Explain foundation (trust) ownership of companies. Why is it relevant for PE?
A foundation is an independent legal person with no owners. Its purpose is fixed in its charter and cannot be changed at will. Classic examples are companies majority-held by their founders' charitable foundations (e.g. Bosch, Carl Zeiss).
Why relevant for PE? Foundations typically cannot be bought outright, but they regularly sell partial stakes or sub-divisions (carve-outs). Foundation sales are supervised by the relevant charitable-foundation authority and require approval.
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| Aspect | Foundation | Holding |
|---|---|---|
| Owner | none (purpose-bound) | shareholders/members |
| Sellability | very limited | unrestricted |
| Tax | often charitable (tax-exempt) | normal corporate tax |
- Carve-out: the foundation sells a sub-division (e.g. Bosch's packaging-technology unit to CVC in 2019)
- Continuation vehicle: the foundation seeks a liquidity solution without losing control
- Mezzanine investment: operating capital without an equity stake
- 100% buyout: almost always ruled out by the foundation's purpose
- Selling foundation assets needs regulatory approval (slow)
- A full sale forfeits the tax advantages
If asked about foundation structures, answer: "Foundations are untouchable for classic buyouts but regular sellers of sub-stakes. Bosch handed its packaging unit to CVC in 2019 — a typical carve-out from a foundation. The sponsor has to work with the foundation regulator and plan the closing timing accordingly."