Buchanan launches €150m fund

The independent private equity arm of Germany’s Buchanan Capital Group has launched a €150m private equity fund aimed at growing family-run companies.

Buchanan Capital Partners (BCP), the recently-formed private equity arm of German financial group Buchanan Capital Group, has launched a €150 million ($180 million) private equity fund targeted at family-run businesses.

Frank Henkelmann, partner at BCP, said that the Buchanan Unternehmer-Fonds has a target of €150 million, which the firm expects to reach by the end of this year. Henkelmann added that a first closing of around €40 million is likely by mid-2006.

There’s no merit in approaching too many investors at once, but we’ve had good feedback from a number of family offices and it’s fair to say that there’s a healthy appetite for German mid-market funds at the moment.

Frank Henkelmann, partner, BCP

BCP is currently in discussions with German family offices and institutions regarding investing in the new vehicle. Henkelmann said that the firm has also begun initial conversations with “a handful” of international institutional investors.

“There’s no merit in approaching too many investors at once, but we’ve had good feedback from a number of family offices and it’s fair to say that there’s a healthy appetite for German mid-market funds at the moment,” said Henkelmann. “Obviously, we’re not the only ones out there fundraising, which means competition, but it also helps to educate investors about the significant market opportunity.”

Buchanan Unternehmer-Fonds will typically make investments of up to €20 million in mostly growth businesses in the German-speaking countries. Henkelmann said that BCP’s strategy is “generally sector agnostic”, focusing on strong entrepreneurs instead.

The fund has a slightly longer than normal life cycle of 12 years and Henkelmann added that holding periods for portfolio companies can be up to eight years. “We believe that it’s more attractive to the entrepreneur that we have the ability to be a long-term partner,” he said. “If we jointly see the opportunity to sell the stake or do a deal after, say, four years, we will do so. Some might worry about the negative impact on the IRR, but we are rather focused on generating an attractive return multiple for our investors and our longer-term orientation ultimately provides us with access to successful entrepreneurs and attractive companies.”

The BCP team currently numbers four including Henkelmann, who was previously at General Atlantic from 1999 to 2004 and Morgan Stanley prior to that. Partners Peter Blumenwitz and Herbert Seggewiß, who joined BCP at the beginning of this year, were previously at Apax Partners and 3i Germany respectively. Marc-Steffen Hennerkes, a director at BCP, joined from Roland Berger.

Henkelmann launched Buchanan Capital Partners in early 2005. The firm is based in Starnberg, Germany, just outside of Munich. The Buchanan Capital Group also provides mezzanine and senior debt solutions to German mid-market companies, partnering in these areas with firms such as Morgan Stanley, DZ Bank and Creditreform.