KKA Partners holds first close for second fund

The firm announced in a statement on its website in May 2021 that the fund had begun to deploy equity.

Founding partner Dominic Faber told Unquote that the fund has commitments totalling more than €50m, although he declined to disclose a specific figure.

The vehicle has a target of €200m and a hard-cap of €250m. The fundraising process was launched in September 2020.

“We have a proprietary pipeline that could enable us to invest €100m in equity in total this year from the fund,” Faber said. “So we hope to have a second substantial close this year, which could be the final close – otherwise, our target is to close in Q1 or Q2 next year.”

KKA (which stands for the classical Greek principle of Kalos Kai Agathos) was founded by Dominic Faber and Kaspar Hartmann in 2018. Faber worked at McKinsey and Blackstone prior to forming KKA, while Hartmann had previously held financial roles at organisations including Citigroup.

The GP held a first and final close for its debut vehicle, KKA Seed Fund, in September 2019 on €45m, surpassing its €25m target. The fund invested in live event infrastructure rental business Evago in October that year.

First Point Equity is acting as placement agent. The vehicle follows standard market terms and conditions.

Investors
LPs in the fund at first close are institutional investors from the Nordics, Germany and the UK, Faber said. These fall into three categories, he said: funds-of-funds managing capital from private wealth and pensions; pension fund allocations via managed accounts from larger asset managers; and insurance companies.

The GP aims to expand its LP base to other European countries including Switzerland, Italy and Spain, Faber said. KKA also hopes to expand its LP base towards the US, he added, although travel restrictions due to the coronavirus pandemic have so far prevented in-person meetings.

The fund will also offer co-investment opportunities, Faber said, adding that this is of interest to its LP base.

Investments
KKA invests in profitable Mittelstand businesses based in the DACH region with EBITDA of at least €2m, targeting healthcare, smart industry, business services and consumer branded goods and services. The firm makes lower-mid-market deals with enterprise values of €50-120m, with a sweet spot of €20-30m in equity per transaction.

“We focus on sectors and companies where technology can be used to help transform businesses, using existing technology to improve the Mittelstand and help companies to future-proof,” Faber told Unquote.

Faber said that the fund expects to make seven to nine platform investments in total. The fund has made its first deal, acquiring IT infrastructure business Xantaro, and has a further healthcare sector deal that the firm expects to announce shortly. Faber said that the fund expects to make its third and fourth deals before the end of 2021.

The Xantaro deal was led by founding partner Kaspar Hartmann and investment principal Jan Mickel, Faber told Unquote. SMP, Gütt Olk Feldhaus, AC Christes & Partner and PwC advised on the deal.

Xantaro specialises in the design, integration, operation and maintenance of high-performance IT networks and infrastructure. The company employs 160 people and posted revenues of €75m in the 2019/20 financial year. Xantaro was founded in 2007 and is headquarered in Hamburg, with additional operations in the UK.

Unquote sister publication Mergermarket reported in February 2021 that Xantaro was up for sale and was being marketed based on EBITDA of €8m, but Faber declined to comment on this figure.

The deal is a co-investment with family office Friba Investment. While the GP has a long-standing relationship with Friba, the firm is not an LP in KKA Fund II, Faber said.

People
KKA Partners – Dominic Faber (founding partner); Kaspar Hartmann (founding partner).

Correction 04/06/21: This article was amended to clarify the launch date of KKA Value Fund II; the fund was launched in September 2020 and was not registered in August 2019, as previously stated.

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