Astorg, the investment fund that has owned IQ-EQ since 2016, set up a continuation fund at the beginning of the year to continue to support the group’s development over the next four years. At the same time, , while remaining a shareholder, took a step aside by relinquishing all operational responsibility.
Marc Fassone: What is your role within IQ-EQ today?
Serge Krancenblum: I am chairman of the group’s supervisory board and I am responsible for acquisition strategy.
So you are responsible for all the recent acquisitions made by IQ-EQ?
Yes. I find these target companies and convince them to join us.
We have a strong desire at group level to grow organically and to provide more services to our customers. And sometimes, when we enter a new country or a new market segment, we need to have a lot of momentum right away. We then proceed by acquisition.
How do you find them and what do you offer them?
There are different ways of finding them.
We obviously do a study of the market or the business we want to go into. We know the ecosystem in which we operate in the 24 different countries where we are currently present. We know our peers, we know the different service providers that our clients use. Very often, word of mouth through feedback from clients who are happy with the services of such and such other companies plays an important role.
I then contact them, introduce myself and our group and explain our desire to develop. This takes time and trust has to be built up, especially with entrepreneurs who have their own firm and have grown it. For one of our recent acquisitions, it had been four years since I first met the people who ran the company. Our modus operandi is really to convince the best entrepreneurs to join us and to continue their development with the support of a group.
It also happens that other acquisitions are made through investment banks mandated by companies that have decided that for their development, it would be better for them to operate within a large group. There is less time to get to know the people you are going to work with afterwards.
What are your growth targets?
We are very ambitious and we still want double-digit growth. I mean organic growth. We really want to grow fast to expand. There is a very strong concentration of players in our business. We must therefore always be able to provide more services in more places to a clientele that is increasingly international, increasingly global.
In Luxembourg, more than anywhere else, you have an obligation to grow, to develop your services in order to remain a valid partner for your clients, who are often larger than you.
From the start, our strategy was to become a global player. To achieve this, we attracted outside capital to the company, in particular investment funds on three occasions--the local [investment firm] BIP, then the Belgian [firm] Cobepa and the French [firm] Astorg in 2015. At the beginning of the year, Astorg set up a continuation fund to continue supporting our international development. Always with the same objective: to accelerate growth by making acquisitions and larger investments possible.
This has automatically diluted my share of the capital. I have been a minority shareholder for some time now. But this has enabled the entire management team to become shareholders. We have more than 300 managers in the group worldwide. They are all shareholders.
Where do you see growth in your business in the coming months?
We have strong growth in Europe, in the grand duchy, which is one of our still important platforms. But the highest growth, the most important growth is on the North American continent. We now make more than 25% of our turnover there and we have very high growth rates there.
How did you come to be the head of IQ-EQ?
I started in 1985 as an employee of KBL. I held various positions there. I worked in corporate finance. I was responsible for the paying agent activity for euro issues and IPOs on the Luxembourg Stock Exchange for several years. Then I was appointed head of the bank’s development on the French market. In this market, what worked best was the creation of Luxembourg investment funds for French asset managers and the creation of Luxembourg holding companies for very wealthy families or large groups. The domiciliation and company administration activities of our sister company, Kredietrust, were very successful. These are the activities that were taken over in 1998 by Arthur Andersen with Carlo Schlesser and me at the head. We took over the capital of the company in 2000.
The company was called Services Généraux de Gestion and became SGG in 2009.
When you embarked on this adventure, what were your objectives and your vision? And did the development of SGG, the future IQ-EQ, go as you had planned?
Carlo Schlesser and I started out with two convictions: the first was that in order to grow, we had to go beyond the borders of Luxembourg. We absolutely had to be able to offer services to our clients in other geographical markets. The second was that, as was the case with audit firms, there would be a very strong consolidation in our business. The move to Andersen was an eye-opener from this point of view: we became aware of the strength of a network and the strength of the potential of a global group. Our main competitors at the time were Dutch. They were commercially very aggressive and were prospecting the Luxembourg market. We decided to return the favour from our Luxembourg base. Our objective was to have a service capacity in the Netherlands. We did it organically at first and then we realised that our clients--we had very large clients--were asking us to grow ultra-fast. The only way for us to do that was to buy specialist companies in the Netherlands. We bought two of them and accelerated our growth there. Until around 2015, one-third of our business was in the Netherlands and two-thirds in Luxembourg.
