The vast swathe of German mid-sized companies known as the Mittelstand is the hunting ground for a new fund being raised by Cologne-based Argantis.
The firm, which aims to achieve a final closing of €200 million by the beginning of 2005, will target medium-sized family-run businesses and corporate spin-offs in Germany, Austria and Switzerland. It will invest between €10 million and €30 million of equity in transactions worth between €30 million and €100 million.
Argantis will acquire majority stakes in companies “providing above average growth potential” in mature industries such as logistics, packaging, services, engineering, healthcare and automotive components. “We think this is an attractive market segment because it does not have the capital overhang you see in the large buyout market,” said Michael Hildisch, managing director of Argantis. He estimates that the firm will have at least 100 investment opportunities a year to choose from.
The firm is headed by Hildisch and fellow managing director Fritz von der Schulenburg. Hildisch was formerly a director at US private equity firm Carlyle Group, where he had joint responsibility for the development of Carlyle in German-speaking territories and for the company’s investments in the region. German deals he oversaw included Beru, a maker of products for diesel powered engines, and Edscha, a maker of door, roof and driver systems for the automotive industry.
Hildisch’s move echoes that of compatriot Hans Albrecht, who left Carlyle Group – where he was managing director and co-founder of Carlyle Europe Partners – to launch German mid-market turnaround specialist Nordwind Capital in May 2002.
Von der Schulenburg was most recently a member of the executive board at Ferrostaal, where he headed the firm’s worldwide engineering and systems business. Ferrostaal is the industrial services unit of German trucks group MAN.
The two sponsors of the fund are Bankhaus Sal. Oppenheim of Cologne and IKB Deutsche Industriebank of Duesseldorf. The two banks’ involvement stems from a co-operation agreement they signed in February 2003 to broaden the range of support and advisory services to their Mittelstand clients. KfW Bankengruppe of Frankfurt is another major investor, while the management team has also invested its own money in the fund.
The next stage of the fundraising will target both institutions and high net worth individuals throughout Europe and the Middle East, but not in the US. Hildisch says the firm is looking to complete “one or two” investments by the end of the year.