Constellation Capital launches €100m fund

Emanuel Eftimiu
11 April 2011

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Constellation Capital has launched its first institutional fund, Constellation II German Small Cap Fund, targeting €100m.

The private equity house and its team members are no novices to deal doing, having already completed 14 transactions funded on a deal-by-deal basis with external investors. The new fund focuses on "asset-light" service-related companies in German-speaking Europe. Fee structure for the fund follows the market standard with a 2% management fee, 8% hurdle and 20% carry, but the vehicle features a three-year investment period, reducing the fund lifetime and expenses to eight years.

The GP contribution is 5%, while the two managing partners have a personal liability to the fund, given the fund manager is established as a commercial limited partnership. Baker & McKenzie provided legal advice, with IPES chosen as fund administrator. No placement agent is being used for the time being.

Investors
The fund will look to draw on its established relationships with 40 investors that have previously contributed to investments on a deal-by-deal basis. It will look to attract high-net-worth individuals, family offices and institutional investors. The minimum ticket for private individuals is €1m and €10m for institutions.

Investments
Constellation II German Small Cap Fund has a strong sector approach, focusing on four main segments: outsourcing/business services, financial services, lifestyle/education and healthcare services. The fund will aim to make two to three investments in the DACH region per year and six to eight investments in total. Additionally, it will look to grow existing portfolio companies through add-on acquisitions. Equity tickets range between €5-15m, while typical targets are asset-light service companies with revenues ranging from €20-150m.

The 14 transactions that were previously undertaken on a deal-by-deal basis have on average returned a 1.9x money multiple and 25% IRR.

People
Ralf Flore and Rainer Fröhlich are managing partners of Constellation Capital supported by six further partners. Additionally, 10 "industry partners" provide specific sector advice on transactions.

Advisers
Baker & McKenzie (Legal)
IPES (Fund administration)