CGS UpdateThe CGS Journal

May 2012

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Dear Reader

In the last two editorials, I expressed the opinion thatwe can no longer take long-lasting, stable growth forgranted, nor will we be able to any time soon. I concludedthat only active management can ensure the necessaryadjustments are made to enable businesses to adaptto this trend. Of course, the same also applies to theidentifi cation and exploitation of opportunities, both on company and fund level.

What has CGS achieved in this direction since last November? Starting in early 2008, we built up and expanded the Maag Group into a world market leader in the sector for plastic processing machinery and sold this group to Dover in February 2012. The Maag Group will underpin future growth with existing structures and Dover’s strength as a partner. We also set up a new fund (CGS III) successfully in a fi nancially-demanding environment. We have already made our fi rst acquisition with this new fund: Rauscher & Stoecklin AG, a Swiss, third-generation, medium-sized family business company, which we will internationalize by means of an active proprietary approach.

Rolf Lanz

After the successful implementation of its well-proven Buy & Build strategy, CGS sold the Maag Group to Pump Solutions Group (a unit of the US-based Dover Corporation).

History of Maag GroupIn April 2008 CGS acquired the German-based Automatik Plastics Machinery(Automatik), which at the time was a unit of the Rieter Group, a renowned Swisssupplier to the textile machinery and automotive industries.

Although Automatik was a leading supplier of pelletizing equipment, it operated on a stand-alone basis and did not yet act as a global player in the plastic industry. It was a promising opportunity for the application of CGS’ Buy & Build strategy in one of its focus sectors. After establishing production and service sites in China and USA, and the creation of several sales and service offi ces in Malaysia, Taiwan and Brazil, CGS merged Automatik with Maag Pump Systems (MPS), creating the new Maag Group.MPS develops, manufactures and supplies gear pumps and systems for process appli-cations and has pioneered the development of gear pumps for handling a variety of media in the plastics, chemical, pharmaceutical and food industries.

The merger was a further signifi cant step in the implementation of the Buy & Build strategy. The combined product portfolios of MPS and Automatik created a comprehen-sive range of pumps, pelletizers, fi ltration systems, extruders and screen changers. CGS has established a worldwide operating Group that is now uniquely placed to provide complete systems solutions to its clients in the polymer and extrusion market.

From a single-site, German-based SME to the world market leader in its fi eld

>>> CGS PRIVATE EqUITY FUNd II – FIRST SUCCESSFUL EXIT

36 sales engineers52 agents

Charlotte, USASalesEngineeringManufacturingAssemblyTest labAfter Sales service

Grossostheim, GermanySalesEngineeringManufacturingAssemblyTest labAfter Sales service

Mumbai, IndiaSalesAfter Sales serviceMoscow, Russia

SalesVilleurbanne, FranceSalesAfter Sales service

Rozzano, ItalySalesManufacturingAssemblyTest labAfter Sales service

Kuala Lumpur, MalaysiaSalesAfter Sales serviceGrinding service

SingaporeSalesAfter Sales service

Taipei, TaiwanSalesAfter Sales serviceGrinding service

Taipei, TaiwanSalesAfter Sales serviceGrinding service

Shanghai, ChinaSalesEngineeringManufacturingAfter Sales serviceGrinding service

Sao Paulo, BrazilSalesAfter Sales serviceGrinding service

Manufacturing facilitySales and/or after sales centre

Oberglatt, SwitzerlandSalesEngineeringManufacturingAssemblyTest labAfter Sales service

CGS Update I May 2012

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Maag Group todayThe integration process was fi nalized at the end of 2010 and was per-ceived as very successfulby Maag’s management.The combined business’ strong performance hascontinued since the merger, and the benefi ts have been significant,

such as realigned market focused business units, the creation of global sales teams, and the establishment of fi ve manufacturing centers of excellence across the globe.Today Maag Group is the world’s leading manufacturer of equipment and systems for the relevant part of the global plastics processing machinery industry.