We had proposals to join other groups, which we declined. We didn’t want to be a company that was going to be consolidated into another large group. We wanted to be a player in the consolidation process.
Today, we are one of the top 5 global players in our field.
What we did not foresee was the evolution of the company’s size.
When Astorg joined us at the beginning of 2016, our plan was ultra-ambitious: I had given them a number of countries we wanted to be in, the way we wanted to do things, the services we wanted to provide, etc.
And everything went faster than we expected. We were already very ambitious, but each time we had a success, we gave ourselves a new ambition. But from there to a group of 4,000 people and a turnover of €500m...
If you had asked me the question in 2005, I would not have given such considerable figures.
What were the key moments in the development of IQ-EQ, the great dates?
The first big date was 1998 when we left Kredietrust and therefore the banking sector. This was a trauma for many people. Leaving the collective agreement to join the big bad wolf Arthur Andersen. There were people who were very afraid of that.
The second date was the year 2000 when Carlo Schlesser and I bought the company’s capital. We sold it in 2005 to the Sal Oppenheim group, while remaining co-CEOs and retaining a significant profit share. The exit of Sal Oppenheim in 2010, victim of the financial crisis, and its takeover by Deutsche Bank was also an important date. We bought the company with its managers and with the help of BIP Investment Partners. Cobepa took over from BIP a year later and enabled us to conduct international operations, which was not the case previously.
Then in 2015, an operation that became a reality in 2016, we did an LBO with Astorg Partners that gave us the means to develop even more internationally. Our dimension then changed completely. The continuation fund set up in 2022 by Astorg will give us the means to develop the IQ-EQ Group internationally for the next three or four years.
Looking back, what is your best memory of this journey?
Honestly, I couldn’t tell you. I’m not jaded, I’m like a little boy who is amazed every time he passes a stage. I have an accumulation of good memories, but I don't have a ‘best moment’. The teams have been great, and all our shareholders have been very supportive.
But if we talk about objectives, my main one was to conquer an institutional clientele. Originally, our client base was private and corporate. Corporate clients were the big companies that everyone swore by, and our big Dutch competitors only wanted that. We went straight for the institutional clientele, which are the large private equity funds, the large real estate funds and the large institutional investors and family offices. This was a proactive and assertive approach that played a large part in our success. It was not a foregone conclusion, I must tell you.
Do you have any worst memories, or even regrets?
I have no regrets. It’s not in my nature to have regrets.
A worst memory? No. I have been extremely lucky, the planets have always aligned well. We were able to surf the different opportunities that came our way, riding the waves as they presented themselves.
Starting a business can be an exhilarating adventure. How do you know when and how to hand over?
Passing on a business is a duty.
The first decision we made with Carlo Schlesser was that our children would not join the company. Why not? We had a complete understanding. We have never had a word out of place in 20 years of partnership and association. Bringing our children into the company meant taking the risk that they would not get along. And that would reflect on the company.
But the duty of transmission remains towards your employees and your customers. This duty is not to die with your company. When Carlo Schlesser retired and sold his shares, he left me the complete reins of the company.
When we signed with Astorg, I indicated in writing that I would not be the CEO of the exit. It’s difficult when you are the founder of a company to say that you no longer have a hold on the management. But I forced myself to do it because it’s the only way to get new blood, another vision. If you have people who are ultra-competent and ambitious and you don’t give them room, at some point they leave.
From a simple capital point of view, for my shares to have value, I needed new blood, people who would continue to develop the company.
I am doing this gradually. Three years ago, I became executive chairman of the group before becoming non-executive chairman at the beginning of the year. I am still a shareholder, I am still responsible for the smooth running of the company and its supervision at supervisory board level, but the day-to-day running of the company is now carried out by a CEO and by a management team based in different countries.
I would add that there is not a day in the year, including Saturdays and Sundays, when I am not working for the group. I’m still here! But it’s not like before, 20 hours a day. It’s not the same. I still have contact with some customers, but I don’t manage the teams anymore.
What advice would you give to an entrepreneur or project leader who wants to start up today?
I think you have to be ambitious in the right sense of the word. It is better to succeed--or fail--with a big ambition than with a small one.
The second thing, an important quality in my eyes, is that you have to be hardworking. I believe in the virtuous effect of work. And the value of setting an example, whether for your children or for the people you work with. And then, when you work, you don’t have time to do anything stupid.
Read the originally French version of this interview on . This article was published for the Paperjam + Delano Finance newsletter, the weekly source for financial news in Luxembourg. .