GP Profile: Emeram Capital Partners

Emeram Capital Partners was co-founded in Munich in 2012 by Kai Köppen, Kai Obring and Christian Näther. Senior partner Näther explains the founding ethos of the firm: "We started Emeram to provide a professionalised approach to investing in the German Mittelstand. We focus on growth situations only, where we can support organic growth and add further companies to platform investments."

The GP generally invests in DACH-based companies with enterprise values of €30-250m. "We look for companies with a strong software or technology element, a strong service business model, and/or a consumer-centric approach," says Näther. Emeram's focus therefore lies in consumer goods and retail, business services, industrial goods, software and technology, as well as healthcare. It has so far focused on companies with revenues of €20-150m.

"We act as a business development partner to companies and their management teams, since these businesses typically don't have the resources to afford these services and scale up," Näther says. "We look at strategic and organisational development. We focus on HR and the office of the CFO, selecting the right training and supporting recruitment. We also help to digitalise financial reporting, so the monthly board meetings don't have to focus too much on the numbers, and we of course track key performance indicators. We also help with digitalisation, and last but not least, ESG, especially ecological topics such as CO₂ reduction."

Emeram currently has a portfolio of seven companies and has made 19 add-ons. The GP is investing from its debut fund, which held a final close in January 2015 on €400m, having launched in April 2013. The fund's LPs include fund-of-funds managers DB Private Equity and SwanCap Partners, according to Unquote Data, as well as institutional investors including RWB Group.

The GP also completed a €50m capital increase for Emerarm Fond I in a GP-led secondaries deal in April 2019, with 80% of the new capital coming from new investors such as Arcano Capital, Schroder Adveq, Unigestion and Lombard, as reported.

The fund currently has a number of deals in the pipeline, Näther says: "We currently have three deals under observation – we plan to close one by the end of Q3, but would like to make at least one more."

The GP also anticipates a move towards launching its second fund after Q3 2020. Says Näther: "We will hold our AGM this year digitally and will kick off fundraising in September or October, when we are in a position to assess the portfolio. So it might kick off in Q4 2020 and H1 2021."

Steering the portfolio
Asked how the firm's current portfolio has fared during the coronavirus pandemic, Näther says: "All in all, we are quite pleased with how the portfolio has held up. We have companies that partially or totally benefited, some where it has been a bit of a rollercoaster, and others with a more mid-term financing situation to resolve."

One portfolio company that Näther would classify as having seen a "rollercoaster" effect is Germany-based surfing equipment retailer Boards & More. The GP acquired the company in November 2013 in a deal valued at €39m, according to Unquote Data. "Boards & More's sales dropped by 80% initially," he says. "As lockdowns have been eased country by country, there was a significant uptick in sales, and in some weeks we had double the sales compared to the same period in the previous year. The H1 2020 sales will be above the figure for H1 2019 now."

Näther cites frozen food products producer Frostkrone as a company that has seen a slight impact but has overall continued to see solid performance. "Frostkrone has somewhat benefited from the coronavirus outbreak due to higher consumer demand from people cooking at home. But there was a slight hit in the hospitality, restaurants and catering sector. In total the company grew by 7% compared with last year." The GP bought a majority stake in Frostkrone in February 2017 and backed the add-on of UK-based market peer Innovative Foods in February 2020.

Emeram announced in July 2020 that portfolio company Matrix42 had acquired US-based market peer FireScope. "Matrix42 was also able to hit last year's numbers," Näther says. Emeram initially began a sale process for Matrix42 in 2018, as reported by Unquote sister publication Mergermarket, and had mandated Raymond James to run the process. However, the sale was halted in May 2019 following valuation issues due to EBITDA adjustments, with both Emeram and Matrix42 telling Mergermarket that the GP would continue its investment for another two to three years. Emeram had hoped to see a valuation of €150-200m and had marketed Matrix24 based on adjusted EBITDA of €20m.

However, the GP has further plans for the company's growth, Näther says: "The transition of its revenue model from licensing to subscription will be accelerated, but not completed before mid-2021."

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