Munich-based private equity firm EMH Partners has closed its second fund on its hard-cap of €350 million and raised a further €350 million of co-investment capital.
The firm, which invests in traditional businesses and takes them through “digital transformation”, is unusual in private equity circles, having been established in 2010 by two brothers then in their mid-20s. Maximillian and Sebastian Kuss had founded, scaled and sold their first business while still in high school and their second by the time they left university.
Until this year none of EMH's 20 staff were over the age of 30; in June it hired Thomas von Werner, a veteran of EQT who latterly spent four years as a managing director of central European investment group Penta. In his mid-40s, von Werner adds the first metaphorical “grey hair” to the group.
There is no shortage of capital chasing investment opportunities in the technology sector, with specialist fund managers, such as Silver Lake, Thoma Bravo and Vista Equity Partners, all enjoying significant fundraising success in the last 12 months . Established generalists are also targeting in the sector, with Apax Partners and KKR recently raising tech-focused capital.
EMH separates itself from longer-established peers through its approach, according to founding brother and managing partner Maximilian Kuss. “We are not trying to kill or disrupt the old economies,” Kuss told Private Equity International . “We are helping digitise traditional SMEs. We want to take them from good to great.”
Digitalisation is putting many business models to the test, especially among SMEs, Kuss said. “As next generation investors, we want to help these businesses take full advantage of their digital potential.”
The approach, he continued, gives the strategy a different return profile from other technology investors.
Co-founding brother Sebastian Kuss added: “We do not invest in start-ups. Instead, we focus on companies already turning a profit or on the verge of breaking even which harbour great potential for growth and digitalisation.”
EMH made 11 investments in what it refers to as its “first portfolio” – essentially its first fund. According to a marketing document seen by PEI, the firm had generated a multiple on invested capital of 3.4x as of 30 September 2016 and no write downs.
The firm has assembled a network of 15 industrial advisers, the most recent addition being Manfred Seitz, leader of Berkshire Hathaway's European activity. “The EMH team has an exceptional track record. The successful fundraising efforts not only confirm their previous success, but also underscore how attractive the business model is,” said Seitz in a statement.