The lower mid-market offers the most interesting return potential for European private equity investors according to speakers at the recent Certior Capital Private Equity Seminar 2020
HELSINKI – Certior Capital recently held a private equity seminar in Helsinki for a group of local institutional investors including pension funds, insurance companies, asset managers and family offices. The event included presentations and discussion focusing on private equity opportunities in Europe with guest speakers from two leading managers, Growth Capital Partners (London) and KKA Partners (Berlin), who provided their views on the current market and gave detailed updates on two transaction, JKR and Evago, in which Certior Private Equity Fund I is a co-investor. The seminar was led by Ari Jauho, founder and chairman of Certior Capital. “We were very happy with the numbers of investors who attended and the overall level of the discussion. There was a lot of interest in our approach focusing particularly on lower mid-market and first time managers which have often outperformed other market segments and we believe our new fund will offer attractive returns to investors”, commented Mr Jauho.
The morning began with an analysis of the benefits of private equity to investors, how the asset class creates value using a case study of a recent buy-and-build transaction and an assessment of which segments of the market may offer the most interesting investment opportunities in 2020. This section was presented by Timo Hara, a founder and partner at Certior Capital. He remarked that four key value drivers have been proven across cycles. “Value investing – buying low and selling high – is a great starting point. Investing in resilient businesses enjoying recurring revenues and high margins while accelerating growth using operating cashflows can also dramatically increase returns. Finally, the best results come with a strong alignment of interest which is often the case with emerging managers, in particular”.
Kirsty McDonald from Growth Capital Partners and Kaspar Hartmann from KKA Partners then gave their views on the current market opportunity in their respective markets, how they source and structure transactions and the value they add. Ms McDonald underlined that it is not always the fund manager who is prepared to pay the most who ultimately wins the deal. “In many cases the owner and management team want a long-term partner who will give the business the best possible platform for growth and they are not simply seeking to maximise their exit price”, she said. “For example, in our recent management buyout of JKR, a global branding and design-led creative consultancy, the management team – who strongly reinvested in the company – were focused on the future. They really wanted to work with us, as a minority partner, allowing the business to remain proudly independent. Since GCP’s investment in mid-2019 the company has grown strongly, in particular in its North American business, it has won significant new clients, made several senior hires, refocused its Singapore office and is trading ahead of plan”.
Meanwhile, the theme of driving the increasing pace of digitalisation in Europe’s vast pool of SMEs is the key focus of KKA Partners. “This is our number one priority and we have built our firm entirely around it whereas for most PE firms it is perhaps priority number 7 or 8 for their portfolio companies”, explained Mr Hartmann. “Our value creation strategy focuses on Technology Enabled Transformation (TET) and we believe this can take our returns well beyond the 2x that many PE firms have traditionally been able to deliver. We recently invested in Evago, which is one of the world’s leading companies in the field of temporary infrastructure, such as the barriers, flooring and temporary furniture used in concert and live entertainment venues. Our value creation strategy is clear: consolidation and extending Evago’s moat through M&A, internationalisation through hub expansion and TET by digitally enabling the company’s operations and adding tech-enabled SaaS service offerings”.
Ending the event, Ari Jauho gave a short update on the Certior Private Equity Fund I which holds a final closing for new investors in March. The fund currently has 6 primary funds and 2 co-investments in its portfolio, JKR and Evago, both of which are mentioned above, and has passed through its J curve according to the most recent quarterly report.
About Certior Capital
Certior Capital is a value-add focused private equity and private credit advisor and alternative investment fund manager supervised by the Finnish FSA. The firm’s core expertise is in European lower- and mid-market private equity and credit markets, where the team’s experience is one of the longest in Europe. Certior Private Equity Fund I focuses on European small- and mid-market private equity opportunities, with an emphasis on backing emerging managers, and will hold a final close in March. Certior Credit Opportunities Fund II, held a first close in August 2018 and will hold a final close in February. It focuses predominantly on the European SME direct lending segment, in particular in cornerstoning emerging managers. In addition to working with a number of mandate clients, Certior also manages two other investment programs: Certior Credit Opportunities Fund invests in SME direct lending funds and makes investments directly into loans while Certior Credit Investments invests in European mid-market direct lending transactions.
For further comments or additional information please contact Ari Jauho.
Tel: +358 50 3378 282