Deal Mechanic: KKR scouts for growth at Scout24

It was not KKR’s intention to sell its 49 percent stake in Swiss online classifieds business Scout24 Schweiz just 18 months after acquiring it from media company Ringier.

The firm and the management team were making excellent progress with the value creation “road map” devised prior to acquisition and the business was performing well. Plans for an exit, however, were some way off.

But private insurance company Swiss Mobiliar had also noticed how well Scout24 was performing – and the value such a strategic acquisition could bring to its existing business – and it made an offer that KKR and majority shareholder Ringier, who would remain as a partner, could not refuse.

KKR had become a significant minority shareholder in Scout24 in August 2014. At this point the business already had a strong market position in Switzerland. Through its two online car portals, and, Scout24 claimed around 90 percent market share, while enjoyed a number one market position in “horizontal classifieds” – which covers multiple categories of online listings – and real estate portal was on the cusp of becoming the market leader.

However, there was still plenty of improvement KKR could make. Online advertisement penetration in Switzerland at the time was just 5 percent, behind the 20 percent in Germany and 30-40 percent in the UK and the US. There was also a lot of unrealised operational upside, into which KKR felt uniquely placed to tap.

“During our last digital transactions like Fotolia and GoDaddy, we had built up an operational digital playbook that we were quite confident to implement at Scout to create value,” says Lucian Schönefelder, a director at KKR focused on the European media and technology sector.

“Even before we acquired the business, we pulled together a road map, which we agreed with management and with Ringier,” Schönefelder says. “This essentially set out all the operational improvements that we wanted to implement together with management.”

Previously part of a large corporate – Scout24 was originally majority-owned by Deutsche Telekom – the management team at Scout24 hadn’t the freedom to manage the business the way it wanted. Along with the capital KKR and Ringier brought to the table, which allowed the team to get stuck into the road map, KKR introduced an incentivisation scheme to empower the managers as owners of the business.

“That was a very, very important piece of the success of Scout24, as it was a huge motivational factor for the managers to become owners in the business,” Schönefelder says. KKR put aside “quite a significant piece of equity” for management to buy, and provided the managers with bank facilities to help them acquire it.

As part of the Scout24 transaction, KKR and Ringier had acquired a fairly sizeable, but not very profitable, digital marketing business called OmniMedia. The team immediately identified this business as irrelevant to what it was trying to achieve with the rest of Scout24, and decided to sell it off quickly to allow the management team to focus on the core business.

KKR also helped the business overhaul its product development processes.

“We had seen during the due diligence that the product development cycle was too long,” Schönefelder says.

“We introduced the team to a couple of top-notch experts that we’d worked with before. They facilitated the transformation from a waterfall development model, which is quite linear and usually results in longer development cycles, to a more agile development model.

“The change was very important to the company because our thesis was really premised on making a lot of upgrades to the product.”

One of the experts that KKR brought in was Bob Bellack, co-founder of, who joined the company’s board of directors, bringing with him access to a network of advisors and technology experts.

“We got to know Bob during a couple of transactions in the States,” Schönefelder says.
“He, for example, brought on board two people who worked hand in hand with the team in Switzerland on the development of some new products. This was a real boost for the business because our team saw [what] ‘great’ looks like and didn’t have to re-invent the wheel.”

While 85 percent of all used cars in Switzerland go through, just 30 percent of new cars – a market more than three times the size – used the platform. The reason was twofold: there was not enough new car content already on the site and car dealers were concerned that the transparency on pricing that came with listing new cars on the platform would result in price compression.

“It was really a two-pronged approach: upgrading our marketing vis-à-vis the dealers and importers to essentially explain to them the value that a classified platform can bring to them in the new car business; and secondly, [explaining] that the marketing they would spend on classifieds would deliver much higher returns than print, radio or TV marketing.”

This was an area to which the team brought a lot of knowledge and value.
“They went through exactly that same shift eight years ago, and had to use exactly the same arguments to bring the new car dealers on board,” Schönefelder says.

One early initiative to drive profit growth in the business was a pricing overhaul.
“We started with the preparation of price increases on the back of new product introductions as early as 2014,” Schönefelder says.

Scout24 was able to deliver more value to clients by making improvements to the way customer and product data was collected, and then offering that data on consumers to the sellers.

KKR also began working on the introduction of a pricing model linked to performance.

“We just took the first step towards a value-based pricing model,” Schönefelder says. “I think there is a lot more Scout24 can do there because it takes time for the dealers and agents to understand value-based pricing.”

KKR also helped Scout24 make a push into online advertising as a revenue stream, appealing to original equipment manufacturers on the car sites, as well as banks and insurance companies on


In just 18 months KKR and Ringier had almost doubled EBITDA at Scout24. Thanks to a partnership between real estate site and classified listings aggregator platform Comparis, under which Comparis gives listings priority positioning on its site, Scout24 is now a market leader across all its platforms. It was an attractive proposition for a strategic buyer.

“Mobiliar’s goal is to cross-sell their insurance and mortgage products through the property and car portals of Scout,” Schönefelder says.

In March, KKR agreed to sell its stake in Scout24 to Mobiliar in a deal that it is understood will generate a return of more than 3x for investors in the 2008-vintage, $6.79 billion KKR European Fund III.