medicine technology Succession Questions at the Other Braun 

The family-owned company, B. Braun, became a billion dollar corporation with cannulas and hospital products. Who will continue the success story now that the son, Otto Philipp, has resigned?
Inside a B. Braun factory in Meslungen.

It took 150 years to reach the first billion in sales, but the second and third each took less than a decade.

Now, the B. Braun medical technology company has sales of close to €6.5 billion ($6.9 billion), making it one of the largest family-owned companies in Germany.

But that's not what's had people talking about the company that started out as a pharmacy in 1839 these past weeks.

Chatter began when Otto Philipp Braun suddenly resigned from the company’s management board at the end of February. The 39-year-old representative of the family’s sixth generation was already being traded as the future head of the company.

There's also excitement around what objective B. Braun might be pursuing with the expansion of its holdings in the private, publicly-listed hospital group, Rhön-Klinikum.

"For B. Braun, Rhön-Klinikum is a core investment,” the chairman of the company’s management board, Heinz-Walter Grosse, made clear last Friday at the presentation of the annual figures. Digitalization and data, he said, would lead to huge changes in hospitals. So B. Braun is expecting key insights from its partnering with Rhön-Klinikum.

Rhön-Klinikum was Germany’s first hospital operator to use IBM’s super computer, Watson, which is designed to help doctors diagnose diseases and choose therapies. B. Braun CEO Mr. Grosse is certain that even simple medical products, such as the famous Braunüle, a plastic cannula for infusions named after the family corporation, will become smart products through digital technology in the future.

Otto Philipp Braun's resignation was a personal decision and took place at his own wish. There is no successor.

On the other hand, there are persistent speculations in the industry that one of these days B. Braun could join together with privately-owned hospital operator, Asklepios, also a substantial stakeholder, and mount a takeover bid for Rhön-Klinikum, which has a sales volume of around €1 billion.

B. Braun and Asklepios bought into Rhön-Klinikum in 2012 to prevent a takeover by the Fresenius Medical Care Group. Since then, Rhön-Klinikum has sold two-thirds of its business to Fresenius.

Braun’s stake in Rhön-Klinikum is currently worth more than €380 million, an expensive investment, says one industry representative, to merely ensure cooperation in digitalization or guarantee product sales. No other information has been provided about the investment. As a non-listed, family-owned corporation, the company is also not accountable to outsiders.

Sources within the industry say that in the past the family patriarch, Ludwig Georg Braun, and his son, Otto Philipp supposedly had differing opinions about owning shares in Rhön-Klinikum. Elder Ludwig Georg, who now sits on Rhön-Klinikum’s supervisory board, wanted to increase the influence in Rhön. His son, it is said, was more for investing in internationalization. This is, however, only speculation – the family did not comment.

CEO Mr. Grosse also didn’t give the reason, at the balance sheet press conference, for Otto Philipp Braun having resigned, who had been a member of the management board since 2011. Only this much: it had been a personal decision and took place at the younger Braun's own wish. There is no successor. His responsibilities have been reassigned to the remaining board members, who now number seven. According to information from within the company, the fact that the Latin America business, for which, among other things, Otto Philipp Braun was responsible, performed comparably weakly, with a 2.3 percent increase in sales, was not a reason for his leaving.

Otto Philipp Braun is the oldest of Ludwig Georg Braun’s five children. Mr. Braun was hugely successful in taking the company forward from 1977 until March 2011 and still wields a lot of influence as chairman of the supervisory board. Otto Philipp continues to be a shareholder in the company. In matters of a successor, attention is being now turned to Anna Maria Braun, the second-oldest child. The 37-year-old has already been responsible for the Asia-Pacific region for some time now and has been a deputy member of the management board for a year, though the “deputy” has been dropped since April 1 and she has advanced to being a full member of the board. Admittedly, that is no indication for a programmed rise to the top of the company since board members at B. Braun regularly first complete one year as deputy.

Heinz-Walter Grosse, who has been leading the company since 2011 and is the first non-family member to hold that position, attests that Anna Maria is doing a good job in Asia. However, the 64-year-old also considers the remaining five board members to be in a position to assume even more responsibility. In fact, he was reluctant to delve any deeper into the subject of successor. According to what he has said, Mr. Grosse is, himself, not yet thinking about retiring. His contract expires at the end of 2018 and he has already stated his intentions to do his job as long as possible. A source familiar with the company assumes that the corporation will also most likely end up having yet another non-family manager at the helm.

The positive figures that Mr. Grosse submitted Friday attest to the work of the manager. Last year, B. Braun grew with cannulas, nutrient solutions, surgical instruments, and dialysis machines by 5.6 percent to €6.47 billion. After adjusting for exchange rate effects, it was an increase of 7.9 percent.

Braun has facilities in 64 countries around the world and employs 60,000 workers. The company has profited from the rising global demand for healthcare products and services and, at the same time, has been able to maintain stronger growth than the industry average. According to a current study completed for the economics ministry by WifOR, an economic research institute, the German medical technology industry grew last year by 3.8 percent.

Earnings increased even more for B. Braun. Thanks to higher prices, more efficient procurement, and more cost-effective production, the annual net profit grew by just under 24 percent to €396 million. At the same time, B. Braun is soundly financed. The equity ratio is close to 40 percent.

The company is not the only one pleased with its performance; labor unions also welcome the success. For as of now, the workforce in Germany has grown to almost 7,000 employees, while elsewhere companies are shifting production overseas. The management has negotiated innovative location retention agreements with the unions. These flexi agreements, in effect since 2015, regulate more flexible working hours and bar business-related layoffs until 2020. “Such agreements can only be made when the company is doing well,” says Friedrich Nothhelfer, head of the Kassel district of the trade union for mining, chemicals and energy industries.

Meanwhile, CEO Heinz-Walter Grosse wants to continue the above-average growth, aiming to expand 5 to 7 percent and boost profits. And for 2020, the company is targeting sales of €8 billion. From here, €1.5 billion in three years seems realistic.

 

Maike Telgheder is an editor at Handelsblatt, covering the health economy, pharmaceutical companies and chemistry. Contact the author at: [email protected]