General Atlantic pursues German tech PIPE

The US private equity firm is reportedly planning to take a stake in loss-making listed German internet software manufacturer Intershop.

General Atlantic Partners, the US-based technology investor, is considering proposals to take a stake in loss-making German internet software manufacturer Intershop, according to reports in Germany.


German newspaper Welt am Sonntag quoted unnamed investment bank sources as saying that the firm is planning to take a stake in Intershop, which is listed both on the Deutsche Borse (SMAX) and Nasdaq. Earlier this month, the business, which develops online commercial software, said that it would not meet 2003 forecasts.


Intershop has confirmed that it is in talks with financial institutions, but declined to give further details. General Atlantic declined to comment.

According to Reuters, Intershop traded at 350 times its current value during the internet bubble. Yesterday the firm announced that the company's founder, Stephan Schambach, has left his position as CEO, replaced by Juergen Schoettler, current chief financial officer, prompting the share price to rise by as much as 30 per cent.


If the deal goes ahead, it will be General Atlantic’s second investment in a German publicly-traded company following last year’s acquisition of a 25 per cent stake in Ixos Software, the Munich-based developer of eBusiness solutions which is listed on the Neuer Markt and Nasdaq exchanges. General Atlantic became the largest investor in Ixos following its acquisition of 5.4m shares in a transaction worth E34m.


General Atlantic has also invested in a quoted company in the UK. Earlier this year the firm completed a £34m investment in iSoft, a UK-based supplier of software applications for the health sector. General Atlantic subscribed for 5.8m of new ordinary shares in the company, in addition to acquiring 10m existing ordinary shares in the company from the founders of iSoft. iSoft remains listed on the London Stock Exchange.


A recent report by KPMG highlighted the potential for PIPE transactions as a “halfway house” between staying public and going private. “The first preference of a private equity house is likely to be an acquisition of the whole company with management taking a stake in the bidding vehicle,” said Michael Higgins, partner, KPMG Corporate Finance. “If a private equity acquirer is capable of meeting the full value expectations of the existing shareholders then this will remain the favoured route. However a PIPE offers a halfway house between staying public and going private and potentially greater flexibility as a result.” 


Since 1980 GA Partners has invested in over 120 IT companies and currently has over $5bn in capital under management. The firm has more than 60 companies in its portfolio today, of which almost one-third are based outside of the US. The firm  says it aims to invest up to $800m annually, with investments ranging from $25m to $100m. The firm is usually a minority investor and does not seek a controlling interest.


Klaus Esser, former head of German utilities group Mannesmann, is one of the firm’s two European partners.