Operational improvementsAfter a sharp decline in 2009, Automatik already achieved the turnaround in 2010 through anti-cyclical behavior as demonstrated in the project “Sphero value analysis”. The project included the development of the new Sphero machine and an unsparing optimization of the productionprocesses, resulting in a signifi cant value increase for thecompany. The Association of German Engineers, an inde-pendent team of experts, awarded Automatik with the German Innovation prize in that year.Furthermore the applications for the protection of intel-lectual property doubled since the end of 2007, from 29 to 58, due to the very substantial efforts made in product development. A good example is the Baoli machine that was developed for the Chinese market and successfully launched in 2009.

The establishment of additional production sites, the enhancement of system solutions and the realization of cost synergies through effi cency projects compounded the inherent benefi ts of the merger and further increasedrevenue with higher margins.

Exit of Maag GroupIn the second half of 2011, the shareholders of the MaagGroup initiated the exit process. On 13 February 2012 theshare purchase agreement between the sellers (CGS Funds, Clyde Blowers Capital Funds, Maag Management) and the purchaser Pump Solutions Group of dover Corporation was signed. Maag will be integrated in the Pump Solutions Group, which is also operating in the polymer processing indus-try. This deal will further enhance dover’s strategic posi-tion in this market and offer the Maag Group the perfect environment for its further development.

CGS is proud of this fi rst divestment of the CGS II funds and the continued success story of the predecessor fund CGS I. n

“First Closing” of the New CGS Fund>>> SUCCESSFUL START OF CGS III

On February 29, 2012, the Directors of the Managing General Partner approved the fi rst closing of CGS’ new Private Equity fund CGS III (Jersey) L.P. with total com-mitments of CHF 55 million. A part of this capital was used for a fi rst transaction, the acquisition of Rauscher & Stoecklin (s. separate article).

The group of fi rst closing investors consists predomi-nately of existing investors in CGS II, the new fund’s pre-decessor vehicle. At the time of fi rst closing, additional subscriptions of CHF 33 million were available, which will be included in a next closing. The new fund targets a volume of total commitments of CHF 180 million.

CGS Management giesinger gloor lanz & co., the Swiss-based experts for industrial buy-outs in the small and mid-size range, will again exclusively advise the Fund. Rolf Lanz said: “We are excited to act again as sole advisers to the new CGS fund. Our proven Buy & Build strategy and the solid industrial roots of our investment team give us confi dence that we will again realize top-quartile results for the investors in CGS III. Our deal pipeline is well fi lled and we are convinced that the new funds can be deployed comparatively fast.”CGS III has attracted signifi cant interest from existing and new investors. n

AutomatikUnderwater pelletizer

SPHERO®

MaagScreen

changer MaagMelt

pump

Maag Pump Systems

Automatik Plastics Machinery

MaagStart-up

valve

Loss inweightfeeder

Extruder

AutomatikCentrifugal dryer

CENTRO

AutomatikProcess water

system

Engineered system

solution provider

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With RAUSCHER & STOECKLIN AG CGS Management acquired a traditional Swiss company enjoying an excellent reputation in its market

>>> CGS FUNd III – FIRST ACqUISITION AFTER THE FUNd’S FIRST CLOSING

One week after the first closing of its new fund, CGS signed its first deal and acquired Rauscher & Stoecklin AG. Together with the existing management team, CGS will further develop the traditional Swiss company in the area of electrical components for infrastructure. A strong pan-European industry group shall be created through acquisitions.

Traditional Swiss companyRauscher & Stoecklin AG was founded in 1919 by Hermann Rauscher and Achilles Stoecklin. Both founders formerly worked at Sprecher + Schuh before they started their operation focusing on switches and control systems. In the late 1920s the two founders built their first trans-former. Throughout the years, Hermann Rauscher and Achilles Stoecklin and their succession family members added different businesses to the company where they saw potential for market growth. Thus, they added over line switchgears, high current sockets and plugs, and house service connection systems. The focus for their own manufactured products was and still is today the Swiss market, where they have been very successful in the past and enjoy a unique market position.

