Mountain Alliance would like to purchase?
Daniel Wild: Developing our existing portfolio is one pillar of our growth. As I said earlier, this is an area where we see significant upside potential. On top of projected gains in the value of existing investments, stepping up our commitments to particularly promising portfolio companies will likewise further enhance our portfolio value. The second pillar will be additional acquisitions – including the purchase of entire portfolios – with a focus on acquisitions outside the Mountain Partners Group in the future. We have no plans to buy any more investments or entire portfolios off Mountain Partners.
How fast do you want to grow in the future?
Daniel Wild: We want to step on the gas and grow even faster. If we find suitable acquisition targets, I could well imagine that, 12 to 18 months from now, we will be looking at something like EUR 80 to 100 million – double our current portfolio value, in other words. That will obviously require a sizeable capital increase to give us more financial scope for acquisitions.
You mention a planned capital increase. What are your specific plans?
Daniel Wild: As we announced on 29 April, we will propose a resolution on a capital increase with subscription rights to the Annual General Meeting on 27 June 2019. We have found MainFirst Bank to be the ideal partner to support us in this project. The planned volume and the issue price of the new shares will be announced at a later date.
Let's get back to the current portfolio. In addition to the recent acquisitions you have already mentioned, what are your most exciting and valuable investments right now?
Daniel Wild: Promipool, the technology-driven celebrity stories platform we launched ourselves and which is available in German and English, is of special importance to me. This platform has given us profitable growth for years and is something we will continue to internationalize. The model works very well in German and English-speaking countries, and we are confident that we will be able to spread it to other markets, too, which will vastly increase promipool's market value. Another exciting platform is Lingoda, a language learning platform that has expanded by more than 100 percent over the past two years. Lingoda is the leading language teacher placement platform in Europe and a prime example of a highly scalable business model. The third example I would like to mention is Volders, the insurtech company with which we entered the fast-growing online brokerage business for insurance contracts. In particular, Volders' offer of managing fixed-term contracts is generating huge interest among customers. Insurtech companies are seeing their valuations rise fast right now, because the large insurance groups do not want to make the same mistakes as the banks and are investing in digital competitors at an early stage.
Let's look at one negative point: The consolidated result for 2018 was adversely affected by the sharp decline in the share price of The Native SA, a listed investment. Do you see this as just a blip? Or do you have more serious concerns about the development of this Swiss investment?
Daniel Wild: In our view, developments at The Native were exaggeratedly negative, due in part to the difficult stock market environment in the fourth quarter of 2018. The Native is a major shareholder in Germany's Asknet, which in turn became a leading global provider of a commerce-as-a-service platform and merchant services through its merger with French company Nexway. We believe The Native's true value is well above its current market capitalization. In the medium term, this position is also an exit candidate, but not at the current level.
Are there any other "problem children" in the portfolio?
Daniel Wild: We currently have 36 investments in our portfolio, as I said. Of these, the largest 13 account for just under 90 percent of the total value. Among the smallest investments, there are definitely one or two problem children that cannot sustainably meet our expectations. These are, however, of only minor significance to the overall portfolio. For us, it is important that these investments do not cause major costs and do not unnecessarily tie up management capacity.
How are things in the service business at the moment? After the decline in 2017, is this area now delivering any positive impetus again?
Daniel Wild: Yes, we are also seeing fresh positive impetus in the service business. The TV business in particular, which went into a steep decline in 2017, performed solidly again in 2018. Essentially, the service business is of importance to us not only because we consolidate companies: The knowledge possessed by service companies also helps us to accelerate the growth of our technology investments.
There is no shortage of listed investment companies. Is there a role model that you at Mountain Alliance seek to emulate?
Daniel Wild: There is indeed. Our role model is London-based Draper Esprit, which is about eight times as big as we are at the moment. Like us, Draper Esprit is a digital investment company whose shares normally trade at a mark-up of 10 to 30 percent on its net asset value. We want to become the German Draper Esprit!
After a long period of bottoming out, the Mountain Alliance share price jumped by around 20 percent in December. Is the capital market now beginning to recognize the potential of the "new" Mountain Alliance?
Daniel Wild: The takeover of Mountain Technology has certainly made the capital market sit up and take a bit more notice of us. That is another reason why we have begun to flank our growth strategy by strengthening our capital market activities. The feedback from recent investor meetings and roadshows was very positive and encouraging. Having said that, Mountain Alliance is still flying under the radar of many institutional investors – one more reason why it is very important for us to target the EUR 100 million mark.
Over the past year, you reported numerous insider purchases. Will there be any more directors' dealings reports from you this year?
Daniel Wild: I personally currently hold around 6.5% of the shares. I have bought Mountain Alliance shares regularly in the past and will continue to do so in the future, because I believe in this company.
Mr. Wild, thank you very much for the interview.
This interview was recorded for financial.de in German.