Roland Berger

"In the year 2013, René Benko and Roland Berger take a seat at one of the white-laid tables. They dine on upscale bourgeois food at Borchardt, a whole plate-filling Wiener Schnitzel being one of the most popular dishes. Occasionally, one of the other guests comes to the table around lunchtime and greets Berger, who then introduces the young man and successful entrepreneur by his side. Just then, Benko's Signa had entered the department store chain Karstadt and would soon take over all shares from the failed US entrepreneur Nicolas Berggruen. Thus, Benko suddenly becomes a highly relevant real estate investor in German city centers."

"Berger, who enjoys taking risks but is a realist, knows his value to Benko very well. Thanks also to the almost inexhaustible network of the advisor, Benko can gain connections in politics and new investors. Thus, Robert Peugeot from the namesake auto dynasty likely places his trust and invests in Benko's company also because his good old acquaintance Roland Berger is among the shareholders. And for Klaus-Michael Kühne, majority owner of the forwarding company Kühne & Nagel, the name Robert Peugeot matters when he joins the circle of investors years later."

"Benko's gold rush in concrete has, in addition to macroeconomic reasons, very specific ones as well. A long-standing senior executive at Signa lists three arguments for investors: Benko paid up to 6 percent dividends each year, whereas real estate usually only yields 2 to 3 percent. The shares increased in value year after year. Moreover, Benko concluded secret deals with individual financiers like Roland Berger, Klaus-Michael Kühne, or Torsten Toeller. He gave them the option to exit and return their shares if they wanted to. This made the shares fungible, as if investing in stocks – very unusual in the real estate business, which is typically long-term and therefore requires long-term capital planning."

"And Benko served the fantasy of ever higher, further, better with new acquisitions. Thus, he transformed the real estate company Signa, which only invested in prime locations in core Europe, into a conglomerate of real estate, trade and media, and also a bit of digital business. From a business in which he was more knowledgeable than anyone else, it becomes an increasingly complex conglomerate. In 2013, Benko entered the German department store business with the purchase of Karstadt, more of an opportunity than a long-planned venture. Five years later, he also secured the acquisition of Kaufhof after a long attempt. With the idea of merging into the German Department Store AG with high synergies, he attracts fresh investors. Among them is Roland Berger, who invests in the still-young retail division, but also in the two main Signa companies, Prime and Development."

"Benko's gold rush in concrete has, in addition to macroeconomic reasons, very specific ones as well. A long-standing senior executive at Signa lists three arguments for investors: Benko paid up to 6 percent dividends each year, whereas real estate usually only yields 2 to 3 percent. The shares increased in value year after year. Moreover, Benko concluded secret deals with individual financiers like Roland Berger, Klaus-Michael Kühne, or Torsten Toeller. He gave them the option to exit and return their shares if they wanted to. This made the shares fungible, as if investing in stocks – very unusual in the real estate business, which is typically long-term and therefore requires long-term capital planning."

"The company founder proved once again to be a skilled opinion maker – behind the scenes, but also in front of them. Thus, Benko regularly claimed to journalists, often unchallenged, that Signa operated with a high equity ratio of almost 50 percent. That was not entirely wrong, but nevertheless anything but right. Because, like other real estate conglomerates, Signa included financing with hybrid capital - namely mezzanine such as profit participation certificates; both are counted as equity on the balance sheet but come from external creditors. Therefore, the 20 to 30 percent of the capital actually provided by the shareholders was all the more important. But even this genuine equity capital, as it turned out at the latest after the bankruptcy at the end of 2023, was not really safe. For Benko had granted numerous investors the right to return their shares and be paid out at the then current rate. Roland Berger, Torsten Toeller, but also Swiss Lindt & Sprüngli Chairman of the Board Ernst Tanner and German logistics entrepreneur Klaus-Michael Kühne all had written agreements that could compel either René Benko's private foundation or parts of Signa to buy back their shares. And they were probably by far not the only ones."

"But why did Benko make such unusual, legally borderline promises to his financiers that he would buy back their shares? And at the increased price due to the appreciation of the properties, not at the lower entry price? The answer is simple: Without the so-called put options he offered, Benko would have found much fewer investors. Roland Berger, at any rate, today answers the question of whether he would have given Benko money without a contractual exit clause with a clear and succinct no. The business economist and early warning signal, Professor Leonhard Dobusch from Innsbruck, says: "I believe the investors knew exactly how risky the business was and that it was a bubble. But they thought they could get out in time. For this, Benko gave them the put options.""

"The investors also play along. "I understood the danger of over-indebtedness earlier. Practically, Benko generated a negative cash flow every year, so he relied on additional loans or capital increases," says Roland Berger, who thus became suspicious long before the first Signa bankruptcy. "But Benko has repeatedly shown that he could acquire fresh money.""

"Most of the shareholders did not have Benko's private foundation as a contracting partner, but the holding company. Roland Berger, who had invested in low percentages in the Signa companies Prime, Development, and Retail, managed to partially exit. Apparently, he pressed for payment from Benko early on and exchanged about half of his Prime shares for money. Berger benefited from the high market value of the shares, which had multiplied since his entry. However, at the end of the day, Berger will likely exit his Signa investment with a small double-digit million loss, Torsten Toeller will lose a triple-digit million amount, and in the fiscal year 2023, he will write off a book value of 196 million euros, which can be read in the annual financial statement of "Fressnapf" Luxembourg."

"However, many things were quite different from what is known from the stock market, where all shareholders are treated equally. Benko is said to have told each Signa investor their own tailored story. Many had an individual special deal. Some, like the RAG Foundation or Kühne, received dividends for 2022 if they made a fuss – something the other shareholders were not allowed to know. Some, like Roland Berger or temporarily Torsten Toeller, were allowed to attend the supervisory board of Prime as guests if they insisted. Others were not. Numerous investors were given put options, which allowed them to exit within certain periods. Others were not."

"Most of the shareholders did not have Benko's private foundation as a contracting partner, but the holding company. Roland Berger, who had invested in low percentages in the Signa companies Prime, Development, and Retail, managed to partially exit. Apparently, he pressed for payment from Benko early on and exchanged about half of his Prime shares for money. Berger benefited from the high market value of the shares, which had multiplied since his entry. However, at the end of the day, Berger will likely exit his Signa investment with a small double-digit million loss, Torsten Toeller will lose a triple-digit million amount, and in the fiscal year 2023, he will write off a book value of 196 million euros, which can be read in the annual financial statement of "Fressnapf" Luxembourg."

"Recognition, yes, blind following turned with the failures into aversion, into anger. The master was disenchanted, and it seemed nothing was left of his strengths. For a long time, he was admired because he remained cool in crisis situations and found solutions when others became nervous. René always had an idea, says a financial expert who has completed many transactions with him. Now, with the looming bankruptcies, Benko seemed increasingly erratic. Investor Roland Berger, who last spoke to him in mid-December 2023, realized that things had apparently gotten out of hand for Benko: "Mr. Benko said that he also didn’t have an overview at the moment, he was looking for the numbers and would get back to me. That's when I told him: If you don't have the numbers, who does? I then knew that I would not get a sound, honest answer from him anymore.""