Reflecting the continuing difficulties facing venture capital firms in the current market, German venture capital firm IMH Venture has ceded control of its three venture capital funds to Ergo Equity Partner, the private equity arm of the Germany-based Ergo Insurance Group.
According to a spokesperson for Ergo, IMH, which has offices in Berlin and Hanover, had failed to put sufficient funding in place for its third fund, which had initially targeted a E150m final close. “The lack of funding at IMH had led to a danger of insolvency and so the funds’ LPs have agreed on a solution which will see Ergo take over the funds and bring some much-needed stability.”
Since 1999, IMH has set up three venture capital funds with a total volume of approximately E100m. Ergo’s principal objective, according to the firm’s spokesperson, is initially to stabilise the existing portfolio of 20 investee companies. IMH is invested in telecommunications, information technology and life sciences within the European Union. The firm typically sought to invest up to E5m per company.
“We have reached agreement with the fund’s LPs that further liquidity will be made available to businesses in the IMH portfolio.” The spokesperson declined to comment on the possibility of a secondary sale of the portfolio.
Ergo Equity Partner AG specialises in the structuring and placing of private equity funds for institutional investors. Companies of the Ergo Insurance Group are regular investors in these funds. Ergo Equity Partner also provides private equity consultancy services to institutional investors or private equity companies that are not part of the group.
In a similar vein, a team of UK corporate financiers, private equity and interim managers last year established Nova Capital Management, which plans to take over underperforming portfolios run by private equity and venture capital firms across Europe. The company has been set up by Lord Hodgson, former chairman of Granville Baird, David Williamson, former chief executive of Granville Baird, and Michael Kelly, former senior partner of Executive Interim Management.
Unlike secondary players, Nova will acquire the fund management companies rather than the fund itself, although future alliances with secondary firms are likely as the market widens for such transactions.