Prosolvia AB Chronology

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• January 1987 - Two Swedish Graduates from Chalmers University of technology founded Prosolvia AB

 

January 1987- June 1997 - During the first 10 years Prosolvia became the worlds global leading Virtual Reality and Simulation company with focus in:

- Defense Simulators

- Numerical Simulation

- 3D Simulation for Design

- and Manufacturing Simulation.

 

The company grew profitably from 2 employees to over 225 employees, 14 offices with no external financing or external equity.

 

The Prosolvia Group, consisted of the following key groups:

- Prosolvia Research and Technology - specialized in numerical simulation and mechanical design, electronics, and software development

- Prosolvia Systems manufacturing simulation

- Prosolvia Clarus visual stimulation

For details see: http://prosolvia.blogspot.com/2007/07/what-has-happened-with-prosolvias.html 

 

• June 1997 – April 1998 The Company went public on the Stockholm Exchange and raised $ 46 million during the IPO at $100 million market capitalization, reaching a market capitalization value of $ 512 million by April 1998. The company used the capital to accelerate the growth; the number of employees went up from 225 to 586 from 1997 to 1998. This resulted in a significant revenue increase of 94% (1997 to 1998) but also increased costs making the company more vulnerable from cash flow perspective.

 

• April 1998 - The financial newspaper Dagens Industri (followed by several other news papers) alleged irregularities related to accounting and questioned the ownership of the EON software. This became a huge media storm and the shares took a significant hit and had a significant negative impact on customers.

 

• May 1998 - Prosolvia board (CEO included) ordered an extra audit from its auditors Cooper & Lybrand of the first quarter figures to meet the allegations. The auditors conducted a detailed review and found the accounting to be correct. In addition Stockholm Exchange department for Market Surveillance started an inquiry lead by Ernst & Young. The company was placed on the so-called "observation list" during the inquiry period. Finally Stockholm Exchange department for Market Surveillance presented a report from Ernst & Young that found Prosolvia’s accounting not to be incorrect. As a result Prosolvia was fully reinstalled on the Stockholm Exchange in the summer of 1997.

 

• June 1998 – The media storm did not decrease by these measures. In an aim to help the company and restore the positive image the Board persuaded the companies CEO and (second-in-command) to resign. As a part of this decision several key members of the original team that help building the company over 10 years also left. The CEO decided to move to USA.  At this Dagens Industri made an acknowledged in their headlines that their that the Prosolvia accounting was correct and that allegations about software ownership were incorrect. Unfortunately this acknowledgement came late, customers had already stopped existing orders, new prospects did not want to pursue, the cash flow was very weak and Prosolvias organization was shaken .

 

• June 1998 – A New management was put in place. This new management lacked the strength and entrepreneurial spirit that had made Prosolvia successful over 10 years; they focused on reorganizations and internal company activities. As a result the company reported a loss for the first time in its 11 years history. The Founders had to lend the company some $3.5M to cover the cash short fall. The management found it necessary to find an external business partner.

 

• August 1998

Several companies produced written term sheets and proposals to acquire/invest in Prosolvia including ABB, Techomatix, Sigma etc. The former management voted to accept these proposals which would both provide the needed cash and strengthen Prosolvia’s business to safe guard the companies future. O p> 

 

Unfortunately a majority of Prosolvia’s Board lead by the Government Controlled investment group Industrifonden (who had been on Prosolvia’s board since 1995) including the new CEO Mr. Ekener insisted in selecting the Industrifonden instead as the investment partner.

 

The irony is that ABB, Techomatix, Sigma eventually become the owners of the Prosolvia's technologies but only after the bankruptcy. The attraction with Industrifonden offer was that they promised to invest $35 Million to provide long term funding for growth which would minimize any lay off requirements.

 

Industrifonden required also that the Founders agreed to sell the majority of their shares (67% of the company) at significantly reduced price. This was not the Founders preferred choice as they believed that the government controlled company Industrifonden was not the right partner for Prosolvia.

 

However, the Board majority voted in favor to accept Industrifonden to keep the company intact. Consequently, the Founders sold the majority of their Prosolvia shares, and the former CEO discontinued all his relations with Prosolvia and moved permanently to USA.

 

• October 1998 – Industrifonden immediately appointed a new management and their own CEO and declared to the shareholders and customers that they are long term stable key owner committed to Prosolvia’s financially support and future development. Reassured by this the new management interrupted the aggressive cost cutting measures as well as back up partnership alternatives initiated by the former management.

  

• October - November 1998 - The financial newspaper Dagens Industri now attacked Industrifonden accusing them that the Prosolvia’s take over broke the rules of their government founded Charter. They claimed that Industrifonden was set up to invest in small companies not in Public companies. This became a very sensitive matter as Sweden’s Finance Minister was a member of the Industrifonden’s Board. Fueled by this new media storm the Swedish Political opposition initiated a Parliamentary inquiry lead by the Chairman of Konstitutionsutskottet see the attached extensive reports and inquiry Swedish Government and Prosolvia.  

