KKA Partners boasts strong US LP showing in latest EUR 230m fund

The DACH investor exceeded its original target of EUR 200m for Fund II after securing commitments from endowments, pension funds, insurance companies and large family offices, as well as entrepreneurs, he said.

With more than 40% of commitments raised from US investors, KKA Partners has been more successful than some of its peers, who have struggled to gain traction across the Atlantic due to the unfamiliarity of the German and the wider European market, which is further clouded by the ongoing Russian-Ukrainian war, he said.

"A lot of people in the US don't understand the European market," he said. "They don't differentiate the different markets here and have generally invested in Pan-European funds."

"You really need to find the ones that understand the European market and understand that the country funds are performing better," he added.

Germany has generally been an underrepresented market in US LPs' portfolios, but it can offer very attractive entry multiples compared with the US, he said. A German GP such as KKA also offers on-the-ground understanding of the market, whose nuances an American LP may not understand, given the asymmetry of information available, he said.

The fundraise has been what Hartmann describes as "one of the hardest things" to do in this environment.

"Building a firm such as KKA from scratch, "without giving up anything like GP stakes or any sweeteners, is incredibly challenging, he said. "If you look at how many people have tried this in the German market over the past five years and see how many succeeded, in the institutional way with true blind pool to institutional investors - with direct investors and not just opportunists - there's not a very good number who've actually made it."

The GP announced the fundraising close last week, having held a first close for fund with more than EUR 50m in commitments in June 2021, as reported. It had expected to close the fund last year, but the COVID-19 pandemic paused its fundraising push due to travel restrictions, he said.

The fund had a EUR 200m target and a EUR 250m hard-cap, as reported.

Pipeline progress
KKA typically invests in healthcare, smart industries, business services and consumer branded goods & services targets with a view to "technologizing" their business models. It currently has a "very full" pipeline with "several" larger platforms being executed on now, Hartmann said.

Its strategy, which typically targets businesses generating around EUR 8m EBITDA, has not differed from its debut strategy KKA Seed Fund, which raised EUR 45m in September 2019, he said.

"The world had gone crazy once more on the tech bubble [since the pandemic]," he said. "We said that we were going to stick absolutely to our niches, buying good companies from families at a good price and helping them to technologise, and that's exactly what we did and that's exactly what we stuck with."

"I think the market really ended up appreciating that that we didn't turn on the opportunistic dime to do more tech growth. I think a lot of the competition is being bitten, because they went in with earlier funds into very high valuation - which means now the returns are likely going to go down right," he added.

KKA will be looking at a "couple" of companies for exits over the next 18 to 24 months, of which one could be prepped for the upcoming 12 months, he said.

"We are discussing with some M&A advisors around specific companies [for exit]," he said. "But we are not under pressure to exit. It's important the companies are at the right stage when we exit them."

The oldest companies within its portfolio include Evago, a live event infrastructure rental company, which the GP first backed in 2019 via the KKA Seed Fund.

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