By continuously evaluating and refining its own work, Munters has created an internal "M&A manual" that has garnered interest from other companies. In recent years, enhanced background checks have become a standard part of the due diligence process.
Since Munters returned to the stock market in 2017, with the Wallenberg Foundations' holding company FAM AB as the largest shareholder, the company has grown rapidly. Today, the group has over 5,000 employees, and revenue reached nearly SEK 14 billion in 2023. A key factor behind this growth is a series of acquisitions that have expanded the company's geographic footprint and added new technology and products in strategic areas.
With its origins in Carl Munters’ remarkable ingenuity, the company has undergone many transformations since its founding in 1955. Yet, many of the founder’s technical innovations remain a significant part of the company’s portfolio of world-leading climate control systems. Munters’ customers span a wide range of industrial sectors, with an extra boost from the rapid development of battery factories (gigafactories) and data centers in recent years.
Kaspar Kirchmann has been part of the journey since 2017, initially as Head of Tax & Legal and, since last summer, as General Counsel and a member of the executive management team. Over his years at the company, the internal M&A process has evolved significantly. Today, there is both a dedicated M&A department at the headquarters and a well-developed in-house "M&A manual."
"After each transaction, we evaluate what went well and what could be improved"
– I have been involved in building our M&A process over these years. Having a self-learning process has been a crucial success factor for us. After each transaction, we evaluate what went well and what could be improved. You learn something from every acquisition, and then we adjust and modify how we work. This way, the experience doesn’t just belong to one person but becomes part of the entire organization, which makes a big difference, says Kaspar Kirchmann.
A testament to their success is the interest shown by other companies in Munters’ acquisition experiences. Some practices can be shared, while others remain internal.
A clear trend is the increasing number of due diligence streams over the years, driven both by tangible business advantages and by new demands from external parties in areas like environmental and sustainability as well as anti-corruption efforts. A few years ago, Kirchmann decided to complement the traditional financial, commercial, and legal due diligence streams with integrity due diligence (IDD), or enhanced background checks. Look Closer has provided this service in several acquisition cases across various countries worldwide.
– I would say an IDD analysis becomes more critical the farther away you go. Even though we often have good insights through our local colleagues and advisors, we at the headquarters also need a clear understanding of the business and its key executives, Kirchmann explains.
Munters sometimes participates in larger bidding processes, but more often the company identifies the acquisition candidates itself. The search process is global, ranging from deals within the EU to targets in North America or Asia. Even when all commercial aspects look promising, it’s essential that the counterpart is fit and proper, and aligns with Munters’ business ethics and culture. This applies especially to founders and top executives who might remain in the company post-acquisition.
IDD closes the gap
Kaspar Kirchmann’s experience is that M&A processes work best when there is openness and honesty from the counterpart from the start, rather than them presenting a polished facade with tailored answers via an advisor. But during a longer company review, it can still be challenging to truly understand the counterpart. Here, the integrity due diligence report can provide insights not captured by other streams, especially when combined with discreet inquiries.
– Many times, integrity due diligence overlaps with other areas, but it also fills gaps or acts like a glue between the other streams. It often gives a clearer picture of who you’re dealing with, providing extra reassurance – even in cases where it just confirms that nothing has been missed.
Red flags that might stop an acquisition process aren’t limited to obvious factors like corruption or workplace issues. Sometimes, subtler circumstances require deeper analysis.
– Everyone can make mistakes or have had problems. But it’s different if there are signs of moral dubiousness that make the counterpart not trustworthy. This can involve behaviors in the market that we, as the acquiring company, would then be associated with.
Integration starts early
Munters’ M&A team includes project managers from the M&A department, representatives from the relevant business area, and local representatives. Early on, an integration manager is also appointed to take over once the deal is closed. The team ultimately determines what type of challenges Munters can address and when deals are simply too complex to pursue.
– The M&A process is a team effort where everyone plays their part. Much of what comes out of the due diligence phase carries into the integration phase. The integration manager has a checklist of tasks, ranging from buying a new coffee machine to restructuring the management team. But it’s also important not to forget simple things like showing a welcoming attitude and maintaining a degree of humility – we might even learn something from the company we’re acquiring!
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