Finexx closes second fund; acquires Biovegan

The fundraise began in July 2020. Flick Gocke Schaumburg provided legal advice on the LPA.

The GP's debut fund held a final close in November 2018 on €35m.

"We started Fund I in 2018 and have seen investor appetite for structures with short investment periods; we also had deals lined up that we could realise in a short period of time," Matthias Heining, a partner at Finexx, told Unquote. "Normally, a fund would have a five-year investment period, but we offered a shorter period, and we were able to give investors good visibility on the fund."

"Over the last 12 months, we picked deals we felt would be interesting for our investors," said Heining of the fundraise. The GP does not have a set date for the launch of its next fund, but Heining acknowledges that the current remote fundraising environment can be challenging. "When we raise the next fund depends a bit on the Covid-19 situation; we did this fundraise with LPs that we knew, but contacting new LPs at this point is rather difficult."

The vehicle is targeting returns of 3x money.

Finexx has two platform investments in the portfolio of its first fund. Asked about the development of food supplements business GSE during the coronavirus crisis, Heining said: "We established new distribution channels and have followed a buy-and-build strategy, adding three businesses, the latest of which was FeelGoodShop. The group had €7m in revenues at the start of the investment period and we are now at €25m – there has been no negative effect from Covid-19."

Woodworking software platform Sicko has also fared well, Heining said. "We have generated growth through the expansion of distribution and have made one add-on, which was Scharf & Kögel. The business has also not been negatively impacted and we have had our growth plans confirmed."

Of the add-ons for both companies, Heining said: "For add-ons, we use as much cash and bank financing as we can, but we have contributed equity from our funds for the add-ons we have made so far."

Investors
The fund has three LPs, including anchor fund-of-funds investor Access Capital, which also contributed to the GP's debut fund. Finexx also has a pension fund among its LPs, all of which are Europe-based.

Investments
"The fund size is limited, so we plan to have three deals in this fund," Heining told Unquote. "The deal pipeline is already filled up; we have other deals prepared that we could realise in a short period of time. We are aiming to make our next deal within the next six months."

"We focus on general buyouts; but of course in this situation, it's a plus for the seller if you have experience in a certain sector," said Heining. "No one would like to just win the deal on price. Sector competence is helpful."

The fund will focus on family-run SMEs with revenues of at least €10m, deploying equity tickets of €5-20m.

Finexx has already made its first deal from the vehicle, which is also backed by equity from the predecessor fund: the GP has wholly acquired Germany-based Biovegan. The process began in January 2020 and was conducted via a structured auction.

CMS provided legal advice to Finexx, while Rödl & Partner provided financial due diligence and tax services. Hornburg & Partners performed commercial due diligence. Mayerhöfer was Biovegan's M&A adviser.

Heining explained the GP's rationale behind investing in the business. "Biovegan produces vegan, organic food and has a high growth rate; we are seeing a good trend in this sector in Germany, Europe and North America. The business has 15-20% EBITDA levels. It depends on how long it will take to reach the target revenue size, but I would expect we will be invested for four to seven years. We think there is potential to double the size of the business.

"There is a long-standing trend of growth rates of around 10% per year in the organic food market. We see this varying in different countries, but more and more countries have a significant trend in organic food. We have our eyes open for alternative situations with the same growth path."

Biovegan has 95 employees and generates revenues of €20m. The buyout is backed by senior and mezzanine debt from two banks.

The GP will continue to make add-ons for its portfolio companies as part of its investment strategy, including for Biovegan. "Buy-and-build is part of our DNA and investment strategy; we have not lined up add-on deals ,but we are very open to looking for them," said Heining of the strategy for Biovegan. "We would consider buying brands as an asset deal – the important thing is that it has to give the company an advantage in terms of product or distribution."

People
Finexx – Matthias Heining, Marks Seiler (managing directors).

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• Topics
• Buyout
• DACH
• Germany