 

 

 

• 15 November 1998 – The Parliamentary inquiry became a very uncomfortable process for the Swedish government and run almost daily in the news. Consequently, the Government Controlled investment group Industrifonden decided to stop its $35 Million investment in spite of its promises to shareholders, media and employees. Here follows the evidence that this decission was in fact Political motivated by the realisation that the Industrialfund investment was breaking with the  the rules of their government founded Charter (extract from the Parliamentary inquiry that followed):

Konstitutionsutskottet   O p>

2000-03-30

Kl. 08.00-08.30

Offentlig utfrågning med f.d. kanslirådet Lars Häggmark angående statsrådet Anders Sundströms ansvar för Industrifondens engagemang i Prosolvia AB

Ola Karlsson: I Industrifondens styrelse den 15 november 1998 accepterade man ett åtgärdsprogram som skulle innebära ett kraftigt likviditetstillskott för Prosolvia. Enligt protokollet gjorde du, Lars Häggmark, en protokollsanteckning där du betonade vikten av att försöka minska ägarandelen, då huvudägarskap inte låg i linje med förordningen. Vad var skälet till att du gjorde denna protokollsanteckning?

Lars Häggmark: Jag såg det som en del av min roll i den här styrelsen att erinra mina kamrater i styrelsen om de regler som gällde. Det här var ett inslag i det. Det hände flera gånger utan att det noterades till protokollet att jag erinrade om vilka begränsningar som gällde beträffande storlek på företag osv. Flera av mina kolleger i styrelsen kom ju från näringslivet och hade inte samma insyn i regelverket...

Lars Häggmark: Jag ville särskilt betona hur jag tolkade regelverket. Situationen förändrades ju successivt under hösten 1998 i Prosolvia och i fondens engagemang. Nu ansåg vi att tiden var mogen att dels påtala denna omständighet igen, dels få det antecknat i protokollet.

Ola Karlsson: Så man ska inte tolka deras skrivning om ”under särskild vägledning” så att ni bedömdes ha den särskilda kompetensen att utröna stadgarna och reglerna?

Lars Häggmark: Jag minns inte att vi tog på oss någon roll som vägledare för styrelsen; det gör jag inte.

Ola Karlsson: I varje fall hävdar ju Industrifondens ordförande och vd i sin skrivning, eller i sin kommentar, att ni fungerade som vägledare. Förekom det att du stämde av diskussioner i Industrifondens styrelse eller stämde av uppfattningar vad gällde regelverket med någon på departementet?

Ola Karlsson: Och det förekom aldrig att du stämde av med rättschefen på departementet?

Lars Häggmark: Inte som jag minns nu faktiskt men det är möjligt att så kan ha skett. Jag minns inte det.

Kenth Högström: Får jag ställa några frågor kring ditt eget engagemang i fonden? Det är ju synnerligen ovanligt att man i en styrelse av något slag gör en protokollsanteckning och ännu ovanligare att man reserverar sig. Men du har faktiskt gjort en protokollsanteckning, och den är väldigt stark, kring just detta Prosolviaärende. Vad var anledningen till det?

Lars Häggmark: Anledningen var att jag ansåg att man här i fonden var på väg att göra något mycket ovanligt.

Ola Karlsson: Vad hade varit nästa steg om Prosolvia hade överlevt och man trots din protokollsanteckning inte hade vidtagit någon åtgärd för att minska ägarengagemanget?

Lars Häggmark: Om Prosolvia hade överlevt och man hade lyckats vända det här och rädda ett företag och sysselsättning och tjäna pengar till fonden och fonden hade kunnat sälja sina aktier hade nästa steg möjligen varit en klapp på axeln i pressen för att fonden agerat affärsmässigt och duktigt. Jag tror kanske inte att fokus hade varit på eventuella regelbrott i så fall. Fonden har ju deltagit i andra mycket svåra fall och försökt ha, och haft, uthållighet och tagit risker. Det finns ett företag som heter Micronic som går mycket bra i dag och där fonden och samhället kommer att tjäna hundratals miljoner. Jag vet inte om det var något regelbrott. Det tror jag inte, och hoppas inte. Men en viss uthållighet och risktagande kan i vissa fall löna sig och gå mycket bra både för fonden och för företagande och ägare.

 This is the the Real reason for Prosolvias destiny.

 

• December 28 1998 - Prosolvia AB new Board and Management was forced to file for bankruptcy after its main shareholder the Government Controlled investment group Industrifonden, refused to provide the promised funding for the company.

 

• January 1999 – April 2005 - Prosolvia’s shareholders, former employees and lenders started discussions for legal procedures against Industrifonden Management for the breach in agreement. In a classical “wag the dog” diversion tactics Industrifonden initiated a Media Campaign blaming the former Management and the auditors and trying to reopen the case for cleared alleged irregularities related to accounting during the 1997 period. Thanks to their political influence these tactics were successful and lead eventually to a large trial against the auditors (Coopers & Lybrand) and former Management. The trial resulted in that the allegations against the auditors (Coopers & Lybrand) and former Management (including the Founders ) were dismissed. The Founders won the case and received in part the proper recognition from media, shareholders and management.