Electricity is one of the most important sources of energy and a driving force in modern societyRauscher & Stoecklin stands for innovative products with the highest quality standards and specifications. It manufactures oil-cooled transformers for the medium voltage range and electrical engineering equipment, such as switchgears, high current plugs and sockets, switch and control systems.

The transformers are used in the electrical distribution network and are the biggest business unit. The tech-nology, especially in the reduction of dissipation losses, has significantly improved. As a consequence, the distri- bution transformer is replaced after only 20 years in ser- vice even though the life expectancy is beyond 50 years. The electrical engineering equipment products are used in various housing and rail systems applications.With its products, Rauscher & Stoecklin has very high brand recognition and an excellent reputation for quality products.

OutlookThe management has a wealth of experience and is very loyal to the company. CGS is happy to build a pan-Euro-pean company with the existing management that further enhances its sophisticated applications. n

Production equipment for winding goods

Rauscher & Stoecklin AG:Revenue 2011: CHF 33m87 employees

Headquarters and production site of Rauscher & Stoecklin AG in Sissach

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CGS Update I May 2012

Editorial Details

Publisher: CGS Management giesinger gloor lanz & co.Huobstrasse 14 Postfach 355 CH-8808 Pfäffikon Telefon +41 (0)55 416 16 40 Fax +41 (0)55 416 16 41info@cgs-management.comwww.cgs-management.com 

Graphic concept: Creation AG, www.creation.ch

© All rights reserved. Reprint only with permission of CGS Management.

Strengthening the Investment Team’s Expertise in Accounting and Finance

>>> CGS MANAGEMENT HIRES NEW ASSOCIATE

What priorities did you set on becoming CEO with R&S?In the early 2000s, R&S was “small and beautiful” and yet still pleased with this position. Therefore the first thing to do was to generate a spirit of change in the business and to bring the company onto an expansion course. This was most urgent in the field of transformers which was being operated at a subcritical size.

How has the company continued to develop in your time?By 2011, sales had more than doubled. Happily, this occurred in nearly all five business divisions. Leading market positions were achieved almost everywhere on the home market. Parallel to this, earning power had also markedly increased. We invested the acquired assets in infrastructure and production facilities in order to remain at the cutting edge of technology.

How do you view your challenge today?The large fluctuations in raw material prices and demand require that manufacturers produce their best perfor-mance for the customer on a daily basis. Furthermore the market environment has become tougher.

Peter Z. Egli (33), a CGS team member since November 2011, started his career at Ernst & Young, where he gained valuable experience in accounting and finance. As an audit manager, he worked for listed clients in the industrial sector. In addition, Peter played a key role in various advisory and transaction engagements. He was also involved in the professional practice department, where he held internal and external classes on accoun-ting and auditing. He graduated in Business and Admini- stration and is a Swiss Certified Accountant.

Before joining CGS Management, Peter worked for Kuoni Travel Holding as an internal audit manager. In this position, he analyzed Kuoni’s worldwide business per-formance and processes, with a special focus on the subsidiaries in Asia, Europe and North America.At CGS Management, Peter supports the investment

team in the deal flow and value management processes and is also responsible for the fund’s reporting to the investors.

In his spare time Peter likes travelling and discovering other cultures. As his mother is Chinese he speaks Man-darin. He also enjoys various water and winter sports. n

Peter Z. Egli, Associate

Rauscher & Stoecklin AG: Interview

What effect does the strong Swiss Franc have on R&S?In the strong export divisions involving high-current connectors and overhead line switches, the EURO rate forced us to make price and margin concessions. Although the transformer business is heavily focused on Switzerland, the same applies here as all our competi-tors manufacture in the EURO area.

What do you expect from the cooperation with CGS?Given the growth in the past, the potential on the home market has been largely exhausted. Further growth is possible only with an international focus. CGS’ expe-rience, know-how and assets will allow us to develop into an international group. n

Personal details:Name: Marc JauslinAge: 60 (1951-12-12)Marital status: MarriedChildren: Two adult children (33/31)Education: Graduated in electrical engineer from ETHPosition: CEO with R&S since November 2002Interests: Culture, sport( jogging, golf)