Evoco holds final close for third fund

The fund was launched in December 2019 and held a final close in December 2021. It held a first close in June 2020 on EUR 93m against its EUR 150m target, as reported.

Advising on the fundraise were teams led by Andrew Mills at MJ Hudson and Pierre Beissel at Arendt & Medernach.

Much of the fundraise for Evoco TSE III took place over the course of the coronavirus pandemic and its various travel restrictions. This meant that virtual fundraising was necessary, according to Julia Lundström, director of investor relations at Evoco. "For a lot of people, virtual fundraising has been a positive, as it is more efficient: you can get more done in the same amount of time," she said. "However, you don't have the same rapport with people, and we could not meet as many people face to face. But we did get some new LPs on board that we only physically met for the first time at our last AGM in September 2021.

"It took some time to adapt at the beginning, but we were used to working on the go, and we continued to travel a fair bit on the portfolio management side. So the process was challenging due to Covid, but the result shows that it was not a huge impediment."

"We can be considered as a bit of an emerging manager, and a lot of LPs initially focused on re-ups in 2020," Lundström added. "But [LPs] are also focused on returns, so they want to focus on managers with a more differentiated strategy. We have quite a niche in terms of value creation and sourcing, and we provide a unique solution for sellers compared with some of our competitors. The strategy is also able to thrive across different market cycles – it is a very interesting time for our strategy at the moment, but we saw a lot of deals pre-pandemic, too, and our LPs have identified that."

The GP expects to come back to the market for its next vehicle "fairly soon" and is also working on exits from Evoco II, Lundström said, but declined to comment further. The GP also expects to make a senior investment team hire in 2022.

Evoco's predecessor fund held a final close in September 2016 on EUR 105m. The vehicle's remaining portfolio companies include electronics and media resale platform Rebuy; secure enterprise video management technology Movingimage; listed industrial group Blue Cap; customisation products producer Picanova; spices and food compounds specialist Spigol; and document and QR scanner app developer Doo.

Investors
The LP base of Evoco TSE III includes DACH family offices, endowments and funds-of-funds, as well as institutional investors such as the European Investment Fund. The GP commitment to the fund is around 4% of the fund volume, Lundström said.

Evoco aimed to attract a slightly different LP base for Evoco III, Lundström said, and the majority of its LPs are new investors. "Several Fund II investors were secondary players – they treated the fund as a late primary opportunity as we deployed it quickly. For Fund III, we focused on investors with a long-term investment horizon, and we have achieved a more institutionalised and diversified LP base."

Although the majority of Evoco TSE III's LPs are European, the GP could look to the US for future vehicles, according to Lundström. "We were aware that the size of Fund III might be a bit small for the US, since a lot of LPs there are looking for larger funds, but we have already received interest from several US investors and could approach the market for Fund IV."

Investments
The fund acquires groups of non-core assets via portfolio transactions, targeting lower-mid-market businesses with turnovers of EUR 30m-250m. The fund will deploy equity tickets of EUR 20m-75m, with a sweet spot of EUR 40m. Evoco generally targets companies in western Europe.

The GP generally acquires industrial, services and consumer companies, although the nature of its portfolio strategy means that its deals are generally diversified across several industries.

The vehicle made its first deal in December 2020, acquiring a portfolio of companies from German investment holding Gesco, as reported. This included Frank Original, which manufactures technological wear parts for the agricultural industry, as well as CFK CNC-Fertigungstechnik, which focuses on additive manufacturing and wire erosion services for mission critical components in medical technology, aerospace and other industries. The deal also saw the formation of Precision Werks Group, comprising Dömer Ring, Modell Technik Formenbau, Werkzeugbau Laichingen Gruppe and Paul Beier. The group manufactures precision components and tools.

Evoco TSE III is around 20% deployed and is expected to make three to four deals in total, each of which is expected to comprise three to five companies.

People
Evoco – Julia Lundström (director investor relations); Michel Galeazzi, Felix Ackermann (co-founders, partners).

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