ADKL audits landmark merger of Vitesco Technologies Group AG and Schaeffler AG

ADKL was appointed as the auditor in charge shortly before Christmas 2023 and had to complete the audit in less than three months.
 
The mission
In most valuation projects, only one company or group is to be valued. However, in the case of a merger, two companies need to be considered.

In this project, two groups, Schaeffler and Vitesco, which employ 81,300 and 35,500 people worldwide respectively, were to be valued. The value ratio of the two companies determines how the shareholders will be involved in the successor company.

The ADKL Corporate Finance team had to examine the following key questions as a matter of priority:

• What is the market and competitive environment like?
• What are the key success factors of the corporate concepts? How are the companies planning their business development in the coming years?
• Was the planning in previous years realistic or were targets missed or even exceeded?
• So how realistic are the plans of the individual segments?
• How high is the risk that reality will deviate from planning, either upwards or downwards, and which interest rate adequately reflects this risk and should therefore be used to discount the planned distributions?

After answering these questions, we verified the valuations based on management planning by using other valuation methods, such as multiples or analysts' price targets.

While auditors consider a valuation based on planning to be necessary in any case, the German Federal Court of Justice is of the opinion that a valuation based on stock market prices can be at least equivalent to this method. However, stock exchange trading must meet a number of criteria in order to enable a meaningful valuation of the company.
 
The team
Due to the tight deadline, the auditors in charge of ADKL, Wolfram Wagner and Axel Augustin, not only deployed ADKL's entire valuation team, including Uli Kühnen as an additional auditor. The interdisciplinary cooperation within the ADKL group also proved to be a decisive advantage in this project. Two additional auditors (including Thomas Jorde, a proven industry expert) and two tax consultants from the Tax & Legal department applied their expertise in international tax matters successfully.
 
The result
We initially explained the valuation results to the supervisory boards at the beginning of March 2024; we were then able to sign our report on March 12, 2024. The shareholders of both companies approved the merger at the Annual General Meetings on April 24 and 25, 2024. ADKL auditors were available in the back office at the Annual General Meetings for support to answer shareholders' questions.
 
What is still outstanding?
The share exchange ratio is justified by the value ratio derived from the business plans as well as by the ratio of the share prices. Should shareholders nevertheless consider the valuations to be flawed and believe that a different share exchange ratio would be more accurate, they can assert their reservations in appraisal rights proceedings. In such a case, ADKL, as the auditor, would have to justify the valuations in detail in court. Since such proceedings usually take many years, the new Schaeffler AG will have been in existence for a long time by then.

It is to be expected that plaintiffs at the Annual General Meeting of the merged company, which is scheduled for April 24, 2025, will present arguments for the ongoing award proceedings. Schaeffler has therefore asked Axel Augustin and Wolfram Wagner to be available at the upcoming Annual General Meeting to answer questions.

Furthermore it is to be expected that the Schaeffler share will soon return to the MDAX stock market index, which is the index following the German DAX leading index.